This news release contains “forward-looking information and
statements” within the meaning of applicable securities laws. For a
full disclosure of the forward-looking information and statements
and the risks to which they are subject, see the “Cautionary
Statement Regarding Forward-Looking Information and Statements”
later in this news release. This news release contains references
to certain Financial Measures and Ratios, including Adjusted EBITDA
(earnings before income taxes, gain (loss) on investments and other
assets, loss on repurchase of unsecured senior notes, finance
charges, foreign exchange, gain on asset disposals and depreciation
and amortization), Funds Provided by (Used in) Operations, Net
Capital Spending and Working Capital. These terms do not have
standardized meanings prescribed under International Financial
Reporting Standards (
IFRS) and may not be
comparable to similar measures used by other companies, see
“Financial Measures and Ratios” later in this news release.
Precision Drilling announces 2022 second quarter
financial results:
- Revenue for the quarter was $326
million, an increase of 62% as compared with 2021 as our North
American drilling activity increased by 38% and drilling day rates
increased in the U.S. and Canada by 25% and 30%, respectively.
- Strengthened our contract book with
year-to-date additions of 39 term contracts.
- Adjusted EBITDA (see “FINANCIAL
MEASURES AND RATIOS”) of $64 million increased 122% from $29
million the prior year quarter, reflective of our success in
maximizing operating leverage in a growing activity environment.
Current quarter Adjusted EBITDA was negatively impacted by a $6.5
million (US$5 million) well control event, share-based compensation
charges of $5 million and $9 million less of CEWS program
assistance.
- Net loss of $25 million or $1.81
per share compared with a net loss of $76 million or $5.71 per
share in 2021.
- Generated cash from operations and
funds from operations (see “FINANCIAL MEASURES AND RATIOS”) of $135
million and $60 million, respectively, as compared with $42 million
and $13 million in 2021. Our increased activity, operational
leverage and day rates, and lower share-based compensation charges
contributed to higher cash generation in the current quarter.
- Reduced our Senior Credit Facility
balance by approximately $70 million during the quarter, ending
with $52 million of cash and more than $540 million of available
liquidity.
- Increased our capital spending plan
to $149 million in response to higher demand and expected customer
contracted upgrades on over 20 drilling rigs for 2022.
- Repurchased and cancelled 60,796
common shares for $5 million under our Normal Course Issuer Bid
(NCIB).
- Completion and Production Services
segment generated revenue of $33 million and Adjusted EBITDA of $5
million, increases of 60% and 14%, respectively, from the prior
year second quarter.
- Agreed to acquire the well
servicing business and associated rental assets of High Arctic
Energy Services Inc. (High Arctic) for $38 million
subsequent to the end of the quarter.
Precision’s President and CEO, Kevin Neveu,
stated:
“Precision’s strong second quarter financial
results reflect steadily increasing customer demand and demonstrate
the exceptional operational leverage inherent in Precision’s
business model. Second quarter revenue was $326 million, 62% higher
than the same period last year, and reported Adjusted EBITDA more
than doubled from 2021. These strong results were underpinned by
improving field margins and continued focus on cost management and
cost control.
“We remain firmly on track to deliver on our
2022 strategic priorities, which include generating free cash flow
and using cash generated to strengthen our balance sheet and
reinvest in our business. Our High Performance, High Value strategy
is well-aligned with customer objectives and demand for our
services continues to strengthen. Even with commodity price
volatility and recession concerns, our customers continue to seek
the most efficient drilling rigs available as they remain focused
on strict capital discipline and capital efficiency. Consequently,
we expect both of our Super Triple and pad Super Single rig fleets
to become fully utilized later this year.
“Our recent well servicing transaction adds 51
marketed well service rigs, increasing our marketed fleet to over
130 rigs in Canada. The transaction aligns with both our short-term
and long-term strategic priorities, particularly leveraging our
scale and reducing our debt levels. The outlook for our well
service business continues to be positive as strong customer demand
and an industry-wide shortage of high-quality assets and skilled
labor is driving leading edge rates to over $1,000 per hour. During
the second quarter, we realized 30,389 service rig operating hours,
our most active second quarter since 2018, and anticipate this
momentum will continue for the foreseeable future. I welcome the
high-quality field and support staff of over 200 who are joining
the Precision family. I believe this acquisition positions our well
servicing business for a promising future.
“In the U.S., we averaged 55 active drilling
rigs during the second quarter and are currently operating 57 rigs,
an increase from 48 rigs at the start of the year. Customer demand
remains strong and leading-edge day rates are approaching the
mid-US$30,000s, while year over year normalized average fleet rates
are up over US$4,000 per day, as customers recognize both the
efficiency savings generated by our Super Series rigs and seek to
ensure they have access to their preferred rigs.
“In Canada, we averaged 37 active rigs during
the second quarter, representing a 35% increase over the same
period last year. This is the highest activity level since 2014 and
highest average second quarter day rates in a decade. We currently
have 61 rigs active and expect activity in both the third and
fourth quarters to exceed the first quarter as our customers remain
committed to their drilling plans, particularly in the Montney,
conventional heavy oil, and Clearwater plays.
“During the second quarter, we began to lock in
higher day rates with take-or-pay term contracts, particularly for
opportunities that require capital for rig upgrades. With rising
concerns about high-specification rig availability, many customers
are seeking longer-term commitments and since the beginning of the
second quarter we have signed 18 new term contracts at leading-edge
day rates, including five contracts for two years or longer. The
pace of rig contracting and margin expansion is driving an improved
outlook for Precision’s free cash flow in the second half of the
year and into 2023. We are raising our capital budget to include
over 20 expected fully-contracted rig upgrades and anticipate
capital spending will now total $149 million, which includes $76
million of upgrade and expansion capital.
“On the international front, our existing
operations in Kuwait and Saudi Arabia continue to perform well,
leveraging our scale in each country and generating cash flow for
our business. We recently submitted a bid for a tender including
three of our idle AC Super Triple rigs in Kuwait and believe there
are additional Middle East opportunities where we can deploy our
Super Series rigs.
“Both Alpha™ and EverGreen™ are driving revenue
growth and establishing a sustainable competitive advantage for
Precision. In the second quarter, we installed three
AlphaAutomation™ systems, bringing our total to 53 Alpha™ rigs.
Currently over 50% of our North American Super Triple fleet have
been converted to Alpha™ and we see a clear path to converting the
remaining rigs by the end of 2024. We are currently earning
incremental revenue on nearly 90% of our Alpha™-equipped rigs as
customers continue to see the value of this technology, which
provides automation to deliver consistent record well times, access
to several applications to maximize drilling efficiencies and
real-time data to analyze and drive performance and KPIs.
“We also continue to develop our portfolio of
EverGreen™ suite of environmental solutions, offering customers
several products and applications to help measure and reduce their
emissions during drilling operations. In the second quarter, we
began drilling an exploratory geothermal well on Cornell
University’s Ithaca campus as part of Cornell’s Earth Source Heat
project. We are utilizing an EverGreen™ grid-powered Super Triple
rig, which will significantly decrease rig emissions and mitigate
noise in an environmentally sensitive area. We believe geothermal
energy will be an important energy component in the net zero global
energy mix and are well positioned to support this transition,
having participated in geothermal projects for the past 25
years.
“Notwithstanding current economic uncertainty
and commodity price volatility, robust market fundamentals exist
and provide a foundation for Precision’s business, creating
opportunities for us to grow shareholder value. I would like to
thank our shareholders for their continued support and the team at
Precision for their hard work and dedication,” concluded Mr.
Neveu.
