This news release contains “forward-looking information and
statements” within the meaning of applicable securities laws. For a
full disclosure of the forward-looking information and statements
and the risks to which they are subject, see the “Cautionary
Statement Regarding Forward-Looking Information and Statements”
later in this news release. This news release contains references
to Adjusted EBITDA (earnings before income taxes, loss (gain) on
repurchase of unsecured senior notes, gain on investments and other
assets, finance charges, foreign exchange, gain on asset disposals
and depreciation and amortization), Covenant EBITDA, Operating
Earnings (Loss), Funds Provided by (Used in) Operations and Working
Capital. These terms do not have standardized meanings prescribed
under International Financial Reporting Standards (IFRS) and may
not be comparable to similar measures used by other companies, see
“Non-GAAP Measures” later in this news release.
Precision Drilling announces 2021 third quarter
financial results:
- Adjusted EBITDA
(See “NON-GAAP MEASURES”) of $45 million. Excluding the impact of
share-based compensation charges our Adjusted EBITDA was $59
million.
- Revenue of $254
million was an increase of 54% compared with the third quarter of
2020.
- Net loss of $38
million or $2.86 per share compared with a net loss of $28 million
or $2.08 per share in the third quarter of 2020.
- Generated cash and
funds provided by operations (see “NON-GAAP MEASURES”) of $22
million and $34 million, respectively.
- Third quarter
ending cash balance was $57 million, with available liquidity of
$500 million.
- Third quarter and
year to date debt reduction of $8 million and $60 million,
respectively.
- Third quarter
capital expenditures were $20 million.
- Recognized the
Canadian government’s Canada Emergency Wage Subsidy
(CEWS) program assistance of $6 million.
Precision’s President and CEO Kevin Neveu
stated:
“We believe current industry fundamentals are
providing the most promising backdrop for our business that we have
experienced in almost a decade. Strong oil and natural gas prices,
a significantly improved Canadian market structure and rapidly
declining drilled but uncompleted well inventories all point to
higher drilling activity in our core markets. Although we are
likely in the early innings, our firm bookings and current customer
inquiries indicate substantially stronger demand for our services
and improved fleet utilization as this rebound continues.”
“Our third quarter Adjusted EBITDA of $59
million, excluding share-based compensation, is a result of our
continued focus on strict cost discipline, growing our Alpha
revenue base and realizing improved spot pricing in our North
American operations. Our results have begun to reflect the
considerable operating leverage of Precision Drilling, although we
expect the positive impact to be more pronounced in the coming
quarters with increasing activity.”
“Our Alpha suite of digital technologies
continues to act as both the tip of the spear with new customer
relationships and as a means to strengthen existing customer
relationships with retention levels of nearly 100% for Alpha
customers over the past two years. We currently have 65 AC Super
Triple rigs active in North America and nearly 40 of these rigs are
running Alpha at commercial rates. During the quarter, we increased
utilization days of AlphaAutomation, AlphaApps and AlphaAnalytics
by 8%, 36% and 4%, respectively, compared to Q2. We continue to see
our performance, consistency and scalability of Alpha as key
competitive differentiators for Precision.”
“In the U.S., during the quarter, activity
levels nearly doubled from the third quarter last year and
increased 6% sequentially. We generated normalized average drilling
day rate increases of approximately $700 and we expect this trend
will continue. The higher daily operating costs experienced during
the quarter were primarily a result of preparation for increased
activity in the fourth quarter and certain mobilization costs which
will be recovered over the next several months on contracted rigs.
Our current active rig count in the U.S. is 45 rigs, slightly lower
than our prior guidance due to some customer delays and the
decision to decline certain opportunities based on lower price
expectations by customers.”
“In Canada, our drilling activity was nearly
triple our activity in the third quarter of 2020 and our 51 average
active rigs during the quarter represented the highest third
quarter average activity since 2018. We are operating 61 rigs today
and believe the improved Canadian market structure is due to
increased crude takeaway capacity, lower differentials and
substantially improved customer cash flows allowing our customers
to self-fund drilling programs while continuing to generate strong
shareholder returns. Additionally, we expect the prospects of LNG
exports materializing on the medium term will bolster the outlook
for Canadian drilling activity.”
