UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Section 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of, August 2024
Commission File Number: 001-14534
Precision Drilling Corporation
(Exact name of registrant as specified in its charter)
800, 525 - 8 Avenue S.W.
Calgary, Alberta
Canada T2P 1G1
(Address of principal executive offices)
Indicate by check mark whether the registrant files
or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___ Form 40-F _X_
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 1, 2024 | PRECISION DRILLING CORPORATION |
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| By: |
/s/Carey T Ford |
| Name: |
Carey T Ford |
| Title: |
Chief Financial Officer |
Exhibit 31.1
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, Kevin A. Neveu, President and Chief Executive Officer of Precision Drilling
Corporation, certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
"interim filings") of Precision Drilling Corporation (the "issuer"), for the interim period ended June 30, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are
defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's
other certifying officer and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer's other certifying officer and I used
to design the issuer's ICFR is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (1992) and the Control Objectives
for Information and Related Technologies (COBIT). |
| 5.2 | ICFR – material weakness relating to design: N/A. |
| 5.3 | Limitation on scope of design: N/A. |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on April 1, 2024 and ended on June 30, 2024 that has materially
affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: August 1, 2024
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By: |
/s/Kevin A Neveu |
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Name: Kevin A. Neveu
Title: President and Chief Executive Officer |
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Exhibit 31.2
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, Carey T. Ford, Chief Financial Officer of Precision Drilling Corporation,
certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
"interim filings") of Precision Drilling Corporation (the "issuer"), for the interim period ended June 30, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are
defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's
other certifying officer and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer's other certifying officer and I used
to design the issuer's ICFR is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (1992) and the Control Objectives
for Information and Related Technologies (COBIT). |
| 5.2 | ICFR – material weakness relating to design: N/A. |
| 5.3 | Limitation on scope of design: N/A. |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on April 1, 2024 and ended on June 30, 2024 that has materially
affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: August 1, 2024
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By: |
/s/Carey T. Ford |
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Name: Carey T. Ford
Title: Chief Financial Officer
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Exhibit 99.1
![](https://www.sec.gov/Archives/edgar/data/1013605/000117184324004344/logo.jpg)
PRECISION DRILLING CORPORATION
Second Quarter Report for the three and six months ended June 30, 2024 and 2023
This report 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
report. This report contains references to certain Financial Measures and Ratios, including Adjusted EBITDA (earnings before income taxes,
loss (gain) on investments and other assets, gain 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, Working Capital and
Total Long-term Financial Liabilities. These terms do not have standardized meanings prescribed under International Financial Reporting
Standards (IFRS) Accounting Standards and may not be comparable to similar measures used by other companies. See “Financial
Measures and Ratios” later in this report.
Precision Drilling Corporation ("Precision" or the "Company") delivered
outstanding second quarter financial results and demonstrated its cash flow potential. During the quarter, Precision generated cash flow
from operations of $174 million, allowing it to reduce debt by $102 million, increase its cash position by $17 million, return $23 million
to shareholders through share buybacks, and invest $38 million in its fleet. For 2024, Precision remains firmly committed to repaying
debt between $150 million and $200 million and allocating 25% to 35% of its free cash flow to share buybacks.
Additional Financial Highlights
| · | Revenue was $429 million and comparable to $426 million in the second quarter of 2023 due to
higher activity and pricing in both Canada and internationally, which more than offset lower results in the U.S. |
| · | Adjusted EBITDA(1) was $115 million and included
share-based compensation charges of $10 million. By comparison, Adjusted EBITDA in the second quarter of 2023 was $142 million and included
share-based compensation charges of $3 million. |
| · | Net earnings was positive for the eighth consecutive quarter at $21 million or $1.44 per share
compared to $27 million or $1.97 per share in the second quarter of 2023. |
| · | Completion and Production Services revenue increased 43% over the same period last year to $66
million, while Adjusted EBITDA rose 66% to $12 million, reflecting the successful integration of the CWC Energy Services (CWC)
acquisition in late 2023. |
| · | Internationally, our revenue nearly doubled over the second quarter of last year as we
realized US$40 million of contract drilling versus US$23 million in 2023. |
Operational Highlights
| · | Canada's activity increased 18%, averaging 49 active drilling rigs versus 42 in the second quarter
of 2023. |
| · | Canadian revenue per utilization day grew to $36,075 compared to $33,535 in the same period
last year. |
| · | U.S. activity averaged 36 drilling rigs compared to 51 for the second quarter of 2023. |
| · | U.S. revenue per utilization day was US$33,227 compared to US$35,576 in the same quarter last
year. |
| · | International activity increased 61% compared to the second quarter of 2023, with eight drilling
rigs active following rig reactivations in 2023. Revenue per utilization day was US$55,301 compared to US$50,551 in the second quarter
of 2023. |
| · | Service rig operating hours increased 44% over the same quarter last year totaling 57,051 hours
driven by the CWC acquisition. |
| (1) | See “FINANCIAL
MEASURES AND RATIOS." |
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) | |
2024 | | |
2023 | | |
% Change | | |
2024 | | |
2023 | | |
% Change | |
Revenue | |
| 429,214 | | |
| 425,622 | | |
| 0.8 | | |
| 957,002 | | |
| 984,229 | | |
| (2.8 | ) |
Adjusted EBITDA(1) | |
| 115,121 | | |
| 142,093 | | |
| (19.0 | ) | |
| 258,270 | | |
| 345,312 | | |
| (25.2 | ) |
Net earnings | |
| 20,701 | | |
| 26,900 | | |
| (23.0 | ) | |
| 57,217 | | |
| 122,730 | | |
| (53.4 | ) |
Cash provided by operations | |
| 174,075 | | |
| 213,460 | | |
| (18.5 | ) | |
| 239,618 | | |
| 241,816 | | |
| (0.9 | ) |
Funds provided by operations(1) | |
| 111,750 | | |
| 136,959 | | |
| (18.4 | ) | |
| 229,515 | | |
| 296,612 | | |
| (22.6 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash used in investing activities | |
| 26,943 | | |
| 44,062 | | |
| (38.9 | ) | |
| 102,180 | | |
| 122,879 | | |
| (16.8 | ) |
Capital spending by spend category(1) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Expansion and upgrade | |
| 8,422 | | |
| 9,615 | | |
| (12.4 | ) | |
| 22,792 | | |
| 25,960 | | |
| (12.2 | ) |
Maintenance and infrastructure | |
| 30,001 | | |
| 35,099 | | |
| (14.5 | ) | |
| 71,158 | | |
| 69,549 | | |
| 2.3 | |
Proceeds on sale | |
| (10,992 | ) | |
| (6,261 | ) | |
| 75.6 | | |
| (16,178 | ) | |
| (14,026 | ) | |
| 15.3 | |
Net capital spending(1) | |
| 27,431 | | |
| 38,453 | | |
| (28.7 | ) | |
| 77,772 | | |
| 81,483 | | |
| (4.6 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net earnings per share: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 1.44 | | |
| 1.97 | | |
| (26.9 | ) | |
| 3.97 | | |
| 8.98 | | |
| (55.8 | ) |
Diluted | |
| 1.44 | | |
| 1.63 | | |
| (11.7 | ) | |
| 3.97 | | |
| 7.22 | | |
| (45.0 | ) |
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 14,389 | | |
| 13,672 | | |
| 5.2 | | |
| 14,398 | | |
| 13,661 | | |
| 5.4 | |
Diluted | |
| 14,395 | | |
| 14,747 | | |
| (2.4 | ) | |
| 14,402 | | |
| 14,857 | | |
| (3.1 | ) |
| (1) | See “FINANCIAL
MEASURES AND RATIOS.” |
Operating Highlights
| |
For the three months ended June 30, | | |
For the six months ended June 30, | |
| |
2024 | | |
2023 | | |
% Change | | |
2024 | | |
2023 | | |
% Change | |
Contract drilling rig fleet | |
| 214 | | |
| 225 | | |
| (4.9 | ) | |
| 214 | | |
| 225 | | |
| (4.9 | ) |
Drilling rig utilization days: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
U.S. | |
| 3,236 | | |
| 4,626 | | |
| (30.0 | ) | |
| 6,689 | | |
| 10,008 | | |
| (33.2 | ) |
Canada | |
| 4,464 | | |
| 3,795 | | |
| 17.6 | | |
| 11,081 | | |
| 9,963 | | |
| 11.2 | |
International | |
| 728 | | |
| 452 | | |
| 61.1 | | |
| 1,456 | | |
| 885 | | |
| 64.5 | |
Revenue per utilization day: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
U.S. (US$) | |
| 33,227 | | |
| 35,576 | | |
| (6.6 | ) | |
| 33,041 | | |
| 35,247 | | |
| (6.3 | ) |
Canada (Cdn$) | |
| 36,075 | | |
| 33,535 | | |
| 7.6 | | |
| 35,789 | | |
| 32,773 | | |
| 9.2 | |
International (US$) | |
| 55,301 | | |
| 50,551 | | |
| 9.4 | | |
| 54,055 | | |
| 51,139 | | |
| 5.7 | |
Operating costs per utilization day: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
U.S. (US$) | |
| 22,427 | | |
| 18,963 | | |
| 18.3 | | |
| 22,062 | | |
| 19,667 | | |
| 12.2 | |
Canada (Cdn$) | |
| 21,652 | | |
| 21,332 | | |
| 1.5 | | |
| 20,641 | | |
| 19,731 | | |
| 4.6 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Service rig fleet | |
| 165 | | |
| 119 | | |
| 38.7 | | |
| 165 | | |
| 119 | | |
| 38.7 | |
Service rig operating hours | |
| 57,051 | | |
| 39,709 | | |
| 43.7 | | |
| 131,555 | | |
| 98,050 | | |
| 34.2 | |
Drilling Activity
| |
Average for the quarter ended 2023 | | |
Average for the quarter ended 2024 | |
| |
Mar. 31 | | |
June 30 | | |
Sept. 30 | | |
Dec. 31 | | |
Mar. 31 | | |
June 30 | |
Average Precision active rig count(1): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
U.S. | |
| 60 | | |
| 51 | | |
| 41 | | |
| 45 | | |
| 38 | | |
| 36 | |
Canada | |
| 69 | | |
| 42 | | |
| 57 | | |
| 64 | | |
| 73 | | |
| 49 | |
International | |
| 5 | | |
| 5 | | |
| 6 | | |
| 8 | | |
| 8 | | |
| 8 | |
Total | |
| 134 | | |
| 98 | | |
| 104 | | |
| 117 | | |
| 119 | | |
| 93 | |
| (1) | Average number
of drilling rigs working or moving. |
Financial Position
(Stated in thousands of Canadian dollars, except ratios) | |
June 30,
2024 | | |
December 31,
2023(2) | |
Working capital(1) | |
| 158,470 | | |
| 136,872 | |
Cash | |
| 48,233 | | |
| 54,182 | |
Long-term debt | |
| 844,671 | | |
| 914,830 | |
Total long-term financial liabilities(1) | |
| 917,139 | | |
| 995,849 | |
Total assets | |
| 2,914,533 | | |
| 3,019,035 | |
Long-term debt to long-term debt plus equity ratio (1) | |
| 0.34 | | |
| 0.37 | |
| (1) | See “FINANCIAL
MEASURES AND RATIOS.” |
| (2) | Comparative
period figures were restated due to a change in accounting policy. See "CHANGE IN ACCOUNTING
POLICY." |
Summary for the three months ended June 30, 2024:
| · | Revenue increased to $429 million compared with $426 million in the second quarter of 2023 as a result
of higher Canadian and international activity and day rates, partially offset by lower U.S. activity and day rates. |
| · | Adjusted EBITDA was $115 million as compared with $142 million in 2023, primarily due to lower U.S. activity
and day rates, partially offset by increased Canadian and international results, and increased share-based compensation of $7 million.