SELECT FINANCIAL AND OPERATING
INFORMATION
Financial Highlights
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
Revenue |
|
326,016 |
|
|
201,359 |
|
|
61.9 |
|
|
677,355 |
|
|
437,832 |
|
|
54.7 |
|
Adjusted EBITDA(1) |
|
64,099 |
|
|
28,944 |
|
|
121.5 |
|
|
100,954 |
|
|
83,483 |
|
|
20.9 |
|
Net loss |
|
(24,611 |
) |
|
(75,912 |
) |
|
(67.6 |
) |
|
(68,455 |
) |
|
(112,018 |
) |
|
(38.9 |
) |
Cash provided by (used in)
operations |
|
135,174 |
|
|
42,219 |
|
|
220.2 |
|
|
69,880 |
|
|
57,641 |
|
|
21.2 |
|
Funds provided by
operations(1) |
|
60,373 |
|
|
12,607 |
|
|
378.9 |
|
|
90,328 |
|
|
56,037 |
|
|
61.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing
activities |
|
36,782 |
|
|
10,150 |
|
|
262.4 |
|
|
67,125 |
|
|
20,064 |
|
|
234.6 |
|
Capital spending by spend
category(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expansion and upgrade |
|
15,530 |
|
|
6,446 |
|
|
140.9 |
|
|
25,145 |
|
|
9,883 |
|
|
154.4 |
|
Maintenance and infrastructure |
|
23,906 |
|
|
13,809 |
|
|
73.1 |
|
|
50,693 |
|
|
18,808 |
|
|
169.5 |
|
Proceeds on sale |
|
(6,849 |
) |
|
(2,590 |
) |
|
164.4 |
|
|
(9,696 |
) |
|
(5,914 |
) |
|
63.9 |
|
Net capital spending(1) |
|
32,587 |
|
|
17,665 |
|
|
84.5 |
|
|
66,142 |
|
|
22,777 |
|
|
190.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
(1.81 |
) |
|
(5.71 |
) |
|
(68.3 |
) |
|
(5.06 |
) |
|
(8.41 |
) |
|
(39.8 |
) |
Diluted |
|
(1.81 |
) |
|
(5.71 |
) |
|
(68.3 |
) |
|
(5.06 |
) |
|
(8.41 |
) |
|
(39.8 |
) |
(1) See “FINANCIAL MEASURES AND RATIOS.”
Operating Highlights
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
Contract drilling rig fleet |
|
226 |
|
|
227 |
|
|
(0.4 |
) |
|
226 |
|
|
227 |
|
|
(0.4 |
) |
Drilling rig utilization
days: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
5,037 |
|
|
3,579 |
|
|
40.7 |
|
|
9,627 |
|
|
6,530 |
|
|
47.4 |
|
Canada |
|
3,376 |
|
|
2,497 |
|
|
35.2 |
|
|
9,029 |
|
|
6,315 |
|
|
43.0 |
|
International |
|
546 |
|
|
546 |
|
|
- |
|
|
1,086 |
|
|
1,086 |
|
|
- |
|
Revenue per utilization
day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. (US$) |
|
25,547 |
|
|
20,497 |
|
|
24.6 |
|
|
24,951 |
|
|
21,236 |
|
|
17.5 |
|
Canada (Cdn$) |
|
26,746 |
|
|
20,634 |
|
|
29.6 |
|
|
25,192 |
|
|
20,935 |
|
|
20.3 |
|
International (US$) |
|
54,612 |
|
|
54,269 |
|
|
0.6 |
|
|
52,436 |
|
|
53,512 |
|
|
(2.0 |
) |
Operating cost per utilization
day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. (US$) |
|
18,864 |
|
|
13,745 |
|
|
37.2 |
|
|
18,628 |
|
|
14,360 |
|
|
29.7 |
|
Canada (Cdn$) |
|
19,010 |
|
|
13,510 |
|
|
40.7 |
|
|
16,749 |
|
|
13,216 |
|
|
26.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service rig fleet |
|
93 |
|
|
123 |
|
|
(24.4 |
) |
|
93 |
|
|
123 |
|
|
(24.4 |
) |
Service
rig operating hours |
|
30,389 |
|
|
26,630 |
|
|
14.1 |
|
|
68,654 |
|
|
61,533 |
|
|
11.6 |
|
Financial Position
(Stated in thousands of Canadian dollars, except ratios) |
June 30, 2022 |
|
|
December 31, 2021 |
|
Working capital(1) |
|
111,492 |
|
|
81,637 |
|
Cash |
|
51,641 |
|
|
40,588 |
|
Long-term debt |
|
1,139,720 |
|
|
1,106,794 |
|
Total long-term financial
liabilities |
|
1,226,744 |
|
|
1,185,858 |
|
Total assets |
|
2,704,686 |
|
|
2,661,752 |
|
Long-term debt to long-term debt plus equity ratio (1) |
|
0.49 |
|
|
0.47 |
|
(1) See “FINANCIAL MEASURES AND RATIOS.”
Summary for the three months ended June 30,
2022:
- Revenue for the second quarter was
$326 million, 62% higher than in 2021 and was the result of
increased North American drilling and service activity and day
rates. Drilling rig utilization days increased by 41% in the U.S.
and 35% in Canada and well service activity increased 14% as
compared with the second quarter of 2021.
- Adjusted EBITDA for the quarter was
$64 million, $35 million higher than 2021 mainly due to lower
share-based compensation charges, partially offset by a $6.5
million (US$5 million) charge related to a well control event and
$9 million less CEWS program assistance. Share-based compensation
charges for the quarter were $5 million, $21 million lower than in
2021 with the decrease primarily due to our lower share price
during the current year quarter. Please refer to “Other Items”
later in this news release for additional information on the well
control event and share-based compensation charges.
- Adjusted EBITDA as a percentage of
revenue (see “FINANCIAL MEASURES AND RATIOS”) was 20% as compared
with 14% in 2021, demonstrating our ability to maximize the
operating leverage within the business in a growing activity
environment.
- General and administrative expenses
this quarter were $21 million, $10 million lower than in 2021 due
to lower share-based compensation charges, partially offset by
lower CEWS program assistance.
- Net finance charges for the quarter
were $21 million, a decrease of $7 million from 2021 due to lower
debt issue costs. Our higher debt issue costs in 2021 related to
accelerated amortization of issue costs associated with the
unsecured senior notes that were fully redeemed in the
quarter.
- In the U.S., revenue per
utilization day was US$25,547 compared with US$20,497 in 2021. The
increase was primarily the result of improved pricing and turnkey
activity. During the second quarter, we recognized revenue from
turnkey projects of US$9 million compared with US$3 million in
2021. Revenue per utilization day in the quarter, excluding the
impact of turnkey, was US$23,689, compared to US$19,666 in the
prior year, an increase of $4,023. On a sequential basis, revenue
per utilization day, excluding turnkey revenue, increased
approximately US$1,925.
- Our U.S. operating costs on a per
day basis increased to US$18,864, compared with US$13,745 in 2021
due to higher rig operating expenses, repairs and maintenance and
turnkey activity, partially offset by the impact of fixed costs
being spread over higher activity. During the second quarter of
2022, we experienced a well control event resulting in a US$5
million charge, causing our daily operating costs to increase by
approximately US$1,015. U.S. operating cost per day during the
quarter, excluding turnkey, was US$16,517 compared with US$13,160
in the prior year. Sequentially, excluding the impact of turnkey
activity, our operating costs per day increased approximately
US$420.
- In Canada, average revenue per
utilization day for contract drilling for the quarter was $26,746
compared with $20,634 in 2021, an increase of 30% and the result of
higher day rates and increased labor and cost recoveries.
- Our Canadian operating costs on a
per day basis increased to $19,010, compared with $13,510 in 2021
due to industry-wide wage increases, higher repairs and maintenance
expense and lower CEWS program assistance. During the second
quarter of 2021, we recognized $5 million of CEWS program
assistance which decreased our comparative daily operating costs by
$1,877. Canadian operating cost per day for the prior year quarter,
excluding the impact of CEWS program assistance, were $15,387.
- Completion and Production Services
second quarter revenue and Adjusted EBITDA was $33 million and $5
million, respectively, compared with $21 million and $4 million in
2021. Our improved results were supported by higher service rates
and operating hours, partially offset by lower CEWS program
assistance as we recognized $3 million of assistance in 2021.
- During the quarter, we did not
recognize any CEWS program assistance as compared with $9 million
in 2021. In 2021, CEWS program assistance was presented as offsets
to operating and general and administrative costs of $8 million and
$1 million, respectively.
- We realized second quarter revenue
from international contract drilling of US$30 million, consistent
with 2021, as activity and day rates remained constant.
- Second quarter cash provided by
operations was $135 million as compared with $42 million in 2021.