“We increased our 2021 capital spending plan to
$74 million to support our improved activity outlook in North
America. The increase primarily relates to advanced drill pipe
purchases to take advantage of vendor discounts and lower cost
vendor inventories that were secured early in the quarter and will
address increased drill pipe needs into next year.”
“Our Completion and Production Services division
continues to deliver strong operational and financial results. In
particular, Precision Well Servicing is successfully
differentiating itself by delivering high quality crews and High
Performance, certified equipment to customer projects, while the
broader industry is navigating the dual challenges of labor
availability and equipment quality. For the quarter, the division
generated Adjusted EBITDA of approximately $5 million.”
“Our international drilling operations continue
at a steady pace with 6 rigs active in Kuwait and the Kingdom
of Saudi Arabia. During the quarter, we received extension
notifications for two Kuwait rig contracts, each for one-year.
Regional bidding activity is robust, and we see opportunities to
activate several of our idle rigs in the region early next year and
are confident in our likelihood of success.”
“During the third quarter, we introduced our
Evergreen suite of environmental and emission-reduction focused
products and services to complement our Super Series drilling rigs
and Alpha digital offering. Recently, we successfully deployed our
first Evergreen hybrid battery storage, natural gas and low
emission power generating system to a Super Triple drilling rig in
the Canadian market. The system reduces GHG emissions and fuel
costs, helping our customer achieve their GHG emission-reduction
targets and improving their well construction economics. Later this
year, we expect to deploy three real-time combustion fuel
monitoring packages, using AlphaAnalytics to determine precise
baseline emission data. These accurate baselines will enable us to
make customer-specific recommendations to further reduce
rig-generated GHG emissions.”
“We remain focused on strict cost discipline and
debt reduction and are on track to meet our debt reduction goal of
$100 million to $125 million for 2021. In the quarter, cash from
operations was $22 million, funds from operations were $34 million
and debt reduction was $8 million with year to date debt reduction
of $60 million. We expect cash flow to be strong in the fourth
quarter as we have only $3 million in cash interest payments due
and expect minimal working capital increases. With no senior note
maturities until 2026 and approximately $500 million of available
liquidity, our balance sheet remains in excellent shape to support
our business activities and allow for further deleveraging through
cash flow,” concluded Mr. Neveu.
SELECT FINANCIAL AND OPERATING
INFORMATION
Financial Highlights
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
Revenue |
|
253,813 |
|
|
|
164,822 |
|
|
|
54.0 |
|
|
|
691,645 |
|
|
|
734,065 |
|
|
|
(5.8 |
) |
Adjusted EBITDA(1) |
|
45,408 |
|
|
|
47,771 |
|
|
|
(4.9 |
) |
|
|
128,891 |
|
|
|
208,140 |
|
|
|
(38.1 |
) |
Operating earnings
(loss)(1) |
|
(20,762 |
) |
|
|
(26,785 |
) |
|
|
(22.5 |
) |
|
|
(76,033 |
) |
|
|
