The world’s concerted push towards environmental sustainability often masks the green energy transition’s glacial pace, with renewables expected to grow from 3.5 per cent of the global market in 2024 to only 13.5 per cent by 2050, and oil and gas positioned to add to their more than 50 per cent combined share over the period.
Contrary to popular sentiment, this means that oil and gas will continue to be essential to the livelihoods of hundreds of millions of people for generations to come, making it a prospective industry to invest in companies with track records of value creation and strong cases to expand them over the long term.
An ideal company under this thesis would be located in a jurisdiction with established rule of law and guided by a leadership team replete with commodity-specific expertise, whose demonstrated ability to achieve profitable growth is suggestive of future momentum and worthy of any reasonable investor’s conviction.
AKITA Drilling’s fundamental excellence
An operator of note worth a wider profile is AKITA Drilling (TSX:AKT.A), market capitalization C$72.80 million, a top drilling contractor active in major oil and gas basins in Canada and the United States, whose focus on professionalism, community and technological advancement has yielded a more than 500 per cent return since 2020 backed by significant revenue growth and consistent profitability.
This article is disseminated in partnership with oil and gas services company AKITA Drilling Ltd. It is intended to inform investors and should not be taken as a recommendation or financial advice.
Strategically located assets
AKITA oversees a fleet of 32 high-spec drilling rigs, more than half of which are of the pad variety, which are considerably easier to move compared to conventional rigs, making it more cost-effective to drill large groups of wells.
These rigs are strategically placed in hydrocarbon-rich Alberta (16) and Saskatchewan (1) north of the border, and in Wyoming (1), Oklahoma (1), New Mexico (2) and Texas (11) to the south, the vast majority in the Permian Basin, which is responsible for 93 per cent of US oil production growth from 2020 to 2024, according to data from the US Energy Information Administration.
From a more macroeconomic perspective, AKITA’s rigs are active in the only two free markets among the world’s top five oil producing countries, granting the company a firm legislative foundation on which to continue garnering market share and creating shareholder value.
Leadership proven on the income statement
AKITA’s seasoned oil and gas executives, whose industry tenures fluctuate between 10 to more than 40 years, steered operations out of the COVID pandemic with aplomb, battening the hatches when the sector stalled and tapping the debt markets as demand re-emerged, paving the way for the company’s ongoing return to profitable growth.
2022
Following a five-year low of C$110.9 million in revenue and a net income loss of C$20.99 million in 2021, AKITA turned itself around in 2022, rebounding to C$201 million in revenue and C$4.29 million in net income, including a 387 per cent increase in operating margin year-over-year (YoY), thanks to improved activity in both Canada and the US, supported by oil trading consistently above US$70 per barrel, hitting a decade high of more than US$115, comfortably ahead of the approximately US$50-65 per barrel price required by AKITA’s clients to turn a profit.
2023
AKITA bolstered top and bottom-line growth in 2023, posting US$225.47 million in revenue and net income of C$18.41 million, the latter representing a 10-year high for the company, while cutting long-term debt from C$95 million to C$69.5 million, even though the oil price was essentially cut in half over the course of the year. This momentum was enabled by improved day rates and operating margins per day, which the company fostered through a new program to reconfigure its oil sands rigs for both steam-assisted gravity drainage and deep-gas drilling, diversifying exposure across two of Canada’s strongest energy markets.
2024
The company posted more robust profitability in 2024, including C$12.86 million in net income and a 96 per cent YoY improvement in operating margin from C$193.33 million in revenue, delivering the most profitable fourth quarter in company history, despite a falling total US industry rig count.
Key drivers included lower maintenance costs following equipment related investments over the preceding two years, as well as a rebound in rig utilization beginning in Q3, serving as a testament to AKITA’s high-tech, service-driven value proposition.