We generated $60 million of funds from operations as compared with
$13 million in 2021. Our increased activity, operational leverage,
day rates and lower share-based compensation charges contributed to
higher cash generation in the current quarter.
- Capital expenditures were $39
million as compared with $20 million in 2021. Capital spending by
spend category (see “FINANCIAL MEASURES AND RATIOS”) included $16
million for expansion and upgrades and $24 million for the
maintenance of existing assets and infrastructure.
- We reduced our Senior Credit
Facility balance by approximately $70 million during the quarter,
ending the quarter with $52 million of cash and more than $540
million of available liquidity. Year-to-date, we have borrowed $12
million on our Senior Credit Facility.
- We repurchased and cancelled 60,796
common shares for $5 million under our NCIB.
- Subsequent to the quarter, we
agreed to acquire the well servicing business and associated rental
assets of High Arctic for $38 million, adding 80 service rigs (51
marketed and 29 inactive) to our fleet along with related rental
assets, ancillary support equipment, inventories and spares and six
additional operating facilities in key operating basins.
Summary for the six months ended June 30,
2022:
- Revenue for the first six months of
2022 was $677 million, an increase of 55% from 2021.
- Adjusted EBITDA for the period was
$101 million as compared with $83 million in 2021. Our higher
Adjusted EBITDA was attributable to higher activity and day rates,
partially offset by higher share-based compensation charges, the
impact of the well control event and lower CEWS program assistance.
Our 2021 Adjusted EBITDA was positively impact by $17 million of
CEWS program assistance.
- General and administrative costs
were $77 million, an increase of $24 million from 2021 primarily
due to higher share-based compensation charges of $17 million and
lower CEWS program assistance of $2 million.
- Net finance charges were $42
million, a decrease of $8 million from 2021 due to lower debt issue
costs. In 2021, we accelerated the amortization of issue costs
associated with fully redeemed unsecured senior notes.
- Cash provided by operations was $70
million as compared with $58 million in 2021. Funds provided by
operations in 2022 were $90 million, an increase of $34 million
from the comparative period.
- Capital expenditures were $76
million in 2022, an increase of $47 million from 2021. Capital
spending by spend category included $25 million for expansion and
upgrades and $51 million for the maintenance of existing assets and
infrastructure.
- Year-to-date, we have borrowed $12
million on our Senior Credit Facility and repurchased and cancelled
60,697 common shares for $5 million under our NCIB.
STRATEGY
Precision’s strategic priorities for 2022 are as
follows:
- Grow
revenue through scaling AlphaTM
technologies and EverGreenTM
suite of environmental solutions across
Precision's Super Series rig
fleet and further competitive differentiation through ESG
initiatives – We exited the quarter with 53 AC Super
Triple AlphaTM rigs equipped with our AlphaAutomationTM platform
and 20 commercialized AlphaAppsTM. As compared with the second
quarter of 2021, our total paid days for AlphaAutomationTM,
AlphaAppsTM and AlphaAnalyticsTM increased by 4%. As at July 26,
2022, we had three commercial, field-deployed, EverGreenTM Battery
Energy Storage Systems with six additional systems scheduled for
installation by year end. In addition, we had 10 EverGreenTM
Integrated Power & Emissions Monitoring Systems deployed and
anticipate ending the year with 15 systems installed. In July, we
released our annual Corporate Responsibility Report which
highlighted several key ESG accomplishments aligned with our High
Performance, High Value strategy. We expanded our reporting to
include additional elements from the Sustainability Accounting
Standards Board and Task Force on Climate-Related Financial
Disclosures guidelines.
- Grow free
cash flow by maximizing operating leverage as demand for
our High Performance, High Value
services continues to rebound – During the second
quarter of 2022, we generated cash from operations of $135 million.
In the U.S., our second quarter average active rig count was 55,
41% higher than in 2021. In Canada, we averaged 37 active rigs for
the quarter, a 37% increase from 2021. Despite industry-wide
inflationary pressures, our second quarter daily operating margins
(average revenue less operating costs per utilization day) in our
North American contract drilling business remained strong. Our
daily operating margins were secured by our strengthening day
rates, growing contract book and disciplined spending. Year-to-date
in 2022, we have entered into 39 term contracts and as at July 26,
2022 had 57 active rigs in the U.S. and 61 in Canada. With the
tightening of available Super Series rigs, we expect to realize
further pricing increases in the U.S. and Canada in the back half
of 2022. Our acquisition of High Arctic’s well servicing business
and associated rental assets maximizes our existing operating
leverage and supports future cash flow generation.
- Utilize
free cash flow to continue strengthening our balance sheet while
investing in our people, equipment and returning capital to
shareholders – During the quarter, our reinvestment into
our drilling fleet included $39 million of capital expenditures and
we generated $7 million of cash proceeds from the divestiture of
non-core assets. We repaid approximately $70 million on our Senior
Credit Facility and continue to target $75 million of debt
reduction for 2022 and longer-term goals of $400 million of debt
reduction between 2022 and 2025 and Net Debt to Adjusted EBITDA
(see “FINANCIAL MEASURES AND RATIOS”) less than 1.5 times by 2025.
Through share repurchases under our NCIB, we returned $5 million of
capital to shareholders. We ended the quarter with a cash balance
of $52 million and more than $540 million of available
liquidity.
OUTLOOK
The return of global energy demand and the
reality of a multi-year period of upstream oil and natural gas
underinvestment has resulted in a shortage of oil and natural gas
and higher commodity prices, providing a promising outlook for the
oilfield services industry. The war in Ukraine and sanctions on
Russian hydrocarbons have exacerbated the challenged supply
situation and many importing countries are looking toward North
America and the Middle East to fill the supply gap, both from
exports of crude oil and natural gas through the global Liquified
Natural Gas (LNG) market. Constrained natural gas
production levels and low natural gas storage volumes have resulted
in North American natural gas prices more than doubling in the last
year. With U.S. LNG exports growing as countries look to displace
Russian natural gas and various Canadian LNG projects to come
online in 2025, we anticipate a sustained period of elevated
natural gas drilling activity.
At current commodity price levels, we anticipate
higher demand for our services and improved fleet utilization as
customers seek to maintain production levels and replenish
inventories, as drilled but uncompleted wells have been depleted
over the past several years. However, broad economic concerns exist
with respect to inflation, rising interest rates and geopolitical
instability. These concerns may negatively impact customer spending
plans.
With North American industry activity expected
to further increase in 2022, we anticipate tightness in the high
specification rig market with customers seeking term contracts to
secure rigs and ensure fulfilment of their development programs.
Accordingly, the tightening of available high specification rigs is
expected to drive higher day rates and necessitate customer funded
rig upgrades.
Interest in our EverGreenTM suite of
environmental solutions continues to gain momentum as customers
seek meaningful solutions to achieve their emission reduction
targets and improve their well economics. We expect our growing
suite of AlphaTM technologies paired with our EverGreenTM suite of
environmental solutions to be key competitive differentiators as
our predictable and repeatable drilling results deliver exceptional
value to our customers by reducing risks, well construction costs
and carbon footprint.
The outlook for our Precision Well Servicing
business remains positive with strong commodity prices supporting
maintenance and completion activity as well as both federal and
provincial support for increased well abandonment and
rehabilitation projects. In addition, we are focusing on the
successful integration of the recent purchase of High Arctic’s well
service and associated rental operations. By leveraging our
existing platform and continuing our strict focus on cost control,
we expect to realize $5 million in annualized savings, realizable
within one year of completing the acquisition.