Please refer to “Other Items” later in this report for additional information on share-based compensation. |
| · | Adjusted EBITDA as a percentage of revenue was 27% as compared with 33% in 2023. |
| · | U.S. revenue per utilization day was US$33,227 compared with US$35,576 in 2023. The decrease was primarily
the result of lower fleet average day rates and idle but contracted rig revenue, partially offset by higher recoverable costs. We did
not recognize revenue from idle but contracted rigs as compared with US$5 million in 2023. Revenue per utilization day, excluding the
impact of idle but contracted rigs was US$33,227 compared with US$34,396 in 2023, a decrease of 3%. Sequentially, revenue per utilization
day, excluding idle but contracted rigs, was largely consistent with the first quarter of 2024. |
| · | U.S. operating costs per utilization day increased to US$22,427 compared with US$18,963 in 2023. The increase
is mainly due to higher recoverable costs, fixed costs spread over fewer activity days and higher rig operating costs. Sequentially, operating
costs per utilization day increased US$708 due to increased rig operating costs and higher recoverable costs. |
| · | Canadian revenue per utilization day was $36,075 compared with $33,535 in 2023. The increase was a result
of higher average day rates, partially offset by lower recoverable costs as compared with the second quarter of 2023. Sequentially, revenue
per utilization day increased $479 due to higher recoverable costs. |
| · | Canadian operating costs per utilization day increased to $21,652, compared with $21,332 in 2023, resulting
from higher field wages due to our rig mix, partially offset by lower recoverable costs. Sequentially, daily operating costs increased
$1,693 due to higher repairs and maintenance and fixed overheads spread over fewer activity days. |
| · | We realized US$40 million of international contract drilling revenue compared with US$23 million in 2023. |
| · | General and administrative expenses were $29 million as compared with $23 million in 2023 primarily due
to higher share-based compensation charges. |
| · | Net finance charges were $18 million, a decrease of $3 million compared with 2023 as a result of lower
outstanding long-term debt. |
| · | Capital expenditures were $38 million compared with $45 million in 2023 and by spend category included $8 million for expansion and
upgrades and $30 million for the maintenance of existing assets, infrastructure, and intangible assets. |
| · | Income tax expense for the quarter was $11 million as compared with $19 million in 2023. During the second quarter, we continued to
not recognize deferred tax assets on certain international operating losses. |
| · | Generated cash from operations of $174 million, reduced debt by $102 million, repurchased $23 million of shares, and ended the quarter
with $48 million of cash and more than $500 million of available liquidity. |
Summary for the six months ended June 30, 2024:
| · | Revenue for the first six months of 2024 was $957 million, a decrease of 3% from 2023. |
| · | Adjusted EBITDA for the period was $258 million as compared with $345 million in 2023. Our lower Adjusted EBITDA was attributable
to decreased U.S. drilling day rates and activity, partially offset by strengthening day rates and activity in Canada and internationally. |
| · | General and administrative costs were $74 million, an increase of $35 million from 2023 primarily due to higher share-based compensation
charges and the impact of the weakening Canadian dollar on our translated U.S. dollar-denominated costs. |
| · | Net finance charges were $37 million, a decrease of $8 million from 2023 due to our lower outstanding debt balance, partially offset
by the impact of the weakening of the Canadian dollar on our U.S. dollar-denominated interest expense. |
| · | Cash provided by operations was $240 million as compared with $242 million in 2023. Funds provided by operations were $230 million,
a decrease of $67 million from the comparative period. |
| · | Capital expenditures were $94 million in 2024, a decrease of $2 million from 2023. Capital spending by spend category included $23
million for expansion and upgrades and $71 million for the maintenance of existing assets, infrastructure, and intangible assets. |
| · | Reduced debt by $103 million from the redemption of US$56 million of 2026 unsecured senior notes and repayment of $26 million of Canadian
Real Estate Credit Facilities. |
| · | Repurchased $40 million of common shares under our Normal Course Issuer Bid (NCIB), which included a $7 million accrual for
anticipated repurchases subsequent to June 30, 2024. Please refer to “Other Items” later in this report for additional information
on our NCIB. |
STRATEGY
Precision’s vision is to be globally recognized as the High Performance,
High Value provider of land drilling services. Our strategic priorities for 2024 are focused on increasing our capital returns to
shareholders by delivering best-in-class service and generating free cash flow.
Precision’s 2024 strategic priorities and the progress made during
the second quarter are as follows:
| 1. | Concentrate organizational efforts on leveraging our scale and generating free cash flow. |
| · | Generated cash from operations of $174 million. |
| · | Increased our daily drilling operating margins(1) 18%
in Canada year over year. |
| · | Increased our Completion and Production Services operating hours
and Adjusted EBITDA 44% and 66%, respectively, year over year. |
| · | On track to realize $20 million in annual synergies from the CWC
acquisition, which closed in November 2023. |
| 2. | Reduce debt by between $150 million and $200 million and allocate 25% to 35% of free cash flow before
debt repayments for share repurchases. |
| · | Reduced debt by redeeming US$56 million of our 2026 unsecured senior notes and repaying $25 million of
Canadian Real Estate Credit Facilities. For the first six months of the year, we have reduced debt by $103 million. |
| · | Returned $23 million of capital to shareholders through share repurchases
and subsequent to June 30, 2024, have returned another $7 million to shareholders through share repurchases, bringing our total share
repurchases in 2024 to $40 million. |
| · | Remain committed to our 2024 debt reduction plans and our long-term
debt reduction target of $600 million between 2022 and 2026, while moving our direct shareholder capital returns towards 50% of free cash
flow. |
| 3. | Continue to deliver operational excellence in drilling and service rig operations to strengthen our
competitive position and extend market penetration of our AlphaTM and EverGreenTM products. |
| · | Increased our Canadian drilling rig utilization days and well servicing
rig operating hours over the second quarter of 2023, maintaining our position as the leading provider of high-quality and reliable services
in Canada. |
| · | Nearly doubled our EverGreenTM revenue from the second
quarter of 2023. |
| · | Expanded our EverGreenTM product offering with commercial
deployment of hydrogen injection systems on our Super Single rigs. EverGreenHydrogenTM reduces diesel consumption, operating
costs, and greenhouse gas emissions for our customers. |
| (1) | Revenue per
utilization day less operating costs per utilization day. |
| (2) | See “FINANCIAL
MEASURES AND RATIOS.” |
OUTLOOK
The outlook for global energy demand is positive with rising demand for all types of energy
including oil and gas driven by economic growth, increasing demand in third world regions, and emerging demand from data centers. Oil
prices remain healthy, and producers remain disciplined while geopolitical issues continue to threaten supply. In Canada, recent commissioning
of the Trans Mountain pipeline expansion and the imminent start-up of LNG Canada provide significant tidewater access for both Canadian
crude and natural gas, supporting additional Canadian drilling activity. In the U.S., the next wave of LNG projects is expected to add
approximately 12 bcf/d of export capacity over the next three years, supporting additional U.S. natural gas drilling activity.
In Canada, we currently have 74 rigs operating, which is over 25% higher than last year, and
expect this trend to continue throughout the third quarter due to activity in the Montney driven by strong condensate demand and increased
drilling for heavy oil targets. Since the start-up of the Trans Mountain pipeline expansion in May, customer activity in heavy oil targeted
areas has exceeded our expectations, resulting in full utilization of our Super Single pad capable rigs. Our Canadian fleet is
in high demand and we expect customer demand for our Super Triple and Super Single pad capable fleets to exceed supply into
2025 as Canadian take-away capacity further increases. Despite strong underlying customer demand, our activity levels could be impacted
in the near term if the current wildfires intensify.
In the U.S., we currently have 38 rigs operating as drilling activity continues to be constrained
by weak natural gas prices and pending merger and acquisition transactions. We view these headwinds as short-term in nature and expect
customer demand will remain stable in the third quarter with a likely increase in the fourth quarter as producers modestly increase drilling
plans into 2025.
Internationally, we expect to have eight rigs running throughout all of 2024, representing a
40% increase in activity compared to 2023. We continue to bid our remaining idle rigs within the region and remain optimistic about our
ability to secure additional rig activations.
As the premier well service provider in Canada, the outlook for this business is positive. We
expect the Trans Mountain pipeline expansion and LNG Canada to drive more service related activity while increased regulatory spending
requirements are expected to result in more abandonment work. Customer demand will remain strong and with continued labor constraints,
we expect firm pricing into the foreseeable future.
We believe cost inflation is largely behind us and will continue to look for opportunities to
lower costs.
Contracts
The following chart outlines the average number of drilling rigs under
term contract by quarter as at July 30, 2024. For those quarters ending after June 30, 2024, this chart represents the minimum number
of 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 term contracts.
As at July 30, 2024 | |
Average for the quarter ended 2023 | | |
Average | | |
Average for the quarter ended 2024 | | |
Average | |
| |
Mar. 31 | | |
June 30 | | |
Sept. 30 | | |
Dec. 31 | | |
2023 | | |
Mar. 31 | | |
June 30 | | |
Sept. 30 | | |
Dec. 31 | | |
2024 | |
Average rigs under term contract: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
U.S. | |
| 40 | | |
| 37 | | |
| 32 | | |
| 28 | | |
| 34 | | |
| 20 | | |
| 17 | | |
| 17 | | |
| 12 | | |
| 17 | |
Canada | |
| 19 | | |
| 23 | | |
| 23 | | |
| 23 | | |
| 22 | | |
| 24 | | |
| 22 | | |
| 23 | | |
| 23 | | |
| 23 | |
International | |
| 4 | | |
| 5 | | |
| 7 | | |
| 7 | | |
| 6 | | |
| 8 | | |
| 8 | | |
| 8 | | |
| 8 | | |
| 8 | |
Total | |
| 63 | | |
| 65 | | |
| 62 | | |
| 58 | | |
| 62 | | |
| 52 | | |
| 47 | | |
| 48 | | |
| 43 | | |
| 48 | |
Capital Spending and Free Cash Flow Allocation
Capital spending in 2024 is expected to be $195 million and by spend category
includes $153 million for maintenance, infrastructure, and intangibles and $42 million for expansion and upgrades. We expect to spend
$173 million in the Contract Drilling Services segment, $17 million in the Completion and Production Services segment and $5 million in
the Corporate segment. At June 30, 2024, Precision had capital commitments of $152 million with payments expected through 2026. We remain
committed to our debt reduction plans and in 2024 expect to reduce debt by $150 million to $200 million and allocate 25% to 35% of free
cash flow before debt repayments for share repurchases, while remaining committed to achieving a sustained Net Debt to Adjusted EBITDA
ratio(1) of below 1.0 times by the end of 2025.
| (1) | See “FINANCIAL
MEASURES AND RATIOS.” |
Commodity Prices
Second quarter average West Texas Intermediate and Western Canadian Select
oil prices increased 9% and 14%, respectively, as compared with 2023 while the average Henry Hub natural gas price remained consistent
and AECO natural gas prices declined 51%.
| |
For the three months ended June 30, | | |
Year ended
December 31, | |
| |
2024 | | |
2023 | | |
2023 | |
Average oil and natural gas prices | |
| | | |
| | | |
| | |
Oil | |
| | | |
| | | |
| | |
West Texas Intermediate (per barrel) (US$) | |
| 80.55 | | |
| 73.77 | | |
| 77.62 | |
Western Canadian Select (per barrel) (US$) | |
| 66.89 | | |
| 58.76 | | |
| 58.96 | |
Natural gas | |
| | | |
| | | |
| | |
United States | |
| | | |
| | | |
| | |
Henry Hub (per MMBtu) (US$) | |
| 2.34 | | |
| 2.32 | | |
| 2.67 | |
Canada | |
| | | |
| | | |
| | |
AECO (per MMBtu) (CDN$) | |
| 1.18 | | |
| 2.43 | | |
| 2.64 | |
Seasonality
In Canada, because of the seasonal
nature of well site access, term contracted rigs normally generate 250 utilization days, with some pad drilling trending toward 300 days.
Accordingly, our anticipated Canadian rigs under term contract may fluctuate as customers complete their commitments earlier than projected.
In most regions in the U.S. and internationally, term contracts normally generate 365 utilization days per year. In accordance
with the seasonality of our business and varying levels of rig count, we generally experience builds of working capital in the first and
third quarters and releases of working capital in the second and fourth quarters.
