(Canadian dollars, unless otherwise indicated)
Precision Drilling Corporation ("Precision" or the
"Corporation") (TSX:PD) (NYSE:PDS) announced today that planned
capital expenditures for 2013 are $485 million and the
implementation of a quarterly dividend starting in the 4th quarter
of 2012. Precision also announced a new international contract
award for two new build rigs in Kuwait and asset writedowns as part
of Precision's High Performance, High Value strategy.
Precision has scheduled a conference call and webcast to discuss
today's announcement. The call will begin promptly at 11:00 a.m. MT
(1:00 p.m. ET) today, December 10, 2012.
The conference call dial in numbers are 416-340-2217 or
866-696-5910.
2013 Capital Plan and Update on 2012 Capital Plan
The 2013 capital expenditure plan includes $164 million for
expansion capital, $194 million for sustaining and infrastructure
expenditures and $127 million to upgrade existing rigs. Precision
expects that the $485 million will be split $417 million in the
Contract Drilling segment and $68 million in the Completion and
Production Services segment.
Precision's expansion capital plan includes completing
construction of two remaining rigs from the 2012 new build program,
one new build rig for the North American market and the costs to
complete about 50 percent of two new build rigs for international
operations. All new build rigs are backed by long-term
contracts.
Precision's sustaining and infrastructure capital plan is based
upon currently anticipated activity levels for 2013. Additionally,
the 2013 capital plan includes the completion of the rig upgrades
previously announced in 2012 and approximately 20 additional rig
upgrades in 2013.
Precision anticipates its 2012 capital expenditures to be
approximately $920 million, consistent with previous guidance. All
anticipated carry forward costs have been included in the 2013
capital expenditure guidance of $485 million.
Implementation of Dividend
Precision is pleased to announce that its board of directors has
approved the implementation of a dividend which provides for an
annualized dividend of $0.20 per common share, payable quarterly,
and concurrently declared its first quarterly dividend of $0.05 per
common share, payable on December 28, 2012, to shareholders of
record on December 20, 2012. For Canadian income tax purposes, all
dividends paid by Precision on its common shares are designated as
"eligible dividends", unless otherwise indicated by Precision.
International Contract Award
Precision's wholly-owned international subsidiary, Grey Wolf
Drilling International Ltd., recently contracted two rigs with
Kuwait Oil Company ("KOC") for deep drilling operations in Kuwait.
The two new 3000 HP rigs are expected to be deployed in 2014 for a
firm service period of five years with a possible one year
extension period at KOC's option.
Asset Writedowns
Precision also announced today the decommissioning of 52
drilling rigs, including 42 Tier 3 drilling rigs and 10 Tier 2
drilling rigs. Precision is exiting the Tier 3 contract drilling
business and will retain 26 Precision drilling rigs for seasonal,
stratification and turnkey drilling work. These rigs will be
categorized as "PSST" rigs. Precision's focus on the Tier 1 and
Tier 2 market is aligned with the Corporation's strategy, customer
relationships and competitive position.
Precision expects to realize value from this decommissioning
through utilizing key components and parts in the Corporation's
existing fleet as well as generating proceeds from future asset
sales. Precision expects to take a pre-tax charge to earnings, net
of salvage value, in the range of $180 million to $200 million for
the fourth quarter of 2012.
After the rig decommissioning, completion of a review and
reclassification of certain existing rigs and delivery of the seven
contracted and undelivered new build rigs, Precision's drilling rig
fleet will consist of 326 drilling rigs, including 193 Tier 1 rigs,
107 Tier 2 rigs and 26 PSST rigs. The fleet will include 189 rigs
in Canada, 127 rigs in the United States and ten rigs
internationally.
Under International Financial Reporting Standards, Precision is
required to assess the carrying value of assets in its cash
generating units annually. Due to the decrease in natural gas well
drilling in Canada and the outlook for natural gas pricing,
Precision anticipates recording an impairment charge to the
goodwill attributable to its Canadian Directional Drilling
operations in the fourth quarter of 2012.
Quote from Precision's CEO
"Over the past five years Precision has transformed from its
legacy fleet, operating only in Canada, to a pre-eminent North
American service provider with 300 High Performance rigs" stated
Kevin Neveu, President & Chief Executive Officer. I am
particularly proud that Precision's High Performance people and
Precision's Super Series rigs are delivering exceptional
operational and financial performance in virtually every
unconventional oil and gas play in Canada and the United States.
Since 2007 this transformation has included over 110 new build rigs
and over 40 rigs upgraded, with all of these investments supported
by long-term customer contracts delivering excellent financial
returns to Precision. Our diversified geographic breadth and our
High Performance rig fleet provide revenue visibility and stability
which seemed improbable five years ago."
"We are pleased to return value directly to our investors
through the implementation of a dividend. The cash flows generated
by our business are not subject to any single regional or seasonal
market dynamic and we expect that our organic growth in North
America and internationally combined with further geographic
expansion of our Completion and Production business and expansion
of our directional drilling integrated service will continue to
deliver exceptional returns throughout oil and gas commodity
cycles. The contract announced today for two new build Super Triple
3000 rigs for Kuwait again confirms our belief that our High
Performance, High Value services have global appeal. While these
rigs will not be deployed until mid-2014, it is important to note
that they will still be operating under a long-term contract near
the end of this decade and it is this long-term stable nature of
High Performance international work we will continue to
pursue."