Contracts
Year-to-date in 2022, we have entered into 39
term contracts and 18 new contracts since the end of the first
quarter of 2022. The following chart outlines the average number of
drilling rigs under contract by quarter as of July 26, 2022. For
those quarters ending after June 30, 2022, this chart represents
the minimum number of long-term contracts from which we will earn
revenue. We expect the actual number of contracted rigs to vary in
future periods as we sign additional contracts.
|
|
Average for the quarter ended 2021 |
|
|
Average for the quarter ended 2022 |
|
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
Average rigs under term contract as of July 26, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
21 |
|
|
24 |
|
|
22 |
|
|
24 |
|
|
27 |
|
|
29 |
|
|
31 |
|
|
27 |
|
Canada |
|
6 |
|
|
6 |
|
|
7 |
|
|
7 |
|
|
6 |
|
|
8 |
|
|
10 |
|
|
11 |
|
International |
|
6 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
4 |
|
|
4 |
|
Total |
|
33 |
|
|
36 |
|
|
35 |
|
|
37 |
|
|
39 |
|
|
43 |
|
|
45 |
|
|
42 |
|
The following chart outlines the average number
of drilling rigs that we had under contract for 2021 and the
average number of rigs we have under contract as of July 26,
2022.
|
|
Average for the year ended |
|
|
|
2021 |
|
|
2022 |
|
Average rigs under term contract as of July 26, 2022: |
|
|
|
|
|
|
U.S. |
|
23 |
|
|
29 |
|
Canada |
|
7 |
|
|
9 |
|
International |
|
6 |
|
|
5 |
|
Total |
|
36 |
|
|
43 |
|
In Canada, term contracted rigs normally
generate 250 utilization days per year because of the seasonal
nature of well site access. In most regions in the U.S. and
internationally, term contracts normally generate 365 utilization
days per year.
Drilling Activity
The following chart outlines the average number
of drilling rigs that we had working or moving by quarter for the
periods noted.
|
Average for the quarter ended 2021 |
|
Average for the quarter ended 2022 |
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
|
Mar. 31 |
|
|
June 30 |
|
Average Precision active rig count: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
33 |
|
|
39 |
|
|
41 |
|
|
45 |
|
|
51 |
|
|
55 |
|
Canada |
|
42 |
|
|
27 |
|
|
51 |
|
|
52 |
|
|
63 |
|
|
37 |
|
International |
|
6 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
6 |
|
Total |
|
81 |
|
|
72 |
|
|
98 |
|
|
103 |
|
|
120 |
|
|
98 |
|
According to industry sources, as of July 26,
2022, the U.S. active land drilling rig count has increased 57%
from the same point last year while the Canadian active land
drilling rig count has increased by 31%. To date in 2022,
approximately 79% of the U.S. industry’s active rigs and 60% of the
Canadian industry’s active rigs were drilling for oil targets,
compared with 82% for the U.S. and 58% for Canada at the same time
last year.
Capital Spending and Free Cash Flow
Allocation
During the quarter, we increased our capital
spending plan to reflect higher maintenance capital from our
increasing activity, strategic purchase of drill pipe and customer
funded rig upgrades. Capital spending in 2022 is expected to be
$149 million and by spend category includes $73 million for
sustaining, infrastructure and intangibles and $76 million for
expansion and upgrades. We expect that the $149 million will be
split $141 million in the Contract Drilling Services segment, $6
million in the Completion and Production Services segment and $2
million to the Corporate segment. At June 30, 2022, Precision had
capital commitments of $159 million with payments expected through
2024.
Our debt reduction plans continue with the goal
of repaying over $400 million of debt over the next four years and
reaching a sustained Net Debt to Adjusted EBITDA ratio of below 1.5
times. At the end of 2025, we expect to have reduced debt by well
over $1 billion since 2018. In addition to our debt reduction
target through 2025, we plan to allocate 10% to 20% of free cash
flow before debt principal repayments toward the return of capital
to shareholders.
SEGMENTED FINANCIAL RESULTS
Precision’s operations are reported in two
segments: Contract Drilling Services, which includes our drilling
rig, oilfield supply and manufacturing divisions; and Completion
and Production Services, which includes our service rig, rental and
camp and catering divisions.
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
|
294,299 |
|
|
181,256 |
|
|
62.4 |
|
|
608,444 |
|
|
386,075 |
|
|
57.6 |
|
Completion and Production Services |
|
33,041 |
|
|
20,667 |
|
|
59.9 |
|
|
71,279 |
|
|
53,211 |
|
|
34.0 |
|
Inter-segment eliminations |
|
(1,324 |
) |
|
(564 |
) |
|
134.8 |
|
|
(2,368 |
) |
|
(1,454 |
) |
|
62.9 |
|
|
|
326,016 |
|
|
201,359 |
|
|
61.9 |
|
|
677,355 |
|
|
437,832 |
|
|
54.7 |
|
Adjusted EBITDA:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
|
70,429 |
|
|
47,703 |
|
|
47.6 |
|
|
141,603 |
|
|
107,734 |
|
|
31.4 |
|
Completion and Production Services |
|
4,839 |
|
|
4,252 |
|
|
13.8 |
|
|
11,378 |
|
|
12,054 |
|
|
(5.6 |
) |
Corporate and Other |
|
(11,169 |
) |
|
(23,011 |
) |
|
(51.5 |
) |
|
(52,027 |
) |
|
(36,305 |
) |
|
43.3 |
|
|
|
64,099 |
|
|
28,944 |
|
|
121.5 |
|
|
100,954 |
|
|
83,483 |
|
|
20.9 |
|
(1) See “FINANCIAL MEASURES AND RATIOS.”
SEGMENT REVIEW OF CONTRACT DRILLING
SERVICES
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars, except where noted) |
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
Revenue |
|
294,299 |
|
|
181,256 |
|
|
62.4 |
|
|
608,444 |
|
|
386,075 |
|
|
57.6 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
215,676 |
|
|
126,394 |
|
|
70.6 |
|
|
445,727 |
|
|
264,515 |
|
|
68.5 |
|
General and administrative |
|
8,194 |
|
|
7,159 |
|
|
14.5 |
|
|
21,114 |
|
|
13,826 |
|
|
52.7 |
|
Adjusted EBITDA(1) |
|
70,429 |
|
|
47,703 |
|
|
47.6 |
|
|
141,603 |
|
|
107,734 |
|
|
31.4 |
|
Adjusted EBITDA as a percentage of revenue(1) |
|
23.9 |
% |
|
26.3 |
% |
|
|
|
|
23.3 |
% |
|
27.9 |
% |
|
|
|
(1) See “FINANCIAL MEASURES AND RATIOS.”
United
States onshore drilling statistics:(1) |
2022 |
|
|
2021 |
|
|
Precision |
|
|
Industry(2) |
|
|
Precision |
|
|
Industry(2) |
|
Average number of active land rigs for quarters ended: |
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
51 |
|
|
603 |
|
|
33 |
|
|
378 |
|
June 30 |
|
55 |
|
|
687 |
|
|
39 |
|
|
437 |
|
Year to date average |
|
53 |
|
|
645 |
|
|
36 |
|
|
408 |
|
(1) United States lower 48 operations only.(2)
Baker Hughes rig counts.
Canadian onshore drilling statistics:(1) |
2022 |
|
|
2021 |
|
|
Precision |
|
|
Industry(2) |
|
|
Precision |
|
|
Industry(2) |
|
Average number of active land rigs for quarters ended: |
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
63 |
|
|
205 |
|
|
42 |
|
|
145 |
|
June 30 |
|
37 |
|
|
113 |
|
|
27 |
|
|
72 |
|
Year to date average |
|
50 |
|
|
159 |
|
|
35 |
|
|
109 |
|
(1) Canadian operations only.(2) Baker Hughes
rig counts.
SEGMENT REVIEW OF COMPLETION AND
PRODUCTION SERVICES
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars, except where noted) |
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
|
|
Revenue |
|
33,041 |
|
|
20,667 |
|
|
59.9 |
|
|
71,279 |
|
|
53,211 |
|
|
34.0 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
26,200 |
|
|
15,125 |
|
|
73.2 |
|
|
56,167 |
|
|
38,515 |
|
|
45.8 |
|
General and administrative |
|
2,002 |
|
|
1,290 |
|
|
55.2 |
|
|
3,734 |
|
|
2,642 |
|
|
41.3 |
|
Adjusted EBITDA(1) |
|
4,839 |
|
|
4,252 |
|
|
13.8 |
|
|
11,378 |
|
|
12,054 |
|
|
(5.6 |
) |
Adjusted EBITDA as a percentage of revenue(1) |
|
14.6 |
% |
|
20.6 |
% |
|
|
|
|
16.0 |
% |
|
22.7 |
% |
|
|
|
Well servicing statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of service rigs (end of period) |
|
93 |
|
|
123 |
|
|
(24.4 |
) |
|
93 |
|
|
123 |
|
|
(24.4 |
) |
Service rig operating hours |
|
30,389 |
|
|
26,630 |
|
|
14.1 |
|
|
68,654 |
|
|
61,533 |
|
|
11.6 |
|
Service rig operating hour utilization |
|
36 |
% |
|
24 |
% |
|
|
|
|
41 |
% |
|
27 |
% |
|
|
|
(1) See “FINANCIAL MEASURES AND RATIOS.”