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) | |
2024 | | |
2023 | | |
% Change | | |
2024 | | |
2023 | | |
% Change | |
Revenue: | |
| | |
| | |
| | |
| | |
| | |
| |
Contract Drilling Services | |
| 365,603 | | |
| 380,958 | | |
| (4.0 | ) | |
| 808,970 | | |
| 867,034 | | |
| (6.7 | ) |
Completion and Production Services | |
| 65,826 | | |
| 46,161 | | |
| 42.6 | | |
| 152,913 | | |
| 120,684 | | |
| 26.7 | |
Inter-segment eliminations | |
| (2,215 | ) | |
| (1,497 | ) | |
| 48.0 | | |
| (4,881 | ) | |
| (3,489 | ) | |
| 39.9 | |
| |
| 429,214 | | |
| 425,622 | | |
| 0.8 | | |
| 957,002 | | |
| 984,229 | | |
| (2.8 | ) |
Adjusted EBITDA:(1) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Contract Drilling Services | |
| 119,754 | | |
| 147,478 | | |
| (18.8 | ) | |
| 273,427 | | |
| 336,601 | | |
| (18.8 | ) |
Completion and Production Services | |
| 12,440 | | |
| 7,507 | | |
| 65.7 | | |
| 31,045 | | |
| 24,913 | | |
| 24.6 | |
Corporate and Other | |
| (17,073 | ) | |
| (12,892 | ) | |
| 32.4 | | |
| (46,202 | ) | |
| (16,202 | ) | |
| 185.2 | |
| |
| 115,121 | | |
| 142,093 | | |
| (19.0 | ) | |
| 258,270 | | |
| 345,312 | | |
| (25.2 | ) |
| (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) | |
2024 | | |
2023 | | |
% Change | | |
2024 | | |
2023 | | |
% Change | |
Revenue | |
| 365,603 | | |
| 380,958 | | |
| (4.0 | ) | |
| 808,970 | | |
| 867,034 | | |
| (6.7 | ) |
Expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Operating | |
| 236,585 | | |
| 224,746 | | |
| 5.3 | | |
| 513,277 | | |
| 511,813 | | |
| 0.3 | |
General and administrative | |
| 9,264 | | |
| 8,734 | | |
| 6.1 | | |
| 22,266 | | |
| 18,620 | | |
| 19.6 | |
Adjusted EBITDA(1) | |
| 119,754 | | |
| 147,478 | | |
| (18.8 | ) | |
| 273,427 | | |
| 336,601 | | |
| (18.8 | ) |
Adjusted EBITDA as a percentage of revenue(1) | |
| 32.8 | % | |
| 38.7 | % | |
| | | |
| 33.8 | % | |
| 38.8 | % | |
| | |
| (1) | See “FINANCIAL
MEASURES AND RATIOS.” |
United States onshore
drilling statistics:(1) | |
2024 | | |
2023 | |
| |
Precision | | |
Industry(2) | | |
Precision | | |
Industry(2) | |
Average number of active land rigs for quarters ended: | |
| | |
| | |
| | |
| |
March 31 | |
| 38 | | |
| 602 | | |
| 60 | | |
| 744 | |
June 30 | |
| 36 | | |
| 583 | | |
| 51 | | |
| 700 | |
Year to date average | |
| 37 | | |
| 593 | | |
| 56 | | |
| 722 | |
| (1) | United States
lower 48 operations only. |
| (2) | Baker Hughes
rig counts. |
Canadian onshore drilling statistics:(1) | |
2024 | | |
2023 | |
| |
Precision | | |
Industry(2) | | |
Precision | | |
Industry(2) | |
Average number of active land rigs for quarters ended: | |
| | |
| | |
| | |
| |
March 31 | |
| 73 | | |
| 208 | | |
| 69 | | |
| 221 | |
June 30 | |
| 49 | | |
| 134 | | |
| 42 | | |
| 117 | |
Year to date average | |
| 61 | | |
| 171 | | |
| 56 | | |
| 169 | |
| (1) | Canadian operations
only. |
| (2) | Baker Hughes rig counts. |
Revenue from Contract Drilling Services was $366 million, 4% lower than
2023, while Adjusted EBITDA decreased 19% to $120 million. The decrease in revenue and Adjusted EBITDA was primarily due to lower U.S.
activity, partially offset by higher Canadian and international activity and day rates.
Drilling rig utilization days (drilling days plus move days) in the U.S.
were 3,236, 30% lower than 2023. Drilling rig utilization days in Canada were 4,464, 18% higher than 2023. Drilling rig utilization days
in our international business were 728, 61% higher than 2023 as our international rig fleet returned to work under renewed long-term contracts.
Revenue per utilization day in the U.S. decreased 7% from 2023 and was
primarily the result of lower fleet average day rates and idle but contracted rig revenue, offset by higher recoverable costs. We did
not recognize revenue from idle but contracted rigs as compared with US$5 million in 2023. Drilling rig revenue per utilization day in
Canada increased 8% due to higher average day rates, partially offset by lower recoverable costs. Our international revenue per utilization
day for the quarter was 9% higher than 2023 due to renewed long-term contracts.
In the U.S., 55% of utilization days were generated from rigs under term
contract as compared with 66% in 2023. In Canada, 42% of our utilization days were generated from rigs under term contract, compared with
39% in 2023.
U.S. operating costs per utilization day increased 18% from 2023 and was
primarily due to due to higher recoverable costs, fixed costs spread over fewer activity days and higher rig operating costs. Our Canadian
operating costs per utilization day increased 2% as compared with 2023 and was due to higher field wages due to our rig mix, partially
offset by lower recoverable costs.
Our general and administrative expenses increased $1 million as compared
with 2023 primarily as a result of higher share-based compensation.
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) | |
2024 | | |
2023 | | |
% Change | | |
2024 | | |
2023 | | |
| |
Revenue | |
| 65,826 | | |
| 46,161 | | |
| 42.6 | | |
| 152,913 | | |
| 120,684 | | |
| 26.7 | |
Expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Operating | |
| 51,040 | | |
| 36,921 | | |
| 38.2 | | |
| 116,520 | | |
| 91,713 | | |
| 27.0 | |
General and administrative | |
| 2,346 | | |
| 1,733 | | |
| 35.4 | | |
| 5,348 | | |
| 4,058 | | |
| 31.8 | |
Adjusted EBITDA(1) | |
| 12,440 | | |
| 7,507 | | |
| 65.7 | | |
| 31,045 | | |
| 24,913 | | |
| 24.6 | |
Adjusted EBITDA as a percentage of revenue(1) | |
| 18.9 | % | |
| 16.3 | % | |
| | | |
| 20.3 | % | |
| 20.6 | % | |
| | |
Well servicing statistics: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Number of service rigs (end of period) | |
| 165 | | |
| 119 | | |
| 38.7 | | |
| 165 | | |
| 119 | | |
| 38.7 | |
Service rig operating hours | |
| 57,051 | | |
| 39,709 | | |
| 43.7 | | |
| 131,555 | | |
| 98,050 | | |
| 34.2 | |
Service rig operating hour utilization | |
| 38 | % | |
| 37 | % | |
| | | |
| 44 | % | |
| 46 | % | |
| | |
| (1) | See “FINANCIAL
MEASURES AND RATIOS.” |
Completion and Production Services revenue increased to $66 million, an
increase of $20 million from 2023. Our increased revenue was due to higher service activity as our second quarter service rig operating
hours increased 44% compared with 2023. Completion and Production Services generated 6% of its revenue from U.S. operations, compared
with 8% in 2023.
Operating costs as a percentage of revenue were 78% as compared with 80%
in 2023. The decreased percentage in 2024 was the result of our operating efficiency. As compared to 2023, our second quarter general
and administrative expenses increased 35%, primarily due to higher share-based compensation charges and higher overhead charges associated
with the CWC acquisition.
Adjusted EBITDA was $12 million as compared with $8 million in 2023. Our
higher Adjusted EBITDA in 2024 was due to increased activity, partially offset by higher share-based compensation and overhead charges.
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 $17 million as compared with negative Adjusted EBITDA of $13
million in 2023. Our lower current quarter Adjusted EBITDA was impacted by higher share-based compensation.
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 2023 Annual Report.
A summary of expense amounts 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) | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Cash settled share-based incentive plans | |
| 8,677 | | |
| 2,081 | | |
| 30,436 | | |
| (10,014 | ) |
Equity settled share-based incentive plans | |
| 1,202 | | |
| 653 | | |
| 2,077 | | |
| 1,133 | |
Total share-based incentive compensation plan expense | |
| 9,879 | | |
| 2,734 | | |
| 32,513 | | |
| (8,881 | ) |
| |
| | | |
| | | |
| | | |
| | |
Allocated: | |
| | | |
| | | |
| | | |
| | |
Operating | |
| 2,686 | | |
| 923 | | |
| 7,938 | | |
| (960 | ) |
General and Administrative | |
| 7,193 | | |
| 1,811 | | |
| 24,575 | | |
| (7,921 | ) |
| |
| 9,879 | | |
| 2,734 | | |
| 32,513 | | |
| (8,881 | ) |
Cash settled share-based compensation expense for the quarter was $9 million
as compared with $2 million in 2023. The higher expense in 2024 was primarily due to our improved share price performance as compared
with 2023.
During the first quarters of 2023 and 2024, we issued Executive Restricted
Share Units (Executive RSUs) to certain senior executives. Accordingly, our equity-settled share-based compensation expense for
the quarter was $1 million as compared with $1 million in 2023.
As at June 30, 2024, 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.
Normal Course Issuer Bid
Pursuant to our NCIB, we repurchased and cancelled 366,214 common shares
for $23 million during the second quarter of 2024. We entered into an Automated Share Purchase Plan (ASPP) with an independent
broker to permit the Corporation to repurchase common shares during our internal blackout period. The volume of purchases is determined
by the broker in its sole discretion based on purchase price and maximum volume parameters established by the Corporation under the ASPP.
At June 30, 2024, we recorded a $7 million liability for purchases that are estimated to occur during our blackout period based on the
parameters of the ASPP with a corresponding decrease to share capital.
LIQUIDITY AND CAPITAL RESOURCES
The oilfield services business is inherently cyclical in nature. To manage
this, we focus on maintaining a strong balance sheet in order to have the financial flexibility to manage our growth and cash flow regardless
of where we are in the business cycle. We maintain a variable operating cost structure so we can be responsive to changes in demand.
Our maintenance capital expenditures are tightly governed and highly responsive
to activity levels with additional cost savings leverage provided through our internal manufacturing and supply divisions. Term contracts
on expansion capital provide more certainty of future revenues and return on our capital investments.
Liquidity
Amount |
|
Availability |
|
Used for |
|
Maturity |
Senior Credit Facility (secured) |
|
|
|
|
|
|
US$375 million (extendible, revolving
term credit facility with US$375 million accordion feature) |
|
Nil drawn and US$54 million in outstanding letters of credit |
|
General corporate purposes |
|
June 28, 2027 |
Real estate credit facilities (secured) |
|
|
|
|
|
|
US$8 million |
|
Fully drawn |
|
General corporate purposes |
|
November 19, 2025 |
Operating facilities (secured) |
|
|
|
|
|
|
$40 million |
|
Undrawn, except $7 million in
outstanding letters of credit |
|
Letters of credit and general
corporate purposes |
|
|
US$15 million |
|
Undrawn |
|
Short-term working capital
requirements |
|
|
Demand letter of credit facility (secured) |
|
|
|
|
|
|
US$40 million |
|
Undrawn, except US$28 million in
outstanding letters of credit |
|
Letters of credit |
|
|
Unsecured senior notes (unsecured) |
|
|
|
|
|
|
US$217 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 |
In 2024, we reduced debt by $103 million comprised of the redemption of
US$56 million of 2026 unsecured senior notes and the repayment of our Canadian Real Estate Credit Facilities for $26 million. As at June
30, 2024, we had $855 million outstanding under our Senior Credit Facility, Real Estate Credit Facility and unsecured senior notes as
compared with $929 million at December 31, 2023. The current blended cash interest cost of our debt is approximately 7.0%.
Senior Credit Facility
On June 28, 2024, we extended our Senior Credit Facility’s maturity
date, revised the available borrowing capacity, and amended certain terms of the facility. The maturity date was extended to June 28,
2027, and the size was revised to US$375 million, down from US$447 million.
Our Senior Credit Facility requires that we comply with certain covenants
including a leverage ratio of consolidated senior debt to consolidated Covenant EBITDA of less than 2.5:1. For purposes of calculating
the leverage ratio, consolidated senior debt only includes secured indebtedness. The Senior Credit Facility limits the redemption and
repurchase of junior debt subject to a pro forma senior net leverage covenant test of less than or equal to 1.75:1.