(23,375 |
) |
|
|
225.3 |
|
Net loss |
|
(38,032 |
) |
|
|
(28,476 |
) |
|
|
33.6 |
|
|
|
(150,050 |
) |
|
|
(82,620 |
) |
|
|
81.6 |
|
Cash provided by
operations |
|
21,871 |
|
|
|
41,950 |
|
|
|
(47.9 |
) |
|
|
79,512 |
|
|
|
221,381 |
|
|
|
(64.1 |
) |
Funds provided by
operations(1) |
|
33,525 |
|
|
|
27,489 |
|
|
|
22.0 |
|
|
|
89,562 |
|
|
|
135,445 |
|
|
|
(33.9 |
) |
Capital spending: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expansion and upgrade |
|
5,998 |
|
|
|
- |
|
|
n.m. |
|
|
|
15,881 |
|
|
|
13,764 |
|
|
|
15.4 |
|
Maintenance and infrastructure |
|
13,502 |
|
|
|
3,211 |
|
|
|
320.5 |
|
|
|
32,310 |
|
|
|
24,859 |
|
|
|
30.0 |
|
Intangibles |
|
- |
|
|
|
- |
|
|
n.m. |
|
|
|
- |
|
|
|
57 |
|
|
|
(100.0 |
) |
Proceeds on sale |
|
(4,476 |
) |
|
|
(5,705 |
) |
|
|
(21.5 |
) |
|
|
(10,390 |
) |
|
|
(16,416 |
) |
|
|
(36.7 |
) |
Net capital spending |
|
15,024 |
|
|
|
(2,494 |
) |
|
|
(702.4 |
) |
|
|
37,801 |
|
|
|
22,264 |
|
|
|
69.8 |
|
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
(2.86 |
) |
|
|
(2.08 |
) |
|
|
37.4 |
|
|
|
(11.27 |
) |
|
|
(6.02 |
) |
|
|
87.2 |
|
Diluted |
|
(2.86 |
) |
|
|
(2.08 |
) |
|
|
37.4 |
|
|
|
(11.27 |
) |
|
|
(6.02 |
) |
|
|
87.2 |
|
(1) See “NON-GAAP
MEASURES.”n.m. Not meaningful
Operating Highlights
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
Contract drilling rig fleet |
|
227 |
|
|
|
227 |
|
|
|
- |
|
|
|
227 |
|
|
|
227 |
|
|
|
- |
|
Drilling rig utilization
days: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
3,785 |
|
|
|
1,957 |
|
|
|
93.4 |
|
|
|
10,315 |
|
|
|
9,684 |
|
|
|
6.5 |
|
Canada |
|
4,648 |
|
|
|
1,613 |
|
|
|
188.2 |
|
|
|
10,963 |
|
|
|
8,216 |
|
|
|
33.4 |
|
International |
|
552 |
|
|
|
559 |
|
|
|
(1.3 |
) |
|
|
1,638 |
|
|
|
1,974 |
|
|
|
(17.0 |
) |
Revenue per utilization
day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.(1) (US$) |
|
20,331 |
|
|
|
28,334 |
|
|
|
(28.2 |
) |
|
|
20,904 |
|
|
|
26,335 |
|
|
|
(20.6 |
) |
Canada (Cdn$) |
|
19,427 |
|
|
|
21,430 |
|
|
|
(9.3 |
) |
|
|
20,295 |
|
|
|
21,593 |
|
|
|
(6.0 |
) |
International (US$) |
|
52,277 |
|
|
|
54,887 |
|
|
|
(4.8 |
) |
|
|
53,095 |
|
|
|
54,631 |
|
|
|
(2.8 |
) |
Operating cost per utilization
day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. (US$) |
|
15,120 |
|
|
|
16,037 |
|
|
|
(5.7 |
) |
|
|
14,639 |
|
|
|
14,727 |
|
|
|
(0.6 |
) |
Canada (Cdn$) |
|
13,189 |
|
|
|
12,924 |
|
|
|
2.1 |
|
|
|
13,204 |
|
|
|
13,940 |
|
|
|
(5.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service rig fleet |
|
123 |
|
|
|
123 |
|
|
|
- |
|
|
|
123 |
|
|
|
123 |
|
|
|
- |
|
Service
rig operating hours |
|
32,244 |
|
|
|
15,599 |
|
|
|
106.7 |
|
|
|
93,777 |
|
|
|
54,666 |
|
|
|
71.5 |
|
(1) Includes revenue from
idle but contracted rig days.
Financial Position
(Stated in thousands of Canadian dollars, except ratios) |
September 30, 2021 |
|
|
December 31, 2020 |
|
Working capital(1) |
|
120,259 |
|
|
|
175,423 |
|
Cash |
|
57,096 |
|
|
|
108,772 |
|
Long-term debt |
|
1,162,841 |
|
|
|
1,236,210 |
|
Total long-term financial
liabilities |
|
1,241,708 |
|
|
|
1,304,162 |
|
Total assets |
|
2,720,415 |
|
|
|
2,898,878 |
|
Long-term debt to long-term debt plus equity ratio |
|
0.48 |
|
|
|
0.47 |
|
(1) See “NON-GAAP
MEASURES.”