SEGMENT REVIEW OF CORPORATE AND
OTHER
Our Corporate and Other segment provides support
functions to our operating segments. The Corporate and Other
segment had negative Adjusted EBITDA of $11 million as compared
with $23 million in the second quarter of 2021. Our Adjusted EBITDA
was positively impacted by decreased share-based compensation costs
from our lower share price, partially offset by lower CEWS program
assistance. During the quarter, we did not recognize any CEWS
program assistance as compared with $1 million in 2021.
OTHER ITEMS
Share-based Incentive Compensation
Plans
We have several cash and equity-settled
share-based incentive plans for non-management directors, officers,
and other eligible employees. Our accounting policies for each
share-based incentive plan can be found in our 2021 Annual
Report.
A summary of amounts expensed under these plans
during the reporting periods are as follows:
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Cash settled share-based incentive plans |
|
5,048 |
|
|
24,830 |
|
|
52,259 |
|
|
34,698 |
|
Equity settled share-based
incentive plans: |
|
|
|
|
|
|
|
|
|
|
|
|
Executive PSU |
|
— |
|
|
1,398 |
|
|
407 |
|
|
2,171 |
|
Share option plan |
|
— |
|
|
34 |
|
|
20 |
|
|
165 |
|
Total share-based incentive compensation plan expense |
|
5,048 |
|
|
26,262 |
|
|
52,686 |
|
|
37,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
1,852 |
|
|
5,901 |
|
|
12,772 |
|
|
8,165 |
|
General and Administrative |
|
3,196 |
|
|
20,361 |
|
|
39,914 |
|
|
28,869 |
|
|
|
5,048 |
|
|
26,262 |
|
|
52,686 |
|
|
37,034 |
|
Cash settled share-based compensation expense
for the quarter was $5 million as compared with $26 million in
2021. The decreased expense in 2022 was primarily due to our lower
share price. Our equity settled share-based compensation expense
for the second quarter of 2022 was nil as our Executive PSUs and
share options fully vested in the first quarter of 2022.
As at June 30, 2022, the majority of our
share-based compensation plans were classified as cash-settled and
will be impacted by changes in our share price. Although accounted
for as cash-settled, Precision retains the ability to settle
certain vested units in common shares at its discretion.
Finance Charges
Second quarter net finance charges were $21
million as compared with $28 million in 2021. The decreased finance
charges were primarily due to lower debt issue costs. In 2021, we
accelerated the amortization of issue costs associated with the
unsecured senior notes that were fully redeemed in the quarter.
Interest charges on our U.S. denominated long-term debt in the
second quarter were US$15 million ($19 million) as compared with
US$16 million ($19 million) in 2021.
Income Tax
Income tax expense for the quarter was $4
million as compared with $1 million recovery in 2021. During the
second quarter, we did not recognize deferred tax assets on certain
Canadian and international operating losses.
Well Control Event
Late in the second quarter of 2022, we
experienced a well control event during a turnkey drilling project.
We recognized revenue of nil and US$5 million of drilling-related
operating costs. Additionally, the net book value of our damaged
drilling rig was derecognized resulting in a US$1 million charge to
depreciation and amortization expense. We accrued US$12 million of
associated well site clean-up and remediation costs and accrued
estimated insurance recoveries of US$16 million for the drilling
rig and associated costs. The provisions for the associated costs
and insurance recoveries are based on our best estimates at June
30, 2022. As the assessment of damage is ongoing, the provisions
may be subject to change.
LIQUIDITY AND CAPITAL
RESOURCES
Liquidity
Amount |
|
Availability |
|
Used for |
|
Maturity |
Senior credit facility (secured) |
|
|
|
|
|
|
US$500 million(1) (extendible, revolvingterm credit facility with
US$300 million accordion feature) |
|
US$128 million drawn and US$32 million in outstanding letters of
credit |
|
General corporate purposes |
|
June 18, 2025(1) |
Real estate credit facilities (secured) |
|
|
|
|
|
|
US$9 million |
|
Fully drawn |
|
General corporate purposes |
|
November 19, 2025 |
$18 million |
|
Fully drawn |
|
General corporate purposes |
|
March 16, 2026 |
Operating facilities (secured) |
|
|
|
|
|
|
$40 million |
|
Undrawn, except $7 million inoutstanding letters of credit |
|
Letters of credit and generalcorporate purposes |
|
|
US$15 million |
|
Undrawn |
|
Short-term working capitalrequirements |
|
|
Demand letter of credit facility (secured) |
|
|
|
|
|
|
US$30 million |
|
Undrawn, except US$12 million inoutstanding letters of credit |
|
Letters of credit |
|
|
Unsecured senior notes (unsecured) |
|
|
|
|
|
|
US$348 million – 7.125% |
|
Fully drawn |
|
Debt redemption and repurchases |
|
January 15, 2026 |
US$400 million – 6.875% |
|
Fully drawn |
|
Debt redemption and repurchases |
|
January 15, 2029 |
(1) US$53 million expires on November 21,
2023.
At June 30, 2022, we had $1,158 million
outstanding under our Senior Credit Facility, Real Estate Credit
Facilities and unsecured senior notes as compared with $1,126
million at December 31, 2021.
The current blended cash interest cost of our
debt is approximately 6.6%.
Covenants
At June 30, 2022, we were in compliance with the
covenants of our Senior Credit Facility and Real Estate Credit
Facilities.
|
Covenant |
|
At June 30, 2022 |
|
Senior Credit Facility |
|
|
|
|
|
Consolidated senior debt to consolidated covenant EBITDA(1) |
< 2.50 |
|
|
0.79 |
|
Consolidated covenant EBITDA to consolidated interest expense |
> 2.25 |
|
|
3.88 |
|
Real Estate Credit
Facilities |
|
|
|
|
|
Consolidated covenant EBITDA to consolidated interest expense |
> 2.25 |
|
|
3.88 |
|
(1) For purposes of calculating the leverage ratio consolidated
senior debt only includes secured indebtedness.
Average shares outstanding
The following table reconciles the weighted
average shares outstanding used in computing basic and diluted net
loss per share:
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Weighted average shares outstanding – basic |
|
13,588 |
|
|
13,304 |
|
|
13,533 |
|
|
13,327 |
|
Effect
of stock options and other equity compensation plans |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Weighted average shares outstanding – diluted |
|
13,588 |
|
|
13,304 |
|
|
13,533 |
|
|
13,327 |
|
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share
amounts) |
2021 |
|
|
2022 |
|
Quarters ended |
September 30 |
|
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
Revenue |
|
253,813 |
|
|
295,202 |
|
|
351,339 |
|
|
326,016 |
|
Adjusted EBITDA(1) |
|
45,408 |
|
|
63,881 |
|
|
36,855 |
|
|
64,099 |
|
Net loss |
|
(38,032 |
) |
|
(27,336 |
) |
|
(43,844 |
) |
|
(24,611 |
) |
Net loss per basic and diluted
share |
|
(2.86 |
) |
|
(2.05 |
) |
|
(3.25 |
) |
|
(1.81 |
) |
Funds provided by
operations(1) |
|
33,525 |
|
|
62,681 |
|
|
29,955 |
|
|
60,373 |
|
Cash
provided by (used in) operations |
|
21,871 |
|
|
59,713 |
|
|
(65,294 |
) |
|
135,174 |
|
(Stated in thousands of Canadian dollars, except per share
amounts) |
2020 |
|
|
2021 |
|
Quarters ended |
September 30 |
|
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
Revenue |
|
164,822 |
|
|
201,688 |
|
|
236,473 |
|
|
201,359 |
|
Adjusted EBITDA(1) |
|
47,771 |
|
|
55,263 |
|
|
54,539 |
|
|
28,944 |
|
Net loss |
|
(28,476 |
) |
|
(37,518 |
) |
|
(36,106 |
) |
|
(75,912 |
) |
Net loss per basic and diluted
share |
|
(2.08 |
) |
|
(2.74 |
) |
|
(2.70 |
) |
|
(5.71 |
) |
Funds provided by
operations(1) |
|
27,489 |
|
|
35,282 |
|
|
43,430 |
|
|
12,607 |
|
Cash
provided by operations |
|
41,950 |
|
|
4,737 |
|
|
15,422 |
|
|
42,219 |
|
(1) See “FINANCIAL MEASURES AND RATIOS.”