Unsecured Senior Notes
The unsecured senior notes require that we comply with certain restrictive
and financial covenants, including an incurrence based consolidated interest coverage ratio test of consolidated cash flow, as defined
in the senior note agreements, to consolidated interest expense of greater than 2.0:1 for the most recent four consecutive fiscal quarters.
In the event our consolidated interest coverage ratio is less than 2.0:1 for the most recent four consecutive fiscal quarters, the unsecured
senior notes restrict our ability to incur additional indebtedness.
For further information, please see the unsecured senior note indentures
which are available on SEDAR+ and EDGAR.
Covenants
As at June 30, 2024, we were in compliance with the covenants of our Senior
Credit Facility and Real Estate Credit Facility.
| |
Covenant | | |
At June 30, 2024 | |
Senior Credit Facility | |
| | | |
| | |
Consolidated senior debt to consolidated covenant EBITDA(1) | |
| <2.50 | | |
| 0.03 | |
Consolidated covenant EBITDA to consolidated interest expense | |
| >2.50 | | |
| 7.48 | |
Real Estate Credit Facilities | |
| | | |
| | |
Consolidated covenant EBITDA to consolidated interest expense | |
| >2.50 | | |
| 7.48 | |
| (1) | For purposes of calculating the leverage
ratio consolidated senior debt only includes secured indebtedness. |
Impact of foreign exchange rates
The following table summarizes the average and closing Canada-U.S. foreign
exchanges rates.
| |
For the three months ended June 30, | | |
For the six months ended June 30, | | |
At December 31, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | | |
2023 | |
Canada-U.S. foreign exchange rates | |
| | | |
| | | |
| | | |
| | | |
| | |
Average | |
| 1.37 | | |
| 1.35 | | |
| 1.36 | | |
| 1.35 | | |
| — | |
Closing | |
| 1.37 | | |
| 1.32 | | |
| 1.37 | | |
| 1.32 | | |
| 1.32 | |
Hedge of investments in foreign operations
We utilize foreign currency long-term debt to hedge our exposure to changes
in the carrying value of our net investment in certain foreign operations as a result of changes in foreign exchange rates.
We have designated our U.S. dollar-denominated long-term debt as a net
investment hedge in our U.S. operations and other foreign operations that have a U.S. dollar functional currency. To be accounted for
as a hedge, the foreign currency denominated long-term debt must be designated and documented as such and must be effective at inception
and on an ongoing basis. We recognize the effective amount of this hedge (net of tax) in other comprehensive income. We recognize ineffective
amounts (if any) in net earnings.
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share amounts) | |
2023 | | |
2024 | |
Quarters ended | |
September 30 | | |
December 31 | | |
March 31 | | |
June 30 | |
Revenue | |
| 446,754 | | |
| 506,871 | | |
| 527,788 | | |
| 429,214 | |
Adjusted EBITDA(1) | |
| 114,575 | | |
| 151,231 | | |
| 143,149 | | |
| 115,121 | |
Net earnings | |
| 19,792 | | |
| 146,722 | | |
| 36,516 | | |
| 20,701 | |
Net earnings per basic share | |
| 1.45 | | |
| 10.42 | | |
| 2.53 | | |
| 1.44 | |
Net earnings per diluted share | |
| 1.45 | | |
| 9.81 | | |
| 2.53 | | |
| 1.44 | |
Funds provided by operations(1) | |
| 91,608 | | |
| 145,189 | | |
| 117,765 | | |
| 111,750 | |
Cash provided by operations | |
| 88,500 | | |
| 170,255 | | |
| 65,543 | | |
| 174,075 | |
(Stated in thousands of Canadian dollars, except per share amounts) | |
2022 | | |
2023 | |
Quarters ended | |
September 30 | | |
December 31 | | |
March 31 | | |
June 30 | |
Revenue | |
| 429,335 | | |
| 510,504 | | |
| 558,607 | | |
| 425,622 | |
Adjusted EBITDA(1) | |
| 119,561 | | |
| 91,090 | | |
| 203,219 | | |
| 142,093 | |
Net earnings | |
| 30,679 | | |
| 3,483 | | |
| 95,830 | | |
| 26,900 | |
Net earnings per basic share | |
| 2.26 | | |
| 0.27 | | |
| 7.02 | | |
| 1.97 | |
Net earnings per diluted share | |
| 2.03 | | |
| 0.27 | | |
| 5.57 | | |
| 1.63 | |
Funds provided by operations(1) | |
| 81,327 | | |
| 111,339 | | |
| 159,653 | | |
| 136,959 | |
Cash provided by operations | |
| 8,142 | | |
| 159,082 | | |
| 28,356 | | |
| 213,460 | |
| (1) | See “FINANCIAL
MEASURES AND RATIOS.” |
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
Because of the nature of our business, we are required to make judgements
and estimates in preparing our Condensed Consolidated Interim Financial Statements that could materially affect the amounts recognized.
Our judgements and estimates are based on our past experiences and assumptions we believe are reasonable in the circumstances. The critical
judgements and estimates used in preparing the Condensed Consolidated Interim Financial Statements are described in our 2023 Annual Report.
EVALUATION OF CONTROLS AND PROCEDURES
Based on their evaluation as at June 30, 2024, Precision’s Chief
Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective
to ensure that information required to be disclosed by the Corporation in reports that are filed or submitted to Canadian and U.S. securities
authorities is recorded, processed, summarized and reported within the time periods specified in Canadian and U.S. securities laws. In
addition, as at June 30, 2024, there were no changes in the internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) that occurred during the three months ended June 30, 2024 that have materially affected, or are reasonably likely
to materially affect, the Corporation’s internal control over financial reporting. Management will continue to periodically evaluate
the Corporation’s disclosure controls and procedures and internal control over financial reporting and will make any modifications
from time to time as deemed necessary.
Based on their inherent limitations, disclosure controls and procedures
and internal control over financial reporting may not prevent or detect misstatements, and even those controls determined to be effective
can provide only reasonable assurance with respect to financial statement preparation and presentation.
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 Accounting Standards to assess performance because we believe they provide useful supplemental information to investors. |
|
Adjusted EBITDA |
|
We believe Adjusted EBITDA (earnings before income taxes, loss (gain) on
investments and other assets, gain 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 Earnings 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. |
| |
For the three months ended June 30, | | |
For the six months ended June 30, | |
(Stated in thousands of Canadian dollars) | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Adjusted EBITDA by segment: | |
| | | |
| | | |
| | | |
| | |
Contract Drilling Services | |
| 119,754 | | |
| 147,478 | | |
| 273,427 | | |
| 336,601 | |
Completion and Production Services | |
| 12,440 | | |
| 7,507 | | |
| 31,045 | | |
| 24,913 | |
Corporate and Other | |
| (17,073 | ) | |
| (12,892 | ) | |
| (46,202 | ) | |
| (16,202 | ) |
Adjusted EBITDA | |
| 115,121 | | |
| 142,093 | | |
| 258,270 | | |
| 345,312 | |
Depreciation and amortization | |
| 73,818 | | |
| 74,088 | | |
| 152,031 | | |
| 145,631 | |
Gain on asset disposals | |
| (7,675 | ) | |
| (3,872 | ) | |
| (10,912 | ) | |
| (13,148 | ) |
Foreign exchange | |
| (471 | ) | |
| (774 | ) | |
| (77 | ) | |
| (1,257 | ) |
Finance charges | |
| 18,189 | | |
| 21,408 | | |
| 36,558 | | |
| 44,328 | |
Gain on repurchase of unsecured notes | |
| — | | |
| (100 | ) | |
| — | | |
| (100 | ) |
Loss (gain) on investments and other assets | |
| 48 | | |
| 5,658 | | |
| (180 | ) | |
| 9,888 | |
Incomes taxes | |
| 10,511 | | |
| 18,785 | | |
| 23,633 | | |
| 37,240 | |
Net earnings | |
| 20,701 | | |
| 26,900 | | |
| 57,217 | | |
| 122,730 | |
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) | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Capital spending by spend category | |
| | | |
| | | |
| | | |
| | |
Expansion and upgrade | |
| 8,422 | | |
| 9,615 | | |
| 22,792 | | |
| 25,960 | |
Maintenance, infrastructure and intangibles | |
| 30,001 | | |
| 35,099 | | |
| 71,158 | | |
| 69,549 | |
| |
| 38,423 | | |
| 44,714 | | |
| 93,950 | | |
| 95,509 | |
Proceeds on sale of property, plant and equipment | |
| (10,992 | ) | |
| (6,261 | ) | |
| (16,178 | ) | |
| (14,026 | ) |
Net capital spending | |
| 27,431 | | |
| 38,453 | | |
| 77,772 | | |
| 81,483 | |
Business acquisitions | |
| — | | |
| — | | |
| — | | |
| 28,000 | |
Proceeds from sale of investments and other assets | |
| (3,623 | ) | |
| — | | |
| (3,623 | ) | |
| — | |
Purchase of investments and other assets | |
| — | | |
| 2,016 | | |
| — | | |
| 2,071 | |
Receipt of finance lease payments | |
| (193 | ) | |
| — | | |
| (384 | ) | |
| — | |
Changes in non-cash working capital balances | |
| 3,328 | | |
| 3,593 | | |
| 28,415 | | |
| 11,325 | |
Cash used in investing activities | |
| 26,943 | | |
| 44,062 | | |
| 102,180 | | |
| 122,879 | |
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: |
| |
June 30, | | |
December 31, | |
(Stated in thousands of Canadian dollars) | |
2024 | | |
2023 | |
Current assets | |
| 469,949 | | |
| 510,881 | |
Current liabilities | |
| 311,479 | | |
| 374,009 | |
Working capital | |
| 158,470 | | |
| 136,872 | |
Total Long-term Financial Liabilities |
|
We define total long-term financial liabilities as total non-current liabilities
less deferred tax liabilities, as reported in our Condensed Interim Consolidated Statements of Financial Position.
Total long-term financial liabilities is calculated as follows: |
| |
June 30, | | |
December 31, | |
(Stated in thousands of Canadian dollars) | |
2024 | | |
2023 | |
Total non-current liabilities | |
| 970,269 | | |
| 1,069,364 | |
Deferred tax liabilities | |
| 53,130 | | |
| 73,515 | |
Total long-term financial liabilities | |
| 917,139 | | |
| 995,849 | |
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 Earnings, 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 of 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 of 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. |
CHANGE IN ACCOUNTING POLICY
Precision adopted Classification of Liabilities as Current or Non-current
and Non-current Liabilities with Covenants - Amendments to IAS 1, as issued in 2020 and 2022. These amendments apply retrospectively
for annual reporting periods beginning on or after January 1, 2024 and clarify requirements for determining whether a liability should
be classified as current or non-current. Due to this change in accounting policy, there was a retrospective impact on the comparative
Statement of Financial Position pertaining to the Corporation's deferred share unit (DSU) plan for non-management directors which
are redeemable in cash or for an equal number of common shares upon the director's retirement. In the case of a director retiring, the
director's respective DSU liability would become payable and the Corporation would not have the right to defer settlement of the liability
for at least twelve months. As such, the liability is impacted by the revised policy. The following changes were made to the Statement
of Financial Position:
| · | As at January 1, 2023, accounts payable and accrued liabilities increased by $12 million and non-current
share-based compensation liability decreased by $12 million. |
| · | As at December 31, 2023, accounts payable and accrued liabilities increased by $8 million and non-current
share-based compensation liability decreased by $8 million. |
The Corporation's other liabilities were not impacted by the amendments.
The change in accounting policy will also be reflected in the Corporation's consolidated financial statements as at and for the year ending
December 31, 2024.
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", "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 2024; |
| · | our capital expenditures, free cash flow allocation and debt reduction plans for 2024 through to 2026; |
| · | anticipated activity levels, demand for our drilling rigs, day rates and daily operating margins in 2024; |
| · | the average number of term contracts in place for 2024; |
| · | customer adoption of AlphaTM technologies and EverGreenTM suite of environmental
solutions; |
| · | timing and amount of synergies realized from acquired drilling and well servicing assets; |
| · | potential commercial opportunities and rig contract renewals; and |
| · | our future debt reduction plans. |
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:
| · | our ability to react to customer spending plans as a result of changes in oil and natural gas prices; |
| · | 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; |
| · | the impact of an increase/decrease in capital spending; 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; |
| · | 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, 2023, which may be accessed on Precision’s SEDAR+ profile at www.sedarplus.ca or under Precision’s
EDGAR profile at www.sec.gov. The forward-looking information and statements contained in this report 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.