Summary for the three months ended September 30,
2021:
- Revenue for the
third quarter was $254 million, 54% higher than in 2020 and was the
result of increased drilling and service rig activity, partially
offset by lower drilling day rates. Drilling rig utilization days
increased by 93% in the U.S. and 188% in Canada and well service
activity increased 107% as compared with the third quarter of 2020.
Our international drilling activity decreased slightly from 2020
due to the expiration of a drilling contract.
- Adjusted EBITDA
(see “NON-GAAP MEASURES”) for the quarter was $45 million, $2
million lower than 2020. Our Adjusted EBITDA as a percentage of
revenue was 18% this quarter, compared with 29% in the comparative
quarter. Our current quarter Adjusted EBITDA was negatively
impacted by higher share-based compensation charges due to our
increased share price and lower average day rates, partially offset
by improved activity. Excluding the impact of $13 million of
share-based compensation charges, our third quarter Adjusted EBITDA
was $59 million as compared with the prior year Adjusted EBITDA
excluding the impact of $4 million of share-based compensation of
$51 million.
- Operating loss (see
“NON-GAAP MEASURES”) for the quarter was $21 million compared with
$27 million in 2020.
- General and
administrative expenses this quarter were $24 million, $12 million
higher than in 2020 due to our increased share-based compensation
charges and lower CEWS program assistance.
- Net finance charges
for the quarter were $21 million, $7 million lower than in 2020 and
was primarily due to reduced interest expense due to lower debt
levels and lower average cost of borrowing.
- In the U.S.,
revenue per utilization day in the third quarter of 2021 decreased
to US$20,331 compared with US$28,334 in 2020. The decrease was
primarily the result of lower revenue from idle but contracted
rigs, turnkey activity and lower fleet average day rates, partially
offset by higher Alpha revenue. During the third quarter of 2021,
we recognized revenue from idle but contracted rigs and turnkey
projects of nil, as compared with US$10 million and US$2 million,
respectively, in 2020. Our third quarter operating costs on a per
day basis decreased to US$15,120, compared with US$16,037 in 2020,
and was mainly due to lower turnkey activity. On a sequential
basis, revenue per utilization day, excluding revenue from turnkey
drilling and idle but contracted rigs, increased by US$692
primarily due to higher fleet average day rates, while operating
costs per day increased by US$1,375 due to higher repairs and
maintenance.
- In Canada, average
revenue per utilization day for contract drilling rigs for the
quarter was $19,427 compared with $21,430 in 2020. The lower
average revenue per utilization day in 2021 was primarily due to
our rig mix. Average operating costs per utilization day in Canada
for the quarter increased to $13,189 compared with $12,924 in 2020.
The increase was mainly due to industry wage increases, partially
offset by fixed costs being spread over higher activity.
- During the quarter,
we recognized CEWS program assistance of $6 million as compared
with $8 million in 2020. CEWS program assistance was presented as
offsets to operating and general and administrative costs of $5
million and $1 million, respectively, as compared with $6 million
and $2 million in 2020.
- We realized third
quarter revenue from international contract drilling of US$29
million in 2021, as compared with US$31 million in 2020. The lower
revenue in 2021 was primarily due to lower day rates. The average
revenue per utilization day for the quarter was US$52,277, 5% lower
than in the third quarter of 2020.
- Cash and funds
provided by operations (see “NON-GAAP MEASURES”) in the third
quarter of 2021 were $22 million and $34 million, respectively,
compared with $42 million and $27 million in 2020.
- Capital
expenditures were $20 million as compared with $3 million in the
third quarter of 2020. Capital spending included $6 million for
expansion and upgrade capital and $14 million for the maintenance
of existing assets, infrastructure spending and intangibles.
- During the third
quarter of 2021, we reduced long-term debt by $8 million.
Summary for the nine months ended September 30,
2021:
- Revenue for the
first nine months of 2021 was $692 million, a decrease of 6% from
2020.
- Adjusted EBITDA
(see “NON-GAAP MEASURES”) for the period was $129 million, $79
million lower than 2020. Our Adjusted EBITDA was negatively
impacted by lower idle but contracted rig revenue, higher
share-based compensation charges due to our increased share price
and lower average day rates, partially offset by improved North
American activity.