FINANCIAL MEASURES AND
RATIOS
Non-GAAP Financial Measures |
We reference certain additional Non-Generally Accepted Accounting
Principles (Non-GAAP) measures that are not
defined terms under IFRS to assess performance because we believe
they provide useful supplemental information to investors. |
Adjusted EBITDA |
We believe Adjusted EBITDA (earnings before income taxes, gain
(loss) on investments and other assets, loss on repurchase of
unsecured senior notes, finance charges, foreign exchange, gain on
asset disposals and depreciation and amortization), as reported in
our Condensed Interim Consolidated Statements of Net Loss and our
reportable operating segment disclosures, is a useful measure,
because it gives an indication of the results from our principal
business activities prior to consideration of how our activities
are financed and the impact of foreign exchange, taxation and
depreciation and amortization charges.The most directly comparable
financial measure is net earnings (loss). |
Funds Provided by (Used in) Operations |
We believe funds provided by (used in) operations, as reported in
our Condensed Interim Consolidated Statements of Cash Flows, is a
useful measure because it provides an indication of the funds our
principal business activities generate prior to consideration of
working capital changes, which is primarily made up of highly
liquid balances.The most directly comparable financial measure is
cash provided by (used in) operations. |
Net Capital Spending |
We believe net capital spending is a useful measure as it provides
an indication of our primary investment activities.The most
directly comparable financial measure is cash provided by (used in)
investing activities.Net capital spending is calculated as
follows: |
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2022 |
|
2021 |
|
2022 |
|
|
2021 |
|
Capital spending by spend category |
|
|
|
|
|
|
|
|
|
|
|
Expansion and upgrade |
15,530 |
|
|
6,446 |
|
|
25,145 |
|
|
9,883 |
|
Maintenance and infrastructure |
23,906 |
|
|
13,809 |
|
|
50,693 |
|
|
18,808 |
|
|
39,436 |
|
|
20,255 |
|
|
75,838 |
|
|
28,691 |
|
Proceeds on sale of property, plant and equipment |
(6,849 |
) |
|
(2,590 |
) |
|
(9,696 |
) |
|
(5,914 |
) |
Net capital spending |
32,587 |
|
|
17,665 |
|
|
66,142 |
|
|
22,777 |
|
Purchase of investments and
other assets |
536 |
|
|
— |
|
|
536 |
|
|
— |
|
Changes
in non-cash working capital balances |
3,659 |
|
|
(7,515 |
) |
|
447 |
|
|
(2,713 |
) |
Cash used in investing activities |
36,782 |
|
|
10,150 |
|
|
67,125 |
|
|
20,064 |
|
Working Capital |
We define working capital as current assets less current
liabilities, as reported in our Condensed Interim Consolidated
Statements of Financial Position.Working capital is calculated as
follows: |
|
At June 30, |
|
At December 31, |
|
(Stated
in thousands of Canadian dollars) |
2022 |
|
2021 |
|
Current assets |
394,717 |
|
319,757 |
|
Current
liabilities |
283,225 |
|
238,120 |
|
Working capital |
111,492 |
|
81,637 |
|
Non-GAAP Ratios |
We reference certain additional Non-GAAP ratios that are not
defined terms under IFRS to assess performance because we believe
they provide useful supplemental information to investors. |
Adjusted EBITDA % of Revenue |
We believe Adjusted EBITDA as a percentage of consolidated revenue,
as reported in our Condensed Interim Consolidated Statements of Net
Loss, provides an indication of our profitability from our
principal business activities prior to consideration of how our
activities are financed and the impact of foreign exchange,
taxation and depreciation and amortization charges. |
Long-term debt to long-term debt plus equity |
We believe that long-term debt (as reported in our Condensed
Interim Consolidated Statements of Financial Position) to long-term
debt plus equity (total shareholders’ equity as reported in our
Condensed Interim Consolidated Statements of Financial Position)
provides an indication to our debt leverage. |
Net Debt to Adjusted EBITDA |
We believe that the Net Debt (long-term debt less cash, as reported
in our Condensed Interim Consolidated Statements of Financial
Position) to Adjusted EBITDA ratio provides an indication to the
number of years it would take for us to repay our debt
obligations. |
Supplementary Financial Measures |
We reference certain supplementary financial measures that are not
defined terms under IFRS to assess performance because we believe
they provide useful supplemental information to investors. |
Capital Spending by Spend Category |
We provide additional disclosure to better depict the nature of our
capital spending. Our capital spending is categorized as expansion
and upgrade, maintenance and infrastructure, or intangibles. |
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements contained in this release,
including statements that contain words such as "could", "should",
"can", "anticipate", "estimate", "intend", "plan", "expect",
"believe", "will", "may", "continue", "project", "potential" and
similar expressions and statements relating to matters that are not
historical facts constitute "forward-looking information" within
the meaning of applicable Canadian securities legislation and
"forward-looking statements" within the meaning of the "safe
harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995 (collectively, "forward-looking
information and statements").
In particular, forward looking information and
statements include, but are not limited to, the following:
- our strategic priorities for 2022;
- our capital expenditures, free cash flow allocation and debt
reduction plan for 2022;
- anticipated activity levels, demand for our drilling rigs, day
rates and margins in 2022;
- the average number of term contracts in place for 2022;
- customer adoption of AlphaTM technologies and EverGreenTM suite
of environmental solutions;
- anticipated timing and amount of costs savings from acquired
well servicing and rental assets;
- potential commercial opportunities and rig contract
renewals;
- our future debt reduction plans; and
- anticipated timing and amounts of insurance recoveries.
These forward-looking information and statements
are based on certain assumptions and analysis made by Precision in
light of our experience and our perception of historical trends,
current conditions, expected future developments and other factors
we believe are appropriate under the circumstances. These include,
among other things:
- the fluctuation in oil prices may pressure customers into
reducing or limiting their drilling budgets;
- the success of our response to the COVID-19 global
pandemic;
- the status of current negotiations with our customers and
vendors;
- customer focus on safety performance;
- existing term contracts are neither renewed nor terminated
prematurely;
- our ability to deliver rigs to customers on a timely basis;
and
- the general stability of the economic and political
environments in the jurisdictions where we operate.
Undue reliance should not be placed on
forward-looking information and statements. Whether actual results,
performance or achievements will conform to our expectations and
predictions is subject to a number of known and unknown risks and
uncertainties which could cause actual results to differ materially
from our expectations. Such risks and uncertainties include, but
are not limited to:
- volatility in the price and demand for oil and natural
gas;
- fluctuations in the level of oil and natural gas exploration
and development activities;
- fluctuations in the demand for contract drilling, well
servicing and ancillary oilfield services;
- our customers’ inability to obtain adequate credit or financing
to support their drilling and production activity;
- the success of vaccinations for COVID-19 worldwide;
- changes in drilling and well servicing technology, which could
reduce demand for certain rigs or put us at a competitive
advantage;
- shortages, delays and interruptions in the delivery of
equipment supplies and other key inputs;
- liquidity of the capital markets to fund customer drilling
programs;
- availability of cash flow, debt and equity sources to fund our
capital and operating requirements, as needed;
- the impact of weather and seasonal conditions on operations and
facilities;
- competitive operating risks inherent in contract drilling, well
servicing and ancillary oilfield services;
- ability to improve our rig technology to improve drilling
efficiency;
- general economic, market or business conditions;
- the availability of qualified personnel and management;
- a decline in our safety performance which could result in lower
demand for our services;
- changes in laws or regulations, including changes in
environmental laws and regulations such as increased regulation of
hydraulic fracturing or restrictions on the burning of fossil fuels
and greenhouse gas emissions, which could have an adverse impact on
the demand for oil and natural gas;
- terrorism, social, civil and political unrest in the foreign
jurisdictions where we operate;
- fluctuations in foreign exchange, interest rates and tax rates;
and
- other unforeseen conditions which could impact the use of
services supplied by Precision and Precision’s ability to respond
to such conditions.