15
Exhibit 99.2
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(Stated in thousands of Canadian dollars) | |
June 30, 2024 | | |
December 31, 2023 | | |
January 1, 2023 | |
ASSETS | |
| | | |
| (see Note 2d) | | |
| | |
Current assets: | |
| | | |
| | | |
| | |
Cash | |
$ | 48,233 | | |
$ | 54,182 | | |
$ | 21,587 | |
Accounts receivable | |
| 376,621 | | |
| 421,427 | | |
| 413,925 | |
Inventory | |
| 38,459 | | |
| 35,272 | | |
| 35,158 | |
Assets held for sale (Note 11) | |
| 6,636 | | |
| - | | |
| - | |
Total current assets | |
| 469,949 | | |
| 510,881 | | |
| 470,670 | |
Non-current assets: | |
| | | |
| | | |
| | |
Income tax recoverable | |
| 704 | | |
| 682 | | |
| 1,602 | |
Deferred tax assets | |
| 29,578 | | |
| 73,662 | | |
| 455 | |
Property, plant and equipment | |
| 2,321,465 | | |
| 2,338,088 | | |
| 2,303,338 | |
Intangibles | |
| 16,659 | | |
| 17,310 | | |
| 19,575 | |
Right-of-use assets | |
| 64,580 | | |
| 63,438 | | |
| 60,032 | |
Finance lease receivables | |
| 5,070 | | |
| 5,003 | | |
| - | |
Investments and other assets | |
| 6,528 | | |
| 9,971 | | |
| 20,451 | |
Total non-current assets | |
| 2,444,584 | | |
| 2,508,154 | | |
| 2,405,453 | |
Total assets | |
$ | 2,914,533 | | |
$ | 3,019,035 | | |
$ | 2,876,123 | |
| |
| | | |
| | | |
| | |
LIABILITIES AND EQUITY | |
| | | |
| | | |
| | |
Current liabilities: | |
| | | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 290,440 | | |
$ | 350,749 | | |
$ | 404,350 | |
Income taxes payable | |
| 1,114 | | |
| 3,026 | | |
| 2,991 | |
Current portion of lease obligations | |
| 18,962 | | |
| 17,386 | | |
| 12,698 | |
Current portion of long-term debt (Note 5) | |
| 963 | | |
| 2,848 | | |
| 2,287 | |
Total current liabilities | |
| 311,479 | | |
| 374,009 | | |
| 422,326 | |
| |
| | | |
| | | |
| | |
Non-current liabilities: | |
| | | |
| | | |
| | |
Share-based compensation (Note 7) | |
| 9,159 | | |
| 16,755 | | |
| 47,836 | |
Provisions and other | |
| 7,466 | | |
| 7,140 | | |
| 7,538 | |
Lease obligations | |
| 55,843 | | |
| 57,124 | | |
| 52,978 | |
Long-term debt (Note 5) | |
| 844,671 | | |
| 914,830 | | |
| 1,085,970 | |
Deferred tax liabilities | |
| 53,130 | | |
| 73,515 | | |
| 28,946 | |
Total non-current liabilities | |
| 970,269 | | |
| 1,069,364 | | |
| 1,223,268 | |
Shareholders’ equity: | |
| | | |
| | | |
| | |
Shareholders’ capital (Note 8) | |
| 2,346,823 | | |
| 2,365,129 | | |
| 2,299,533 | |
Contributed surplus | |
| 75,604 | | |
| 75,086 | | |
| 72,555 | |
Deficit | |
| (954,812 | ) | |
| (1,012,029 | ) | |
| (1,301,273 | ) |
Accumulated other comprehensive income | |
| 165,170 | | |
| 147,476 | | |
| 159,714 | |
Total shareholders’ equity | |
| 1,632,785 | | |
| 1,575,662 | | |
| 1,230,529 | |
Total liabilities and shareholders’ equity | |
$ | 2,914,533 | | |
$ | 3,019,035 | | |
$ | 2,876,123 | |
See accompanying notes to condensed interim consolidated financial statements.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF NET EARNINGS (UNAUDITED)
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
(Stated in thousands of Canadian dollars, except per share amounts) | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| |
Revenue (Note 3) | |
$ | 429,214 | | |
$ | 425,622 | | |
$ | 957,002 | | |
$ | 984,229 | |
Expenses: | |
| | | |
| | | |
| | | |
| | |
Operating | |
| 285,410 | | |
| 260,170 | | |
| 624,916 | | |
| 600,037 | |
General and administrative | |
| 28,683 | | |
| 23,359 | | |
| 73,816 | | |
| 38,880 | |
Earnings before income taxes, loss (gain) on
investments and other assets, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on
asset disposals, and depreciation and amortization | |
| 115,121 | | |
| 142,093 | | |
| 258,270 | | |
| 345,312 | |
Depreciation and amortization | |
| 73,818 | | |
| 74,088 | | |
| 152,031 | | |
| 145,631 | |
Gain on asset disposals | |
| (7,675 | ) | |
| (3,872 | ) | |
| (10,912 | ) | |
| (13,148 | ) |
Foreign exchange | |
| (471 | ) | |
| (774 | ) | |
| (77 | ) | |
| (1,257 | ) |
Finance charges (Note 6) | |
| 18,189 | | |
| 21,408 | | |
| 36,558 | | |
| 44,328 | |
Gain on repurchase of unsecured senior notes | |
| - | | |
| (100 | ) | |
| - | | |
| (100 | ) |
Loss (gain) on investments and other assets | |
| 48 | | |
| 5,658 | | |
| (180 | ) | |
| 9,888 | |
Earnings before income taxes | |
| 31,212 | | |
| 45,685 | | |
| 80,850 | | |
| 159,970 | |
Income taxes: | |
| | | |
| | | |
| | | |
| | |
Current | |
| 1,345 | | |
| 1,120 | | |
| 2,362 | | |
| 1,961 | |
Deferred | |
| 9,166 | | |
| 17,665 | | |
| 21,271 | | |
| 35,279 | |
| |
| 10,511 | | |
| 18,785 | | |
| 23,633 | | |
| 37,240 | |
Net earnings | |
$ | 20,701 | | |
$ | 26,900 | | |
$ | 57,217 | | |
$ | 122,730 | |
Net earnings per share: (Note 9) | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 1.44 | | |
$ | 1.97 | | |
$ | 3.97 | | |
$ | 8.98 | |
Diluted | |
$ | 1.44 | | |
$ | 1.63 | | |
$ | 3.97 | | |
$ | 7.22 | |
See accompanying notes to condensed interim consolidated financial statements.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
(Stated in thousands of Canadian dollars) | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Net earnings | |
$ | 20,701 | | |
$ | 26,900 | | |
$ | 57,217 | | |
$ | 122,730 | |
Unrealized gain (loss) on translation of
assets and liabilities of operations denominated in foreign currency | |
| 14,260 | | |
| (31,718 | ) | |
| 46,513 | | |
| (35,858 | ) |
Foreign
exchange gain(loss) on net investment hedge with U.S. denominated debt | |
| (8,660 | ) | |
| 20,459 | | |
| (28,819 | ) | |
| 23,132 | |
Comprehensive income | |
$ | 26,301 | | |
$ | 15,641 | | |
$ | 74,911 | | |
$ | 110,004 | |
See accompanying notes to condensed interim consolidated financial statements.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
(Stated in thousands of Canadian dollars) | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Cash provided by (used in): | |
| | | |
| | | |
| | | |
| | |
Operations: | |
| | | |
| | | |
| | | |
| | |
Net earnings | |
$ | 20,701 | | |
$ | 26,900 | | |
$ | 57,217 | | |
$ | 122,730 | |
Adjustments for: | |
| | | |
| | | |
| | | |
| | |
Long-term compensation plans | |
| 4,419 | | |
| 1,740 | | |
| 11,870 | | |
| (2,377 | ) |
Depreciation and amortization | |
| 73,818 | | |
| 74,088 | | |
| 152,031 | | |
| 145,631 | |
Gain on asset disposals | |
| (7,675 | ) | |
| (3,872 | ) | |
| (10,912 | ) | |
| (13,148 | ) |
Foreign exchange | |
| (578 | ) | |
| (786 | ) | |
| 150 | | |
| (1,288 | ) |
Finance charges | |
| 18,189 | | |
| 21,408 | | |
| 36,558 | | |
| 44,328 | |
Income taxes | |
| 10,511 | | |
| 18,785 | | |
| 23,633 | | |
| 37,240 | |
Other | |
| 93 | | |
| (220 | ) | |
| 93 | | |
| (220 | ) |
Loss (gain) on investments and other assets | |
| 48 | | |
| 5,658 | | |
| (180 | ) | |
| 9,888 | |
Gain on repurchase of unsecured senior notes | |
| - | | |
| (100 | ) | |
| - | | |
| (100 | ) |
Income taxes paid | |
| (4,100 | ) | |
| (2,037 | ) | |
| (4,334 | ) | |
| (2,208 | ) |
Income taxes recovered | |
| - | | |
| 3 | | |
| - | | |
| 3 | |
Interest paid | |
| (4,313 | ) | |
| (4,827 | ) | |
| (37,743 | ) | |
| (44,202 | ) |
Interest received | |
| 637 | | |
| 219 | | |
| 1,132 | | |
| 335 | |
Funds provided by operations | |
| 111,750 | | |
| 136,959 | | |
| 229,515 | | |
| 296,612 | |
Changes in non-cash working capital balances | |
| 62,325 | | |
| 76,501 | | |
| 10,103 | | |
| (54,796 | ) |
Cash provided by operations | |
| 174,075 | | |
| 213,460 | | |
| 239,618 | | |
| 241,816 | |
| |
| | | |
| | | |
| | | |
| | |
Investments: | |
| | | |
| | | |
| | | |
| | |
Purchase of property, plant and equipment | |
| (38,423 | ) | |
| (44,037 | ) | |
| (93,950 | ) | |
| (94,832 | ) |
Purchase of intangibles | |
| - | | |
| (677 | ) | |
| - | | |
| (677 | ) |
Proceeds on sale of property, plant and equipment | |
| 10,992 | | |
| 6,261 | | |
| 16,178 | | |
| 14,026 | |
Proceeds from sale of investments and other assets | |
| 3,623 | | |
| - | | |
| 3,623 | | |
| - | |
Business acquisitions | |
| - | | |
| - | | |
| - | | |
| (28,000 | ) |
Purchase of investments and other assets | |
| - | | |
| (2,016 | ) | |
| - | | |
| (2,071 | ) |
Receipt of finance lease payments | |
| 193 | | |
| - | | |
| 384 | | |
| - | |
Changes in non-cash working capital balances | |
| (3,328 | ) | |
| (3,593 | ) | |
| (28,415 | ) | |
| (11,325 | ) |
Cash used in investing activities | |
| (26,943 | ) | |
| (44,062 | ) | |
| (102,180 | ) | |
| (122,879 | ) |
| |
| | | |
| | | |
| | | |
| | |
Financing: | |
| | | |
| | | |
| | | |
| | |
Issuance of long-term debt | |
| - | | |
| - | | |
| - | | |
| 139,049 | |
Repayments of long-term debt | |
| (102,132 | ) | |
| (177,677 | ) | |
| (102,848 | ) | |
| (239,021 | ) |
Repurchase of share capital (Note 8) | |
| (23,493 | ) | |
| (7,958 | ) | |
| (33,574 | ) | |
| (12,951 | ) |
Issuance of common shares from the exercise of options | |
| 191 | | |
| - | | |
| 191 | | |
| - | |
Debt amendment fees | |
| (1,317 | ) | |
| - | | |
| (1,317 | ) | |
| - | |
Lease payments | |
| (3,219 | ) | |
| (2,042 | ) | |
| (6,419 | ) | |
| (4,003 | ) |
Cash used in financing activities | |
| (129,970 | ) | |
| (187,677 | ) | |
| (143,967 | ) | |
| (116,926 | ) |
Effect of exchange rate changes on cash | |
| 123 | | |
| (421 | ) | |
| 580 | | |
| (679 | ) |
Increase (decrease) in cash | |
| 17,285 | | |
| (18,700 | ) | |
| (5,949 | ) | |
| 1,332 | |
Cash, beginning of period | |
| 30,948 | | |
| 41,619 | | |
| 54,182 | | |
| 21,587 | |
Cash, end of period | |
$ | 48,233 | | |
$ | 22,919 | | |
$ | 48,233 | | |
$ | 22,919 | |
See accompanying notes to condensed interim consolidated financial statements.
CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY (UNAUDITED)
(Stated in thousands of Canadian dollars) | |
Shareholders’ Capital | | |
Contributed Surplus | | |
Accumulated Other Comprehensive Income | | |
Deficit | | |
Total Equity | |
Balance at January 1, 2024 | |
$ | 2,365,129 | | |
$ | 75,086 | | |
$ | 147,476 | | |
$ | (1,012,029 | ) | |
$ | 1,575,662 | |
Net earnings for the period | |
| - | | |
| - | | |
| - | | |
| 57,217 | | |
| 57,217 | |
Other comprehensive income for the period | |
| - | | |
| - | | |
| 17,694 | | |
| - | | |
| 17,694 | |
Share options exercised | |
| 271 | | |
| (80 | ) | |
| - | | |
| - | | |
| 191 | |
Settlement of Executive Performance and Restricted Share Units | |
| 21,846 | | |
| (1,479 | ) | |
| - | | |
| - | | |
| 20,367 | |
Share repurchases (Note 8) | |
| (40,423 | ) | |
| - | | |
| - | | |
| - | | |
| (40,423 | ) |
Share-based compensation expense | |
| - | | |
| 2,077 | | |
| - | | |
| - | | |
| 2,077 | |
Balance at June 30, 2024 | |
$ | 2,346,823 | | |
$ | 75,604 | | |
$ | 165,170 | | |
$ | (954,812 | ) | |
$ | 1,632,785 | |
(Stated in thousands of Canadian dollars) | |
Shareholders’ Capital | | |
Contributed Surplus | | |
Accumulated Other Comprehensive Income | | |
Deficit | | |
Total Equity | |
Balance at January 1, 2023 | |
$ | 2,299,533 | | |
$ | 72,555 | | |
$ | 159,714 | | |
$ | (1,301,273 | ) | |
$ | 1,230,529 | |
Net earnings for the period | |
| - | | |
| - | | |
| - | | |
| 122,730 | | |
| 122,730 | |
Other comprehensive loss for the period | |
| - | | |
| - | | |
| (12,726 | ) | |
| - | | |
| (12,726 | ) |
Settlement of Executive Performance and Restricted Share Units | |
| 19,206 | | |
| - | | |
| - | | |
| - | | |
| 19,206 | |
Share repurchases | |
| (12,951 | ) | |
| - | | |
| - | | |
| - | | |
| (12,951 | ) |
Redemption of non-management directors share units | |
| 757 | | |
| - | | |
| - | | |
| - | | |
| 757 | |
Share-based compensation expense | |
| - | | |
| 1,133 | | |
| - | | |
| - | | |
| 1,133 | |
Balance at June 30, 2023 | |
$ | 2,306,545 | | |
$ | 73,688 | | |
$ | 146,988 | | |
$ | (1,178,543 | ) | |
$ | 1,348,678 | |
See accompanying notes to condensed interim consolidated financial statements.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Tabular amounts are stated in thousands of Canadian dollars except
share numbers and per share amounts)
NOTE 1. DESCRIPTION OF BUSINESS
Precision Drilling Corporation (Precision or the Corporation)
is incorporated under the laws of the Province of Alberta, Canada and is a provider of contract drilling and completion and production
services primarily to oil and natural gas and geothermal exploration and production companies in Canada, the United States and certain
international locations.
NOTE 2. BASIS OF PRESENTATION
(a) Statement of Compliance
These condensed interim consolidated financial statements have been prepared
in accordance with IFRS Accounting Standards 34, Interim Financial Reporting, using accounting policies consistent with IFRS as issued
by the International Accounting Standards Board (IASB).
The condensed interim consolidated financial statements do not include
all of the information required for full annual financial statements and should be read in conjunction with the consolidated annual financial
statements of the Corporation as at and for the year ended December 31, 2023.
These condensed interim consolidated financial statements were prepared
using accounting policies and methods of their application are consistent with those used in the preparation of the Corporation’s
consolidated annual financial statements for the year ended December 31, 2023, except as noted in Note 2 (d).
These condensed interim consolidated financial statements were approved
by the Board of Directors on July 30, 2024.
(b) Use of Estimates and Judgements
The preparation of the condensed interim consolidated financial statements
requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and
the disclosure of contingencies. These estimates and judgements are based on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances. The estimation of anticipated future events involves uncertainty and, consequently,
the estimates used in preparation of the condensed interim consolidated financial statements may change as future events unfold, more
experience is acquired, or the Corporation’s operating environment changes.
Significant estimates and judgements used in the preparation of these condensed
interim consolidated financial statements remained unchanged from those disclosed in the Corporation’s consolidated annual financial
statements for the year ended December 31, 2023.
(c) Environmental Reporting Regulations
Environmental reporting continues to evolve and the Corporation may be
subject to additional future disclosure requirements. The International Sustainability Standards Board (ISSB) has issued two IFRS
Sustainability Disclosure Standards with the objective to develop a global framework for environmental sustainability disclosure. The
Canadian Sustainability Standards Board (CSSB) has also released two Exposure Drafts on the Proposed Canadian Sustainability Disclosure
Standards which are aligned with the ISSB, in which the comment period closed on June 10, 2024 . Final CSSB standards are anticipated
to be issued later in 2024.
The Canadian Securities Administrators (CSA) have also issued a
proposed National Instrument 51-107 Disclosure of Climate-related Matters which sets forth additional reporting and disclosure
requirements for Canadian public companies. Until such time as the CSA and CSSB make final decisions on sustainability standards for Canada,
there is no requirement for public companies in Canada to adopt sustainability standards. Precision continues to monitor the development
of these reporting requirements as it progresses with its determination of the financial and disclosure-related implications of complying
with these regulations.
(d) Change in Accounting Policy
The Corporation has adopted Classification of Liabilities as Current
or Non-current and Non-current Liabilities with Covenants - Amendments to IAS 1, as issued in 2020 and 2022. The amendments apply
retrospectively for annual reporting periods beginning on or after January 1, 2024. They clarify certain requirements for determining
whether a liability should be classified as current or non-current and require new disclosures for non-current liabilities that are subject
to covenants within 12 months after the reporting period.
Due to the change in policy, there is a retrospective impact on the comparative
statement of financial position, as the Corporation has a deferred share unit (DSU) plan for non-management directors which are
redeemable in cash or for an equal number of common shares upon the director's retirement. In the case of a director retiring, the director's
respective DSU liability would become payable and the Corporation would not have the right to defer settlement of the liability for at
least 12 months. As such, the liability is impacted by the revised policy. The following presentation changes were made to the Statement
of Financial Position:
| · | As at January 1, 2023, accounts payable and accrued liabilities increased by $12 million and non-current
share-based compensation liability decreased by $12 million. |
| · | As at December 31, 2023, accounts payable and accrued liabilities increased by $8 million and non-current
share-based compensation liability decreased by $8 million. |
The related liability is now classified as current at June 30, 2024 because
the DSUs can be redeemed by the holders within 12 months after the reporting period. The Corporation's other liabilities were not impacted
by the amendments.
The change in accounting policy will also be reflected in the Corporation's
consolidated financial statements as at and for the year ending December 31, 2024.
NOTE 3. Revenue
| (a) | Disaggregation of revenue |
The following table includes a reconciliation of disaggregated revenue
by reportable segment. Revenue has been disaggregated by primary geographical market and type of service provided.
Three Months Ended June 30, 2024 | |
Contract Drilling Services | | |
Completion and Production Services | | |
Corporate and Other | | |
Inter- Segment Eliminations | | |
Total | |
United States | |
$ | 147,089 | | |
$ | 3,870 | | |
$ | - | | |
$ | - | | |
$ | 150,959 | |
Canada | |
| 163,429 | | |
| 61,956 | | |
| - | | |
| (2,215 | ) | |
| 223,170 | |
International | |
| 55,085 | | |
| - | | |
| - | | |
| - | | |
| 55,085 | |
| |
$ | 365,603 | | |
$ | 65,826 | | |
$ | - | | |
$ | (2,215 | ) | |
$ | 429,214 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Day rate/hourly services | |
$ | 363,202 | | |
$ | 65,826 | | |
$ | - | | |
$ | (178 | ) | |
$ | 428,850 | |
Other | |
| 2,401 | | |
| - | | |
| - | | |
| (2,037 | ) | |
| 364 | |
| |
$ | 365,603 | | |
$ | 65,826 | | |
$ | - | | |
$ | (2,215 | ) | |
$ | 429,214 | |
Three Months Ended June 30, 2023 | |
Contract Drilling Services | | |
Completion and Production Services | | |
Corporate and Other | | |
Inter- Segment Eliminations | | |
Total | |
United States | |
$ | 221,189 | | |
$ | 3,607 | | |
$ | - | | |
$ | (3 | ) | |
$ | 224,793 | |
Canada | |
| 129,088 | | |
| 42,554 | | |
| - | | |
| (1,494 | ) | |
| 170,148 | |
International | |
| 30,681 | | |
| - | | |
| - | | |
| - | | |
| 30,681 | |
| |
$ | 380,958 | | |
$ | 46,161 | | |
$ | - | | |
$ | (1,497 | ) | |
$ | 425,622 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Day rate/hourly services | |
$ | 372,652 | | |
$ | 46,161 | | |
$ | - | | |
$ | (223 | ) | |
$ | 418,590 | |
Shortfall payments/idle but contracted | |
| 6,358 | | |
| - | | |
| - | | |
| - | | |
| 6,358 | |
Other | |
| 1,948 | | |
| - | | |
| - | | |
| (1,274 | ) | |
| 674 | |
| |
$ | 380,958 | | |
$ | 46,161 | | |
$ | - | | |
$ | (1,497 | ) | |
$ | 425,622 | |
Six Months Ended June 30, 2024 | |
Contract Drilling Services | | |
Completion and Production Services | | |
Corporate and Other | | |
Inter- Segment Eliminations | | |
Total | |
United States | |
$ | 300,032 | | |
$ | 8,011 | | |
$ | - | | |
$ | - | | |
$ | 308,043 | |
Canada | |
| 402,006 | | |
| 144,902 | | |
| - | | |
| (4,881 | ) | |
| 542,027 | |
International | |
| 106,932 | | |
| - | | |
| - | | |
| - | | |
| 106,932 | |
| |
$ | 808,970 | | |
$ | 152,913 | | |
$ | - | | |
$ | (4,881 | ) | |
$ | 957,002 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Day rate/hourly services | |
$ | 803,536 | | |
$ | 152,913 | | |
$ | - | | |
$ | (355 | ) | |
$ | 956,094 | |
Other | |
| 5,434 | | |
| - | | |
| - | | |
| (4,526 | ) | |
| 908 | |
| |
$ | 808,970 | | |
$ | 152,913 | | |
$ | - | | |
$ | (4,881 | ) | |
$ | 957,002 | |
Six Months Ended June 30, 2023 | |
Contract Drilling Services | | |
Completion and Production Services | | |
Corporate and Other | | |
Inter- Segment Eliminations | | |
Total | |
United States | |
$ | 475,327 | | |
$ | 7,684 | | |
$ | - | | |
$ | (17 | ) | |
$ | 482,994 | |
Canada | |
| 330,766 | | |
| 113,000 | | |
| - | | |
| (3,472 | ) | |
| 440,294 | |
International | |
| 60,941 | | |
| - | | |
| - | | |
| - | | |
| 60,941 | |
| |
$ | 867,034 | | |
$ | 120,684 | | |
$ | - | | |
$ | (3,489 | ) | |
$ | 984,229 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Day rate/hourly services | |
$ | 846,317 | | |
$ | 120,684 | | |
$ | - | | |
$ | (237 | ) | |
$ | 966,764 | |
Shortfall payments/idle but contracted | |
| 7,241 | | |
| - | | |
| - | | |
| - | | |
| 7,241 | |
Turnkey drilling services | |
| 8,988 | | |
| - | | |
| - | | |
| - | | |
| 8,988 | |
Other | |
| 4,488 | | |
| - | | |
| - | | |
| (3,252 | ) | |
| 1,236 | |
| |
$ | 867,034 | | |
$ | 120,684 | | |
$ | - | | |
$ | (3,489 | ) | |
$ | 984,229 | |
Precision has operations that are carried on in Canada which represent
approximately 57% (2023 – 45%) of consolidated revenue for the six months ended June 30, 2024 and 39% (2023 – 37%) of consolidated
total assets as at June 30, 2024. The ability to move heavy equipment in Canadian oil and natural gas fields is dependent on weather conditions.