- General and
administrative costs were $77 million, an increase of $27 million
from 2020. The increase was the result of higher share-based
compensation charges.
- Net finance charges
were $71 million, a decrease of $12 million from 2020 primarily due
to reduced interest expense due to lower debt levels and lower
average cost of borrowing, partially offset by higher amortized
debt issue costs.
- Cash provided by
operations was $80 million in 2021 as compared with $221 million in
2020. Funds provided by operations (see “NON-GAAP MEASURES”) in
2021 were $90 million, a decrease of $46 million from the prior
year comparative period of $135 million.
- Capital
expenditures were $48 million in 2021, an increase of $10 million
for the same period in 2020. Capital spending in 2021 included $16
million for expansion and upgrade capital and $32 million for the
maintenance of existing assets, infrastructure spending and
intangibles.
- As of September 30,
2021, we have reduced long-term debt by $60 million and repurchased
and cancelled 155,168 common shares for $4 million pursuant to our
Normal Course Issuer Bid.
STRATEGY
Precision’s strategic priorities for 2021 are as
follows:
- Grow
revenue and market share through our digital leadership
position – Precision exited the third quarter with 46 AC
Super Triple Alpha-rigs equipped with our AlphaAutomation platform
and 16 commercialized AlphaApps. Our third quarter paid AlphaApp
days increased 36% compared with the second quarter of 2021, with
the increase largely driven by operational performance, additional
revenue generating days and further uptake of customers fully
utilizing our suite of Alpha technologies. During the quarter,
Precision added four new AlphaAutomation customers and increased
paid AlphaAutomation days, AlphaApp days and AlphaAnalytics days
quarter-over-quarter by 8%, 36% and 4%, respectively.
- Demonstrate
operational leverage to generate free cash flow and reduce
debt – In the third quarter of 2021, Precision generated
$22 million of cash provided by operations (see “NON-GAAP
MEASURES”) and $4 million of cash proceeds from the divestiture of
non-core assets. As of September 30, 2021, we have reduced debt
levels by $60 million, leaving $40 million of further debt
reduction to achieve the low end of our 2021 debt reduction target
of $100-$125 million. Precision exited the quarter with a cash
balance of $57 million, US$161 million drawn on our US$500 million
Senior Credit Facility and available liquidity of $500
million.
- Deliver
leading ESG (environmental, social and governance) performance to
strengthen customer and stakeholder positioning – During
the third quarter, we introduced our Evergreen suite of
environmental solutions focused on emissions reduction products and
services to complement our Super Series drilling rigs and our Alpha
digital products. We successfully deployed our first Evergreen
hybrid battery storage, natural gas and low emission power
generating system to a Super Triple drilling rig in the Canadian
market. The system reduces GHG emissions and fuel costs, helping
our customer achieve their GHG emission-reduction targets and
improving their well construction economics. We have seen strong
customer appetite in both Canada and the U.S. for hybrid battery
power systems and have multiple commitments to deploy several
additional systems by mid-2022. In the fourth quarter, we expect to
deploy three real-time combustion fuel monitoring packages, using
AlphaAnalytics to determine precise baseline emission data. These
accurate baselines will enable us to make customer-specific
recommendations to further reduce rig-generated GHG emissions.
OUTLOOK
The continued rise in global energy demand,
sustained periods of strong commodity prices and the multi-year
period of upstream underinvestment provide a promising backdrop for
the oilfield services industry. At current commodity prices, we
anticipate higher demand for our services and improved fleet
utilization as customers look to maintain and replenish production
levels as drilled but uncompleted well inventories have
depleted.
In Canada, industry activity has surpassed
pre-pandemic levels as takeaway capacity continues to improve,
price differentials shrink and the startup of LNG exports is
expected in the medium term.
Interest in our Evergreen solutions has gained
momentum as customers look for meaningful solutions to achieve
their emission reduction targets, and in many cases, also improve
their well economics. Our suite of Alpha digital technologies will
continue to be a key competitive differentiator as our predictable
and repeatable drilling results deliver exceptional value to our
customers by reducing risks, time and well construction costs.