Readers are cautioned that the forgoing list of
risk factors is not exhaustive. Additional information on these and
other factors that could affect our business, operations or
financial results are included in reports on file with applicable
securities regulatory authorities, including but not limited to
Precision’s Annual Information Form for the year ended December 31,
2021, which may be accessed on Precision’s SEDAR profile at
www.sedar.com or under Precision’s EDGAR profile at www.sec.gov.
The forward-looking information and statements contained in this
release are made as of the date hereof and Precision undertakes no
obligation to update publicly or revise any forward-looking
statements or information, whether as a result of new information,
future events or otherwise, except as required by law.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED)
(Stated in thousands of Canadian dollars) |
June 30, 2022 |
|
|
December 31, 2021 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash |
$ |
51,641 |
|
|
$ |
40,588 |
|
Accounts receivable |
|
316,529 |
|
|
|
255,740 |
|
Inventory |
|
26,547 |
|
|
|
23,429 |
|
Total current assets |
|
394,717 |
|
|
|
319,757 |
|
Non-current assets: |
|
|
|
|
|
|
|
Income tax recoverable |
|
1,521 |
|
|
|
— |
|
Deferred tax assets |
|
840 |
|
|
|
867 |
|
Right-of-use assets |
|
51,553 |
|
|
|
51,440 |
|
Property, plant and equipment |
|
2,225,236 |
|
|
|
2,258,391 |
|
Intangibles |
|
21,678 |
|
|
|
23,915 |
|
Investments and other assets |
|
9,141 |
|
|
|
7,382 |
|
Total non-current assets |
|
2,309,969 |
|
|
|
2,341,995 |
|
Total assets |
$ |
2,704,686 |
|
|
$ |
2,661,752 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
268,688 |
|
|
$ |
224,123 |
|
Income taxes payable |
|
695 |
|
|
|
839 |
|
Current portion of lease obligations |
|
11,602 |
|
|
|
10,935 |
|
Current portion of long-term debt |
|
2,240 |
|
|
|
2,223 |
|
Total current liabilities |
|
283,225 |
|
|
|
238,120 |
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
Share-based compensation |
|
34,475 |
|
|
|
26,728 |
|
Provisions and other |
|
6,907 |
|
|
|
6,513 |
|
Lease obligations |
|
45,642 |
|
|
|
45,823 |
|
Long-term debt |
|
1,139,720 |
|
|
|
1,106,794 |
|
Deferred tax liabilities |
|
15,341 |
|
|
|
12,219 |
|
Total non-current liabilities |
|
1,242,085 |
|
|
|
1,198,077 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Shareholders’ capital |
|
2,299,370 |
|
|
|
2,281,444 |
|
Contributed surplus |
|
74,057 |
|
|
|
76,311 |
|
Deficit |
|
(1,335,435 |
) |
|
|
(1,266,980 |
) |
Accumulated other comprehensive income |
|
141,384 |
|
|
|
134,780 |
|
Total shareholders’ equity |
|
1,179,376 |
|
|
|
1,225,555 |
|
Total liabilities and shareholders’ equity |
$ |
2,704,686 |
|
|
$ |
2,661,752 |
|
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF NET LOSS (UNAUDITED)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
326,016 |
|
|
$ |
201,359 |
|
|
$ |
677,355 |
|
|
$ |
437,832 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
240,552 |
|
|
|
140,955 |
|
|
|
499,526 |
|
|
|
301,576 |
|
General and administrative |
|
21,365 |
|
|
|
31,460 |
|
|
|
76,875 |
|
|
|
52,773 |
|
Earnings before income taxes, loss (gain) on investments
and other assets, loss on repurchase of unsecured
senior notes, finance charges, foreign exchange,
gain on asset disposals and depreciation and
amortization |
|
64,099 |
|
|
|
28,944 |
|
|
|
100,954 |
|
|
|
83,483 |
|
Depreciation and
amortization |
|
69,757 |
|
|
|
69,704 |
|
|
|
138,214 |
|
|
|
141,717 |
|
Gain on asset disposals |
|
(10,800 |
) |
|
|
(904 |
) |
|
|
(13,914 |
) |
|
|
(2,963 |
) |
Foreign exchange |
|
536 |
|
|
|
(296 |
) |
|
|
18 |
|
|
|
(360 |
) |
Finance charges |
|
21,043 |
|
|
|
27,698 |
|
|
|
41,773 |
|
|
|
50,144 |
|
Loss on repurchase of
unsecured senior notes |
|
— |
|
|
|
9,520 |
|
|
|
— |
|
|
|
9,520 |
|
Loss
(gain) on investments and other assets |
|
4,346 |
|
|
|
— |
|
|
|
(1,223 |
) |
|
|
— |
|
Loss before income taxes |
|
(20,783 |
) |
|
|
(76,778 |
) |
|
|
(63,914 |
) |
|
|
(114,575 |
) |
Income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
635 |
|
|
|
788 |
|
|
|
1,605 |
|
|
|
1,572 |
|
Deferred |
|
3,193 |
|
|
|
(1,654 |
) |
|
|
2,936 |
|
|
|
(4,129 |
) |
|
|
3,828 |
|
|
|
(866 |
) |
|
|
4,541 |
|
|
|
(2,557 |
) |
Net loss |
$ |
(24,611 |
) |
|
$ |
(75,912 |
) |
|
$ |
(68,455 |
) |
|
$ |
(112,018 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(1.81 |
) |
|
$ |
(5.71 |
) |
|
$ |
(5.06 |
) |
|
$ |
(8.41 |
) |
Diluted |
$ |
(1.81 |
) |
|
$ |
(5.71 |
) |
|
$ |
(5.06 |
) |
|
$ |
(8.41 |
) |
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net loss |
$ |
(24,611 |
) |
|
$ |
(75,912 |
) |
|
$ |
(68,455 |
) |
|
$ |
(112,018 |
) |
Unrealized gain
(loss) on translation of assets and
liabilities of operations denominated in foreign
currency |
|
44,638 |
|
|
|
(21,548 |
) |
|
|
27,667 |
|
|
|
(42,546 |
) |
Foreign exchange gain
(loss) on net investment hedge
with U.S. denominated debt |
|
(33,831 |
) |
|
|
15,630 |
|
|
|
(21,063 |
) |
|
|
31,539 |
|
Tax
expense related to net investment hedge of long-
term debt |
|
— |
|
|
|
(285 |
) |
|
|
— |
|
|
|
— |
|
Comprehensive loss |
$ |
(13,804 |
) |
|
$ |
(82,115 |
) |
|
$ |
(61,851 |
) |
|
$ |
(123,025 |
) |
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(24,611 |
) |
|
$ |
(75,912 |
) |
|
$ |
(68,455 |
) |
|
$ |
(112,018 |
) |
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term compensation plans |
|
3,224 |
|
|
|
13,653 |
|
|
|
34,436 |
|
|
|
20,801 |
|
Depreciation and amortization |
|
69,757 |
|
|
|
69,704 |
|
|
|
138,214 |
|
|
|
141,717 |
|
Gain on asset disposals |
|
(10,800 |
) |
|
|
(904 |
) |
|
|
(13,914 |
) |
|
|
(2,963 |
) |
Foreign exchange |
|
422 |
|
|
|
464 |
|
|
|
151 |
|
|
|
1,022 |
|
Finance charges |
|
21,043 |
|
|
|
27,698 |
|
|
|
41,773 |
|
|
|
50,144 |
|
Income taxes |
|
3,828 |
|
|
|
(866 |
) |
|
|
4,541 |
|
|
|
(2,557 |
) |
Other |
|
275 |
|
|
|
(567 |
) |
|
|
275 |
|
|
|
(564 |
) |
Loss (gain) on investments and other assets |
|
4,346 |
|
|
|
— |
|
|
|
(1,223 |
) |
|
|
— |
|
Loss on repurchase of unsecured senior notes |
|
— |
|
|
|