As warm weather returns in the spring, the winter's frost comes out of the ground rendering many secondary roads incapable of supporting
the weight of heavy equipment until they have thoroughly dried out. The duration of this “spring break-up” has a direct impact
on Precision’s activity levels. In addition, many exploration and production areas in northern Canada are accessible only in winter
months when the ground is frozen hard enough to support equipment. The timing of freeze up and spring break-up affects the ability to
move equipment in and out of these areas. As a result, late March through May is traditionally Precision’s slowest time in this
region.
NOTE 4. SEGMENTED INFORMATION
The Corporation has two reportable operating segments; Contract Drilling
Services and Completion and Production Services. Contract Drilling Services includes drilling rigs, procurement and distribution of oilfield
supplies, and manufacture, sale and repair of drilling equipment. Completion and Production Services includes service rigs, oilfield equipment
rental and camp and catering services. The Corporation provides services primarily in Canada, the United States and certain international
locations.
Three
Months Ended June 30, 2024 | |
Contract Drilling Services | | |
Completion and Production Services | | |
Corporate and Other | | |
Inter- Segment Eliminations | | |
Total | |
Revenue | |
$ | 365,603 | | |
$ | 65,826 | | |
$ | - | | |
$ | (2,215 | ) | |
$ | 429,214 | |
Earnings before income taxes, loss (gain) on investments and other assets, gain on
repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals, and depreciation
and amortization | |
| 119,754 | | |
| 12,440 | | |
| (17,073 | ) | |
| - | | |
| 115,121 | |
Depreciation and amortization | |
| 68,732 | | |
| 3,058 | | |
| 2,028 | | |
| - | | |
| 73,818 | |
Gain on asset disposals | |
| (3,887 | ) | |
| (975 | ) | |
| (2,813 | ) | |
| - | | |
| (7,675 | ) |
Total assets | |
| 2,479,410 | | |
| 244,705 | | |
| 190,418 | | |
| - | | |
| 2,914,533 | |
Capital expenditures | |
| 32,868 | | |
| 4,927 | | |
| 628 | | |
| - | | |
| 38,423 | |
Three
Months Ended June 30, 2023 | |
Contract Drilling Services | | |
Completion and Production Services | | |
Corporate and Other | | |
Inter- Segment Eliminations | | |
Total | |
Revenue | |
$ | 380,958 | | |
$ | 46,161 | | |
$ | - | | |
$ | (1,497 | ) | |
$ | 425,622 | |
Earnings before income taxes, loss (gain) on investments and other assets, gain on
repurchase of unsecured senior notes,
finance charges, foreign exchange,
gain on asset disposals, and
depreciation and amortization | |
| 147,478 | | |
| 7,507 | | |
| (12,892 | ) | |
| - | | |
| 142,093 | |
Depreciation and amortization | |
| 68,151 | | |
| 3,638 | | |
| 2,299 | | |
| - | | |
| 74,088 | |
Gain on asset disposals | |
| (3,706 | ) | |
| (148 | ) | |
| (18 | ) | |
| - | | |
| (3,872 | ) |
Total assets | |
| 2,449,323 | | |
| 161,403 | | |
| 121,968 | | |
| - | | |
| 2,732,694 | |
Capital expenditures | |
| 41,375 | | |
| 2,442 | | |
| 897 | | |
| - | | |
| 44,714 | |
Six
Months Ended June 30, 2024 | |
Contract Drilling Services | | |
Completion and Production Services | | |
Corporate and Other | | |
Inter- Segment Eliminations | | |
Total | |
Revenue | |
$ | 808,970 | | |
$ | 152,913 | | |
$ | - | | |
$ | (4,881 | ) | |
$ | 957,002 | |
Earnings before income taxes, loss (gain)
on investments and other assets, gain on
repurchase of unsecured senior notes,
finance charges, foreign exchange,
gain on asset disposals, and
depreciation and amortization | |
| 273,427 | | |
| 31,045 | | |
| (46,202 | ) | |
| - | | |
| 258,270 | |
Depreciation and amortization | |
| 137,784 | | |
| 9,878 | | |
| 4,369 | | |
| - | | |
| 152,031 | |
Gain on asset disposals | |
| (6,554 | ) | |
| (1,517 | ) | |
| (2,841 | ) | |
| - | | |
| (10,912 | ) |
Total assets | |
| 2,479,410 | | |
| 244,705 | | |
| 190,418 | | |
| - | | |
| 2,914,533 | |
Capital expenditures | |
| 85,253 | | |
| 7,847 | | |
| 850 | | |
| - | | |
| 93,950 | |
Six Months Ended June 30, 2023 | |
Contract Drilling Services | | |
Completion and Production Services | | |
Corporate and Other | | |
Inter- Segment Eliminations | | |
Total | |
Revenue | |
$ | 867,034 | | |
$ | 120,684 | | |
$ | - | | |
$ | (3,489 | ) | |
$ | 984,229 | |
Earnings before income taxes, loss (gain)
on investments and other assets, gain on
repurchase of unsecured senior notes,
finance charges, foreign exchange,
gain on asset disposals, and
depreciation and amortization | |
| 336,601 | | |
| 24,913 | | |
| (16,202 | ) | |
| - | | |
| 345,312 | |
Depreciation and amortization | |
| 133,706 | | |
| 7,369 | | |
| 4,556 | | |
| - | | |
| 145,631 | |
Gain on asset disposals | |
| (12,286 | ) | |
| (714 | ) | |
| (148 | ) | |
| - | | |
| (13,148 | ) |
Total assets | |
| 2,449,323 | | |
| 161,403 | | |
| 121,968 | | |
| - | | |
| 2,732,694 | |
Capital expenditures | |
| 90,199 | | |
| 4,225 | | |
| 1,085 | | |
| - | | |
| 95,509 | |
A reconciliation of total segment earnings before income taxes, loss (gain) on investments and
other assets, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals, depreciation and
amortization to net earnings is as follows:
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Total segment earnings before income taxes, loss (gain)
on investments and other assets, gain on
repurchase of unsecured senior notes,
finance charges, foreign exchange,
gain on asset disposals, and
depreciation and amortization | |
$ | 115,121 | | |
$ | 142,093 | | |
$ | 258,270 | | |
$ | 345,312 | |
Deduct: | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 73,818 | | |
| 74,088 | | |
| 152,031 | | |
| 145,631 | |
Gain on asset disposals | |
| (7,675 | ) | |
| (3,872 | ) | |
| (10,912 | ) | |
| (13,148 | ) |
Foreign exchange | |
| (471 | ) | |
| (774 | ) | |
| (77 | ) | |
| (1,257 | ) |
Finance charges | |
| 18,189 | | |
| 21,408 | | |
| 36,558 | | |
| 44,328 | |
Gain on repurchase of unsecured senior notes | |
| - | | |
| (100 | ) | |
| - | | |
| (100 | ) |
Loss (gain) on investments and other assets | |
| 48 | | |
| 5,658 | | |
| (180 | ) | |
| 9,888 | |
Income taxes | |
| 10,511 | | |
| 18,785 | | |
| 23,633 | | |
| 37,240 | |
Net earnings | |
$ | 20,701 | | |
$ | 26,900 | | |
$ | 57,217 | | |
$ | 122,730 | |
NOTE 5. LONG-TERM DEBT
| |
U.S. Denominated Facilities | | |
Canadian Facilities and
Translated U.S. Facilities | |
| |
| | |
| |
| |
June 30, | | |
December 31, | | |
June 30, | | |
December 31, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
Current Portion of Long-Term Debt | |
| | | |
| | | |
| | | |
| | |
Canadian Real Estate Credit Facility | |
US$ | - | | |
US$ | - | | |
$ | - | | |
$ | 1,915 | |
U.S. Real Estate Credit Facility | |
| 704 | | |
| 704 | | |
| 963 | | |
| 933 | |
| |
US$ | 704 | | |
US$ | 704 | | |
$ | 963 | | |
$ | 2,848 | |
| |
| | | |
| | | |
| | | |
| | |
Long-Term Debt | |
| | | |
| | | |
| | | |
| | |
Canadian Real Estate Credit Facility | |
| - | | |
| - | | |
| - | | |
| 24,018 | |
U.S. Real Estate Credit Facility | |
| 7,333 | | |
| 7,685 | | |
| 10,028 | | |
| 10,181 | |
Unsecured Senior Notes: | |
| | | |
| | | |
| | | |
| | |
7.125% senior notes due 2026 | |
| 217,330 | | |
| 273,330 | | |
| 297,263 | | |
| 362,096 | |
6.875% senior notes due 2029 | |
| 400,000 | | |
| 400,000 | | |
| 547,120 | | |
| 529,904 | |
| |
US$ | 624,663 | | |
US$ | 681,015 | | |
| 854,411 | | |
| 926,199 | |
Less net unamortized debt issue costs
and original issue discount | |
| | | |
| | | |
| (9,740 | ) | |
| (11,369 | ) |
| |
| | | |
| | | |
$ | 844,671 | | |
$ | 914,830 | |
| |
Unsecured Senior Notes | | |
Canadian Real Estate Credit Facility | | |
U.S. Real Estate Credit Facility | | |
Debt Issue Costs and Original Issue Discount | | |
Total | |
Current | |
$ | - | | |
$ | 1,915 | | |
$ | 933 | | |
$ | - | | |
$ | 2,848 | |
Long-term | |
| 892,000 | | |
| 24,018 | | |
| 10,181 | | |
| (11,369 | ) | |
| 914,830 | |
December 31, 2023 | |
| 892,000 | | |
| 25,933 | | |
| 11,114 | | |
| (11,369 | ) | |
| 917,678 | |
Changes from financing cash flows: | |
| | | |
| | | |
| | | |
| | | |
| | |
Repayment of unsecured senior notes | |
| (76,436 | ) | |
| - | | |
| - | | |
| - | | |
| (76,436 | ) |
Repayment of Real Estate Credit
Facility | |
| - | | |
| (25,933 | ) | |
| (479 | ) | |
| - | | |
| (26,412 | ) |
| |
| 815,564 | | |
| - | | |
| 10,635 | | |
| (11,369 | ) | |
| 814,830 | |
Amortization of debt issue costs | |
| - | | |
| - | | |
| - | | |
| 1,628 | | |
| 1,628 | |
Foreign exchange adjustment | |
| 28,819 | | |
| - | | |
| 356 | | |
| 1 | | |
| 29,176 | |
June 30, 2024 | |
$ | 844,383 | | |
$ | - | | |
$ | 10,991 | | |
$ | (9,740 | ) | |
$ | 845,634 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current | |
$ | - | | |
$ | - | | |
$ | 963 | | |
$ | - | | |
$ | 963 | |
Long-term | |
| 844,383 | | |
| - | | |
| 10,028 | | |
| (9,740 | ) | |
| 844,671 | |
June 30, 2024 | |
$ | 844,383 | | |
$ | - | | |
$ | 10,991 | | |
$ | (9,740 | ) | |
$ | 845,634 | |
On June 28, 2024, Precision extended its Senior Credit Facility’s
maturity date, revised the available borrowing capacity, and amended certain terms of the facility. The maturity date was extended to
June 28, 2027, and the size was revised to US$375 million, down from US$447 million.