The oil and gas driller paved the way for further growth in 2025 and beyond with C$28 million in capital expenditures, up from C$24.6 million in 2023, to certify and upgrade its equipment, while reducing debt to C$49.58 million, setting operations up to retain more future cash flow and better optimize assets, regardless of turbulence related to potential US tariffs and an oil price hampered by OPEC steadily increasing production since late 2024.
Q1 2025
AKITA carried its record Q4 success into Q1 2025, earning revenue of C$65.09 million, up from C$46.30 million YoY, yielding net income of C$8.6 million, up from C$2.6 million YoY, thanks to consistently high rig utilization rates above Canadian and US averages, as well as a consistent operating margin of 29 per cent, up from 28 per cent YoY, despite the US market continuing to contract.
Q2 2025
Operations remained in the black through Q2 2025, earning revenue of C$49.5 million, up from C$38.3 million YoY, and net income of C$2.3 million, up from a loss of C$0.5 million YoY, thanks to higher activity levels in Canada and the United States.
As cash continued to flow, the company’s debt continued to fall, stepping down from C$52.4 million to C$39.7 million YoY, placing it within leadership’s internal leverage threshold, allowing for a stock buyback initiated in August for up to 5 per cent of outstanding shares.
These value-accretive results, despite a 15 per cent drop in oil prices over the quarter, reflect AKITA’s operational resilience in the face of uncertainty surrounding a new US global tariff regime.
Q3 2025
AKITA’s recently completed Q3 2025 added more heft to the notion that its disciplined emergence out of COVID is worth investors’ long-term conviction.
Net income reached C$1.54 million, up 40 per cent YoY, derived from stable revenue of C$44.6 million, down from C$45.8 million YoY, driven by improvements in the Canadian operating segment and lower overall selling and administrative expenses, offset by lower US-based earnings, Canadian operator delays and the oil price’s continued descent approaching US$60 per barrel. Adjusted funds flow, however, hit C$9.27 million, up from C$8.43 million YoY.
In the Canadian segment, operating days increased by 17 days to 715 days, up from 698 days YoY, ending the quarter with 11 operating rigs or 65 per cent utilization, well ahead of the 58 per cent industry average. This increased activity resulted in an adjusted operating margin of C$7.8 million, up by 24 per cent YoY, thanks to more high-margin rigs in the field.
In the US, operating days fell to 583 days, down 18 per cent from 713 days YoY, mirroring the drop in the overall US industry rig count from 566 to 526 rigs and taking an expected toll on adjusted operating margin, which fell from C$6.83 million to C$5.7 million YoY.
Profitability was backstopped by a 5 per cent decrease in adjusted operating and maintenance expenses per day, a 2 per cent increase in adjusted margin per operating day despite a decline in adjusted revenue per operating day, as well as controlled capital expenditures of C$8.83 million, up from C$7.37 million YoY, with both periods reflecting routine, expected costs.
AKITA’s focus on shareholder value was compounded by an 84,366-share buyback and another significant debt reduction, from C$47.71 million to C$27.81 million YoY, further de-risking leadership’s capital allocation and cost management skills into the future, with the US market expected to show signs of a turnaround in Q1 2026.
Profitability de-risked by a falling-price environment
As we’ve shown, AKITA’s 6x run-up in share price since 2020 has not been unwarranted, thanks to growing revenue and operating margins, and an almost four-year stretch of positive net income, even though the price of oil has given back almost 50 per cent from its high over the period, with natural gas taking a similar haircut. When it comes to investment due diligence, such a profitable track record, despite market tightness, is the epitome of operations aligned with shareholder value.
With the oil and gas industry on track to grow through 2050 and S&P Global expecting prices to rise over the next few years, it’s only reasonable to expect AKITA’s profits to ramp up in tow, as higher prices increase demand for high-efficiency rigs built to maximize producer profits.
While it will serve investors well to remember that oil and gas are tightly tied to macroeconomic sentiment, meaning that short-term price volatility will often be pronounced up and downstream, look for AKITA to continue proving itself on the income statement, delivering profitable growth over the long term across both bullish and bearish environments.
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