The Government of Canada’s $1.7 billion well
site abandonment and rehabilitation program has supported industry
activity levels and provided thousands of jobs throughout Western
Canada. The program runs through to the end of 2022 with government
funds provided in stages. Our well servicing business continues to
capture opportunities because of our scale, operational performance
and strong safety record. During the third quarter of 2021, our
abandonment activity remained strong and we expect this momentum to
continue through to the end of the program in 2022.
During 2020, the Government of Canada introduced
the CEWS program to subsidize a portion of employee wages for
Canadian employers whose businesses have been adversely affected by
COVID-19. For the three months ended September 30, 2021, we
recognized $6 million (2020 – $8 million) in CEWS program
assistance, which is presented as offsets to operating and general
and administrative expenses of $5 million (2020 - $6 million) and
$1 million (2020 - $2 million), respectively. Unless extended, the
CEWS program is expected to end in the fourth quarter of 2021.
Contracts
Year to date in 2021 we have entered into 28
term contracts. The following chart outlines the average number of
drilling rigs under contract by quarter as of October 20, 2021. For
those quarters ending after September 30, 2021, this chart
represents the minimum number of long-term contracts from which we
will earn revenue. We expect the actual number of contracted rigs
to vary in future periods as we sign additional contracts.
|
|
Average for the quarter ended 2020 |
|
|
Average for the quarter ended 2021 |
|
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
Average rigs under term contract as of October 20, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
41 |
|
|
|
32 |
|
|
|
26 |
|
|
|
24 |
|
|
|
21 |
|
|
|
24 |
|
|
|
22 |
|
|
|
22 |
|
Canada |
|
|
5 |
|
|
|
4 |
|
|
|
3 |
|
|
|
4 |
|
|
|
6 |
|
|
|
6 |
|
|
|
7 |
|
|
|
7 |
|
International |
|
|
8 |
|
|
|
8 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
Total |
|
|
54 |
|
|
|
44 |
|
|
|
35 |
|
|
|
34 |
|
|
|
33 |
|
|
|
36 |
|
|
|
35 |
|
|
|
35 |
|
The following chart outlines the average number
of drilling rigs that we had under contract for 2020 and the
average number of rigs we have under contract as of October 20,
2021.
|
|
Average for the year ended |
|
|
|
|
|
2020 |
|
|
2021 |
|
|
|
Average rigs under term contract as of October 20, 2021: |
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
31 |
|
|
|
22 |
|
|
|
Canada |
|
|
4 |
|
|
|
7 |
|
|
|
International |
|
|
7 |
|
|
|
6 |
|
|
|
Total |
|
|
42 |
|
|
|
35 |
|
|
|
In Canada, term contracted rigs normally
generate 250 utilization days per year because of the seasonal
nature of well site access. In most regions in the U.S. and
internationally, term contracts normally generate 365 utilization
days per year.
Drilling Activity
The following chart outlines the average number
of drilling rigs that we had working or moving by quarter for the
periods noted.
|
Average for the quarter ended 2020 |
|
Average for the quarter ended 2021 |
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
Average Precision active rig count: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
55 |
|
|
|
30 |
|
|
|
21 |
|
|
|
26 |
|
|
|
33 |
|
|
|
39 |
|
|
|
41 |
|
Canada |
|
63 |
|
|
|
9 |
|
|
|
18 |
|
|
|
28 |
|
|
|
42 |
|
|
|
27 |
|
|
|
51 |
|
International |
|
8 |
|
|
|
8 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
Total |
|
126 |
|
|
|
47 |
|
|
|
45 |
|
|
|
60 |
|
|
|
81 |
|
|
|
72 |
|
|
|
98 |
|
According to industry sources, as of October 20,
2021, the U.S. active land drilling rig count has increased 98%
from the same point last year while the Canadian active land
drilling rig count increased by 110%. To date in 2021,
approximately 78% of the U.S. industry’s active rigs and 56% of the
Canadian industry’s active rigs were drilling for oil targets,
compared with 80% for the U.S. and 54% for Canada at the same time
last year.