As at June 30, 2024, Precision was in compliance with the covenants of
the Senior Credit Facility and Real Estate Credit Facilities.
| |
Covenant | |
At June 30, 2024 | |
Senior Credit Facility | |
| |
| | |
Consolidated senior debt to consolidated covenant EBITDA(1) | |
< 2.50 | |
| 0.03 | |
Consolidated covenant EBITDA to consolidated interest expense | |
> 2.50 | |
| 7.48 | |
Real Estate Credit Facilities | |
| |
| | |
Consolidated covenant EBITDA to consolidated interest expense | |
> 2.50 | |
| 7.48 | |
| (1) | For purposes of calculating the leverage ratio consolidated senior debt only includes secured indebtedness. |
NOTE 6. FINANCE CHARGES
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Interest: | |
| | |
| | |
| | |
| |
Long-term debt | |
$ | 16,639 | | |
$ | 19,660 | | |
$ | 33,667 | | |
$ | 40,873 | |
Lease obligations | |
| 1,043 | | |
| 909 | | |
| 2,082 | | |
| 1,771 | |
Other | |
| 158 | | |
| 33 | | |
| 249 | | |
| 188 | |
Income | |
| (777 | ) | |
| (256 | ) | |
| (1,345 | ) | |
| (360 | ) |
Amortization of debt issue costs, loan commitment fees
and original issue discount | |
| 1,126 | | |
| 1,062 | | |
| 1,905 | | |
| 1,856 | |
Finance charges | |
$ | 18,189 | | |
$ | 21,408 | | |
$ | 36,558 | | |
$ | 44,328 | |
NOTE 7. SHARE-BASED COMPENSATION PLANS
Liability Classified Plans
| |
Restricted Share Units (a) | | |
Performance Share Units (a) | | |
Non-Management Directors’ DSUs (b) | | |
Total | |
December 31, 2023 | |
$ | 16,114 | | |
$ | 64,042 | | |
$ | 8,367 | | |
$ | 88,523 | |
Expensed during period | |
| 7,550 | | |
| 19,473 | | |
| 3,414 | | |
| 30,437 | |
Settlement in shares | |
| (2,012 | ) | |
| (18,355 | ) | |
| - | | |
| (20,367 | ) |
Payments and redemptions | |
| (12,977 | ) | |
| (39,913 | ) | |
| - | | |
| (52,890 | ) |
Foreign exchange | |
| (132 | ) | |
| (433 | ) | |
| - | | |
| (565 | ) |
June 30, 2024 | |
$ | 8,543 | | |
$ | 24,814 | | |
$ | 11,781 | | |
$ | 45,138 | |
| |
| | | |
| | | |
| | | |
| | |
Current | |
$ | 6,698 | | |
$ | 17,500 | | |
$ | 11,781 | | |
$ | 35,979 | |
Long-term | |
| 1,845 | | |
| 7,314 | | |
| - | | |
| 9,159 | |
| |
$ | 8,543 | | |
$ | 24,814 | | |
$ | 11,781 | | |
$ | 45,138 | |
(a)
Restricted Share Units and Performance Share Units
A summary of the activity under the Restricted Share Unit (RSU)
and the Performance Share Unit (PSU) plans are presented below:
| |
RSUs Outstanding | | |
PSUs Outstanding | |
December 31, 2023 | |
| 276,094 | | |
| 794,743 | |
Granted | |
| 90,448 | | |
| 158,100 | |
Redeemed | |
| (180,300 | ) | |
| (449,465 | ) |
Forfeited | |
| (3,769 | ) | |
| (3,455 | ) |
June 30, 2024 | |
| 182,473 | | |
| 499,923 | |
(b)
Non-Management Directors – Deferred Share Units Plan
A summary of the activity under the non-management director Deferred Share
Unit (DSU) plan is presented below:
| |
DSUs Outstanding | |
December 31, 2023 | |
| 116,280 | |
Granted | |
| 6,187 | |
June 30, 2024 | |
| 122,467 | |
Equity Settled Plans
(c)
Executive Restricted Share Units Plan
Precision granted Executive RSUs to certain senior executives with the
intention of settling them in voting shares of the Corporation either issued from treasury or purchased in the open market. Granted units
vest annually over a three-year term.
| |
Executive RSUs Outstanding | | |
Weighted Average Fair Value | |
December 31, 2023 | |
| 46,740 | | |
$ | 96.90 | |
Granted | |
| 61,930 | | |
| 79.84 | |
Redeemed | |
| (15,570 | ) | |
| 96.90 | |
Forfeited | |
| (608 | ) | |
| 96.90 | |
June 30, 2024 | |
| 92,492 | | |
$ | 85.48 | |
Included in net earnings for the three and six months ended June 30, 2024
were expenses of $1 million (2023 – $1 million) and $2 million (2023 – $1 million) respectively.
(d)
Option Plan
A summary of the activity under the option plan is presented below:
Canadian share options | |
Outstanding | | |
Range of Exercise Price | |
Weighted Average Exercise Price | | |
Exercisable | |
December 31, 2023 | |
| 23,055 | | |
$ | 87.00 | | |
| - | | |
| 145.97 | | |
$ | 113.01 | | |
| 23,055 | |
Exercised | |
| (925 | ) | |
| 87.00 | | |
| - | | |
| 87.00 | | |
| 87.00 | | |
| | |
Forfeited | |
| (10,170 | ) | |
| 145.97 | | |
| - | | |
| 145.97 | | |
| 145.97 | | |
| | |
June 30, 2024 | |
| 11,960 | | |
$ | 87.00 | | |
| - | | |
| 87.00 | | |
$ | 87.00 | | |
| 11,960 | |
U.S. share options | |
Outstanding | | |
Range of Exercise Price (US$) | |
Weighted Average Exercise Price (US$) | | |
Exercisable | |
December 31, 2023 | |
| 128,398 | | |
$ | 51.20 | | |
| - | | |
| 111.47 | | |
$ | 85.80 | | |
| 128,398 | |
Exercised | |
| (1,150 | ) | |
| 68.80 | | |
| - | | |
| 68.80 | | |
| 68.80 | | |
| | |
Forfeited | |
| (57,756 | ) | |
| 68.80 | | |
| - | | |
| 111.47 | | |
| 109.04 | | |
| | |
June 30, 2024 | |
| 69,492 | | |
$ | 51.20 | | |
| - | | |
| 72.46 | | |
$ | 66.77 | | |
| 69,492 | |
(e)
Non-Management Directors – Deferred Share Unit Plan
As at June 30, 2024, there were 1,470 (2023 – 1,470) deferred
share units outstanding.
NOTE 8. SHAREHOLDERS’ CAPITAL
Common shares | |
Number | | |
Amount | |
December 31, 2023 | |
| 14,336,539 | | |
$ | 2,365,129 | |
Settlement of PSUs and RSUs | |
| 265,143 | | |
| 21,846 | |
Share options exercised | |
| 2,075 | | |
| 271 | |
Share repurchases | |
| (366,214 | ) | |
| (33,574 | ) |
Share repurchase accrual | |
| - | | |
| (6,849 | ) |
June 30, 2024 | |
| 14,237,543 | | |
$ | 2,346,823 | |
The Corporation entered into an Automated Share Purchase Plan
(ASPP) with an independent broker to permit the Corporation to repurchase common shares during its internal blackout period. The
volume of purchases is determined by the broker in its sole discretion based on purchase price and maximum volume parameters established
by the Corporation under the ASPP. The Corporation recorded a liability for purchases that are estimated to occur during the blackout
period based on the parameters of the Normal Course Issuer Bid (NCIB) and ASPP. As at June 30, 2024, the Corporation recorded a
liability in accounts payable and corresponding decrease to share capital of $7 million.
NOTE 9. PER SHARE AMOUNTS
The following tables reconcile net earnings and weighted average shares
outstanding used in computing basic and diluted net earnings per share:
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Net earnings – basic | |
$ | 20,701 | | |
$ | 26,900 | | |
$ | 57,217 | | |
$ | 122,730 | |
Effect of share options and other equity
compensation plans | |
| - | | |
| (2,902 | ) | |
| - | | |
| (15,469 | ) |
Net earnings – diluted | |
$ | 20,701 | | |
$ | 23,998 | | |
$ | 57,217 | | |
$ | 107,261 | |
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
(Stated in thousands) | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Weighted average shares outstanding – basic | |
| 14,389 | | |
| 13,672 | | |
| 14,398 | | |
| 13,661 | |
Effect of share options and other equity
compensation plans | |
| 6 | | |
| 1,075 | | |
| 4 | | |
| 1,196 | |
Weighted average shares outstanding – diluted | |
| 14,395 | | |
| 14,747 | | |
| 14,402 | | |
| 14,857 | |
NOTE 10. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying values of cash, accounts receivable, and accounts payable
and accrued liabilities approximates their fair value due to the relatively short period to maturity of the instruments. At the end of
each reporting period, investments and other assets are measured at their estimated fair value, with changes in fair value recognized
in profit or loss. Amounts drawn on the Senior Credit Facility and the Canadian and U.S. Real Estate Credit Facilities are measured at
amortized cost and approximate fair value as this indebtedness is subject to floating rates of interest. The fair value of the unsecured
senior notes at June 30, 2024 was approximately $839 million (December 31, 2023 – $867 million).
Financial assets and liabilities recorded or disclosed at fair
value in the consolidated statement of financial position are categorized based upon the level of judgement associated with the inputs
used to measure their fair value. Hierarchical levels are based on the amount of subjectivity associated with the inputs in the fair value
determination and are as follows:
Level I—Inputs are unadjusted, quoted prices in active
markets for identical assets or liabilities at the measurement date.
Level II—Inputs (other than quoted prices included in
Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement
date and for the duration of the instrument’s anticipated life.
Level III—Inputs reflect management’s best estimate
of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent
in the valuation technique and the risk inherent in the inputs to the model.
The estimated fair value of unsecured senior notes is based on level II
inputs. The fair value is estimated considering the risk-free interest rates on government debt instruments of similar maturities, adjusted
for estimated credit risk, industry risk and market risk premiums.
NOTE 11. ASSETS HELD FOR SALE
During the quarter, Precision committed to sell certain assets contained
within the Contract Drilling and Completion and Production Services segments. The identified assets were previously acquired through business
acquisitions and subsequently deemed as redundant. Accordingly, these assets were presented as held for sale at June 30, 2024 as sales
efforts have been initiated and expected to be completed within one year. At June 30, 2024, property, plant and equipment with a carrying
amount of $7 million was reclassified as assets held for sale.
SHAREHOLDER INFORMATION
STOCK EXCHANGE LISTINGS
Shares of Precision Drilling Corporation are listed on the Toronto Stock
Exchange under the trading symbol PD and on the New York Stock Exchange under the trading symbol PDS.
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company of Canada
Calgary, Alberta
TRANSFER POINT
Computershare Trust Company NA
Canton, Massachusetts
Q2 2024 TRADING PROFILE
Toronto (TSX: PD)
High: $104.90
Low: $88.00
Close: $96.20
Volume Traded: 5,936,839
New York (NYSE: PDS)
High: US$77.21
Low: US$64.18
Close: US$70.34
Volume Traded: 4,168,000
ACCOUNT QUESTIONS
Precision’s Transfer Agent can help you with a variety of shareholder
related services, including:
• change of address
• lost unit certificates
• transfer of shares to another person
• estate settlement
Computershare Trust Company of Canada
100 University Avenue
9th Floor, North Tower
Toronto, Ontario M5J 2Y1
Canada
1-800-564-6253 (toll free in Canada and the United States)
1-514-982-7555 (international direct dialing)
Email: service@computershare.com
ONLINE INFORMATION
To receive news releases by email, or to view this interim report online,
please visit Precision’s website at www.precisiondrilling.com and refer to the Investor Relations section. Additional information
relating to Precision, including the Annual Information Form, Annual Report and Management Information Circular has been filed with SEDAR
and is available at www.sedar.com and on the EDGAR website www.sec.gov |
|
CORPORATE INFORMATION
DIRECTORS
William T. Donovan
Steven W. Krablin
Susan M. MacKenzie
Lori A. Lancaster
Kevin O. Meyers
Kevin A. Neveu
David W. Williams
Alice L. Wong
OFFICERS
Kevin A. Neveu
President and Chief Executive Officer
Veronica H. Foley
Chief Legal & Compliance Officer
Carey T. Ford
Chief Financial Officer
Shuja U. Goraya
Chief Technology Officer
Darren J. Ruhr
Chief Administrative Officer
Gene C. Stahl
President, North American Drilling
AUDITORS
KPMG LLP
Calgary, Alberta
HEAD OFFICE
Suite 800, 525 8th Avenue SW
Calgary, Alberta, T2P 1G1
Canada
Telephone: 403-716-4500
Facsimile: 403-264-0251
Email: info@precisiondrilling.com
www.precisiondrilling.com
|
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