9,520 |
|
|
|
— |
|
|
|
9,520 |
|
Income taxes paid |
|
(2,576 |
) |
|
|
(3,905 |
) |
|
|
(2,803 |
) |
|
|
(4,066 |
) |
Income taxes recovered |
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
Interest paid |
|
(4,540 |
) |
|
|
(26,412 |
) |
|
|
(42,701 |
) |
|
|
(45,178 |
) |
Interest received |
|
5 |
|
|
|
131 |
|
|
|
34 |
|
|
|
176 |
|
Funds provided by operations |
|
60,373 |
|
|
|
12,607 |
|
|
|
90,328 |
|
|
|
56,037 |
|
Changes
in non-cash working capital balances |
|
74,801 |
|
|
|
29,612 |
|
|
|
(20,448 |
) |
|
|
1,604 |
|
|
|
135,174 |
|
|
|
42,219 |
|
|
|
69,880 |
|
|
|
57,641 |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant
and equipment |
|
(39,436 |
) |
|
|
(20,255 |
) |
|
|
(75,838 |
) |
|
|
(28,691 |
) |
Proceeds on sale of property,
plant and equipment |
|
6,849 |
|
|
|
2,590 |
|
|
|
9,696 |
|
|
|
5,914 |
|
Purchase of investments and
other assets |
|
(536 |
) |
|
|
— |
|
|
|
(536 |
) |
|
|
— |
|
Changes
in non-cash working capital balances |
|
(3,659 |
) |
|
|
7,515 |
|
|
|
(447 |
) |
|
|
2,713 |
|
|
|
(36,782 |
) |
|
|
(10,150 |
) |
|
|
(67,125 |
) |
|
|
(20,064 |
) |
Financing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term
debt |
|
6,405 |
|
|
|
676,341 |
|
|
|
94,529 |
|
|
|
696,341 |
|
Repayments of long-term
debt |
|
(75,921 |
) |
|
|
(712,034 |
) |
|
|
(84,111 |
) |
|
|
(761,459 |
) |
Repurchase of share
capital |
|
(5,000 |
) |
|
|
— |
|
|
|
(5,000 |
) |
|
|
(4,294 |
) |
Issuance of common shares on
the exercise of options |
|
4,766 |
|
|
|
— |
|
|
|
6,162 |
|
|
|
— |
|
Debt issuance costs |
|
— |
|
|
|
(9,550 |
) |
|
|
— |
|
|
|
(9,794 |
) |
Debt amendment fees |
|
— |
|
|
|
(910 |
) |
|
|
— |
|
|
|
(910 |
) |
Lease payments |
|
(1,842 |
) |
|
|
(1,709 |
) |
|
|
(3,409 |
) |
|
|
(3,330 |
) |
Changes
in non-cash working capital balances |
|
— |
|
|
|
1,829 |
|
|
|
— |
|
|
|
1,829 |
|
|
|
(71,592 |
) |
|
|
(46,033 |
) |
|
|
8,171 |
|
|
|
(81,617 |
) |
Effect of exchange rate changes on cash |
|
739 |
|
|
|
(430 |
) |
|
|
127 |
|
|
|
(1,295 |
) |
Increase (decrease) in cash |
|
27,539 |
|
|
|
(14,394 |
) |
|
|
11,053 |
|
|
|
(45,335 |
) |
Cash,
beginning of period |
|
24,102 |
|
|
|
77,831 |
|
|
|
40,588 |
|
|
|
108,772 |
|
Cash, end of period |
$ |
51,641 |
|
|
$ |
63,437 |
|
|
$ |
51,641 |
|
|
$ |
63,437 |
|
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Stated
in thousands of Canadian dollars) |
Shareholders’Capital |
|
|
ContributedSurplus |
|
|
AccumulatedOtherComprehensiveIncome |
|
|
Deficit |
|
|
TotalEquity |
|
Balance at January 1, 2022 |
$ |
2,281,444 |
|
|
$ |
76,311 |
|
|
$ |
134,780 |
|
|
$ |
(1,266,980 |
) |
|
$ |
1,225,555 |
|
Net loss for the period |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(68,455 |
) |
|
|
(68,455 |
) |
Other comprehensive income for
the period |
|
— |
|
|
|
— |
|
|
|
6,604 |
|
|
|
— |
|
|
|
6,604 |
|
Share options exercised |
|
8,843 |
|
|
|
(2,681 |
) |
|
|
— |
|
|
|
— |
|
|
|
6,162 |
|
Share repurchases |
|
(5,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,000 |
) |
Share-based compensation
reclassification |
|
14,083 |
|
|
|
(219 |
) |
|
|
— |
|
|
|
— |
|
|
|
13,864 |
|
Share-based compensation expense |
|
— |
|
|
|
646 |
|
|
|
— |
|
|
|
— |
|
|
|
646 |
|
Balance at June 30, 2022 |
$ |
2,299,370 |
|
|
$ |
74,057 |
|
|
$ |
141,384 |
|
|
$ |
(1,335,435 |
) |
|
$ |
1,179,376 |
|
(Stated
in thousands of Canadian dollars) |
Shareholders’Capital |
|
|
ContributedSurplus |
|
|
AccumulatedOtherComprehensiveIncome |
|
|
Deficit |
|
|
TotalEquity |
|
Balance at January 1, 2021 |
$ |
2,285,738 |
|
|
$ |
72,915 |
|
|
$ |
137,581 |
|
|
$ |
(1,089,594 |
) |
|
$ |
1,406,640 |
|
Net loss for the period |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(112,018 |
) |
|
|
(112,018 |
) |
Other comprehensive loss for
the period |
|
— |
|
|
|
— |
|
|
|
(11,007 |
) |
|
|
— |
|
|
|
(11,007 |
) |
Share repurchases |
|
(4,294 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,294 |
) |
Share-based compensation
reclassification |
|
— |
|
|
|
(1,958 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,958 |
) |
Share-based compensation expense |
|
— |
|
|
|
4,293 |
|
|
|
— |
|
|
|
— |
|
|
|
4,293 |
|
Balance at June 30, 2021 |
$ |
2,281,444 |
|
|
$ |
75,250 |
|
|
$ |
126,574 |
|
|
$ |
(1,201,612 |
) |
|
$ |
1,281,656 |
|
SECOND QUARTER RESULTS CONFERENCE CALL
AND WEBCAST
Precision Drilling Corporation has scheduled a
conference call and webcast to begin promptly at 12:00 noon MT
(2:00 p.m. ET) on Wednesday, July 27, 2022. To participate in the
live call please register at the URL link below:
https://register.vevent.com/register/BI520cba3a13144e1e995738278dc02cf4
This link replaces the dial-in details that were
included in past releases. Once registered, you will receive a
dial-in number and a unique PIN, which will allow you to ask
questions.
An archived version of the webcast will be
available through the webcast on-demand for 12 months.
About Precision
Precision is a leading provider of safe and
environmentally responsible High Performance, High Value services
to the energy industry, offering customers access to an extensive
fleet of Super Series drilling rigs. Precision has commercialized
an industry-leading digital technology portfolio known as “Alpha™”
that utilizes advanced automation software and analytics to
generate efficient, predictable, and repeatable results for energy
customers. Additionally, Precision offers well service rigs, camps
and rental equipment all backed by a comprehensive mix of technical
support services and skilled, experienced personnel.
Precision is headquartered in Calgary, Alberta,
Canada and is listed on the Toronto Stock Exchange under the
trading symbol “PD” and on the New York Stock Exchange under the
trading symbol “PDS.”
For further information, please contact:
Carey Ford, Senior Vice President and Chief
Financial Officer713.435.6100
800, 525 - 8th Avenue S.W.Calgary, Alberta,
Canada T2P 1G1Website: www.precisiondrilling.com
Precision Drilling (TSX:PD)
Historical Stock Chart
From May 2024 to Jun 2024
Precision Drilling (TSX:PD)
Historical Stock Chart
From Jun 2023 to Jun 2024