Capital Spending
Capital spending in 2021 is expected to be $74
million and includes $51 million for sustaining, infrastructure and
intangibles and $23 million for expansion and upgrades. We expect
that the $74 million will be split $68 million in the Contract
Drilling Services segment, $5 million in the Completion and
Production Services segment and $1 million to the Corporate
segment. At September 30, 2021, Precision had capital commitments
of $137 million with payments expected through 2023.
SEGMENTED FINANCIAL RESULTS
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
(Stated
in thousands of Canadian dollars) |
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
|
226,957 |
|
|
|
150,773 |
|
|
|
50.5 |
|
|
|
613,032 |
|
|
|
682,060 |
|
|
|
(10.1 |
) |
Completion and Production Services |
|
28,143 |
|
|
|
14,443 |
|
|
|
94.9 |
|
|
|
81,354 |
|
|
|
53,631 |
|
|
|
51.7 |
|
Inter-segment eliminations |
|
(1,287 |
) |
|
|
(394 |
) |
|
|
226.6 |
|
|
|
(2,741 |
) |
|
|
(1,626 |
) |
|
|
68.6 |
|
|
|
253,813 |
|
|
|
164,822 |
|
|
|
54.0 |
|
|
|
691,645 |
|
|
|
734,065 |
|
|
|
(5.8 |
) |
Adjusted EBITDA:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
|
55,384 |
|
|
|
51,594 |
|
|
|
7.3 |
|
|
|
163,118 |
|
|
|
236,940 |
|
|
|
(31.2 |
) |
Completion and Production Services |
|
5,479 |
|
|
|
3,945 |
|
|
|
38.9 |
|
|
|
17,533 |
|
|
|
5,960 |
|
|
|
194.2 |
|
Corporate and Other |
|
(15,455 |
) |
|
|
(7,768 |
) |
|
|
99.0 |
|
|
|
(51,760 |
) |
|
|
(34,760 |
) |
|
|
48.9 |
|
|
|
45,408 |
|
|
|
47,771 |
|
|
|
(4.9 |
) |
|
|
128,891 |
|
|
|
208,140 |
|
|
|
(38.1 |
) |
(1) See “NON-GAAP
MEASURES.”
SEGMENT REVIEW OF CONTRACT DRILLING
SERVICES
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
(Stated
in thousands of Canadian dollars, except where noted) |
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
Revenue |
|
226,957 |
|
|
|
150,773 |
|
|
|
50.5 |
|
|
|
613,032 |
|
|
|
682,060 |
|
|
|
(10.1 |
) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
164,521 |
|
|
|
93,669 |
|
|
|
75.6 |
|
|
|
429,036 |
|
|
|
417,496 |
|
|
|
2.8 |
|
General and administrative |
|
7,052 |
|
|
|
5,151 |
|
|
|
36.9 |
|
|
|
20,878 |
|
|
|
20,004 |
|
|
|
4.4 |
|
Restructuring |
|
- |
|
|
|
359 |
|
|
|
(100.0 |
) |
|
|
- |
|
|
|
7,620 |
|
|
|
(100.0 |
) |
Adjusted EBITDA(1) |
|
55,384 |
|
|
|
51,594 |
|
|
|
7.3 |
|
|
|
163,118 |
|
|
|
236,940 |
|
|
|
(31.2 |
) |
Depreciation |
|
62,751 |
|
|
|
70,675 |
|
|
|
(11.2 |
) |
|
|
191,084 |
|
|
|
220,461 |
|
|
|
(13.3 |
) |
Gain on asset disposals |
|
(3,035 |
) |
|
|
(2,684 |
) |
|
|
13.1 |
|
|
|
(5,355 |
) |
|
|
(8,617 |
) |
|
|
(37.9 |
) |
Operating earnings (loss)(1) |
|
(4,332 |
) |
|
|
(16,397 |
) |
|
|
(73.6 |
) |
|
|
(22,611 |
) |
|
|
25,096 |
|
|
|
(190.1 |
) |
Operating earnings (loss)(1) as a percentage of revenue |
|
(1.9 |
)% |
|
|
(10.9 |
)% |
|
|
|
|
|
|
(3.7 |
)% |
|
|
3.7 |
% |
|
|
|
|
(1) See “NON-GAAP
MEASURES.”