"Our decision to retire and dispose of the legacy Tier 3 rigs is
an important turning point in this transition for Precision. While
some legacy Tier 3 rigs may have market niche opportunities, the
drilling industry's growth and success will be driven by improved
drilling efficiency, safety performance and environmental
responsibility. Precision's diverse fleet of Super Series and Tier
2 rigs are highly competitive in all of those markets and capable
of delivering the high performance today's customers demand.
Currently our 2013 budget includes three new build Super Series
rigs for North America and the two mentioned for Kuwait; however,
Precision remains poised to seize opportunities, which could
include investing in new rigs, but as always, we will seek out
long-term customer contracts which meet or exceed our return
hurdles as we continue to grow our fleet organically."
Cautionary Statement Regarding Forward-Looking Information and
Statements
Certain statements contained in this report, including
statements that contain words such as "could", "should", "can",
"anticipate", "estimate", "propose", "plan", "expect", "believe",
"will", "may", "continue", "project", "appears", "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: Precision expects
that the $485 million of the 2013 capital expenditure plan will be
split $417 million in the Contract Drilling segment and $68 million
in the Completion and Production Services segment and further, the
allocation among expansion capital, sustaining and infrastructure
expenditures and upgrade capital; Precision anticipates its 2012
capital expenditures to be approximately $920 million and includes
all anticipated carry forward costs; the declaration of future
dividends; two new 3000 HP rigs are expected to be deployed in 2014
for a service term of 5 years with a possible 1 year extension at
KOC's option; that Precision is exiting the Tier 3 contract
drilling business and will retain 26 Precision drilling rigs for
seasonal, stratification and turnkey drilling work; Precision
expects to realize value from this decommissioning through
utilizing key components and parts in Precision's existing fleet as
well as generating proceeds from future asset sales; Precision
expects to take a pre-tax charge to earnings, net of expected
proceeds, in the range of $180 million to $200 million for the
fourth quarter of 2012; the tiering and location of Precision's
rigs; Precision anticipates recording an impairment charge to some
of the goodwill attributable to its Canadian Directional Drilling
operations in the fourth quarter of 2012; Precision expects that
its organic growth in North America and internationally combined
with further geographic expansion of Precision's Completion and
Production business and expansion of Precision's directional
drilling integrated services will continue to deliver exceptional
returns throughout all points in the oil and gas commodity cycle;
and that the Super Triple 3000 rigs for Kuwait will still be
operating under a long-term contract near the end of this decade
and that it is this long-term stable nature of High Performance
international work Precision will continue to pursue; and the
drilling industry's growth and success will be driven by improved
drilling efficiency, safety performance and environmental
responsibility and that Precision's rigs will be capable of meeting
customer demands; currently Precision's 2013 budget includes three
new build rigs; and that Precision will seek out long-term customer
contracts which meet or exceed Precision's hurdles as Precision
continues to grow its fleet organically.
These forward-looking information and statements are based on
certain assumptions and analysis made by the Corporation in light
of its experience and its perception of historical trends, current
conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However,
whether actual results, performance or achievements will conform to
the Corporation's expectations and predictions is subject to a
number of known and unknown risks and uncertainties which could
cause actual results to differ materially from the Corporation's
expectations. Such risks and uncertainties include, but are not
limited to: fluctuations 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; capital market liquidity available to fund customer
drilling programs; availability of cash flow, debt and/or equity
sources to fund the Corporation's capital and operating
requirements, as needed; variability of future dividends to be
paid; the effects of seasonal and weather conditions on operations
and facilities; the existence of competitive operating risks
inherent in contract drilling, well servicing and ancillary
oilfield services; general economic, market or business conditions;
changes in laws or regulations; interpretation of tax filing
position for prior period transactions; the availability of
qualified personnel, management or other key inputs; currency
exchange fluctuations; and other unforeseen conditions which could
impact the use of services supplied by Precision.
Consequently, all of the forward-looking information and
statements made in this report are qualified by these cautionary
statements and there can be no assurance that the actual results or
developments anticipated by the Corporation will be realized or,
even if substantially realized, that they will have the expected
consequences to, or effects on, the Corporation or its business or
operations. Readers are therefore cautioned not to place undue
reliance on such forward-looking information and statements. Except
as may be required by law, the Corporation assumes no obligation to
update publicly any such forward-looking information and
statements, whether as a result of new information, future events
or otherwise.
About Precision
Precision is a leading provider of safe and High Performance,
High Value services to the oil and gas industry. Precision provides
customers with access to an extensive fleet of contract drilling
rigs, directional drilling services, well service & snubbing
rigs, coiled tubing services, camps, rental equipment, and
wastewater treatment units backed by a comprehensive mix of
technical support services and skilled, experienced personnel.
Precision is headquartered in Calgary, Alberta, Canada.
Precision is listed on the Toronto Stock Exchange under the trading
symbol "PD" and on the New York Stock Exchange under the trading
symbol "PDS".
Contacts: Precision Drilling Corporation Carey Ford Vice
President, Finance and Investor Relations 403.716.4575 403.716.4755
(FAX) Precision Drilling Corporation 800, 525 - 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1 www.precisiondrilling.com
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