United
States onshore drilling statistics:(1) |
2021 |
|
|
2020 |
|
|
Precision |
|
|
Industry(2) |
|
|
Precision |
|
|
Industry(2) |
|
Average number of active land rigs for quarters ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
33 |
|
|
|
378 |
|
|
|
55 |
|
|
|
764 |
|
June 30 |
|
39 |
|
|
|
437 |
|
|
|
30 |
|
|
|
378 |
|
September 30 |
|
41 |
|
|
|
485 |
|
|
|
21 |
|
|
|
241 |
|
Year to date average |
|
38 |
|
|
|
433 |
|
|
|
35 |
|
|
|
461 |
|
(1) United States lower
48 operations only.(2) Baker Hughes rig
counts.
Canadian onshore drilling statistics:(1) |
2021 |
|
|
2020 |
|
|
Precision |
|
|
Industry(2) |
|
|
Precision |
|
|
Industry(2) |
|
Average number of active land rigs for quarters ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
42 |
|
|
|
145 |
|
|
|
63 |
|
|
|
196 |
|
June 30 |
|
27 |
|
|
|
72 |
|
|
|
9 |
|
|
|
25 |
|
September 30 |
|
51 |
|
|
|
151 |
|
|
|
18 |
|
|
|
47 |
|
Year to date average |
|
40 |
|
|
|
123 |
|
|
|
30 |
|
|
|
89 |
|
(1) Canadian operations
only.(2) Baker Hughes rig counts.
SEGMENT REVIEW OF COMPLETION AND
PRODUCTION SERVICES
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
(Stated
in thousands of Canadian dollars, except where noted) |
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
Revenue |
|
28,143 |
|
|
|
14,443 |
|
|
|
94.9 |
|
|
|
81,354 |
|
|
|
53,631 |
|
|
|
51.7 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
21,188 |
|
|
|
9,872 |
|
|
|
114.6 |
|
|
|
59,703 |
|
|
|
42,056 |
|
|
|
42.0 |
|
General and administrative |
|
1,476 |
|
|
|
626 |
|
|
|
135.8 |
|
|
|
4,118 |
|
|
|
3,020 |
|
|
|
36.4 |
|
Restructuring |
|
- |
|
|
|
- |
|
|
|
n.m. |
|
|
|
- |
|
|
|
2,595 |
|
|
|
(100.0 |
) |
Adjusted EBITDA(1) |
|
5,479 |
|
|
|
3,945 |
|
|
|
38.9 |
|
|
|
17,533 |
|
|
|
5,960 |
|
|
|
194.2 |
|
Depreciation |
|
4,004 |
|
|
|
4,014 |
|
|
|
(0.2 |
) |
|
|
11,859 |
|
|
|
12,416 |
|
|
|
(4.5 |
) |
Gain on asset disposals |
|
(95 |
) |
|
|
(236 |
) |
|
|
(59.7 |
) |
|
|
(551 |
) |
|
|
(1,237 |
) |
|
|
(55.5 |
) |
Operating earnings (loss)(1) |
|
1,570 |
|
|
|
167 |
|
|
|
840.1 |
|
|
|
6,225 |
|
|
|
(5,219 |
) |
|
|
(219.3 |
) |
Operating earnings (loss)(1) as a percentage of revenue |
|
5.6 |
% |
|
|
1.2 |
% |
|
|
|
|
|
|
7.7 |
% |
|
|
(9.7 |
)% |
|
|
|
|
Well servicing statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of service rigs (end of period) |
|
123 |
|
|
|
123 |
|
|
|
- |
|
|
|
123 |
|
|
|
123 |
|
|
|
- |
|
Service rig operating hours |
|
32,244 |
|
|
|
15,599 |
|
|
|
106.7 |
|
|
|
93,777 |
|
|
|
54,666 |
|
|
|
71.5 |
|
Service rig operating hour utilization |
|
28 |
% |
|
|
14 |
% |
|
|
|
|
|
|
28 |
% |
|
|
16 |
% |
|
|
|
|
(1) See “NON-GAAP
MEASURES.”n.m. Not
meaningful.
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 (see “NON-GAAP MEASURES”) of
$15 million as compared with $8 million in the third quarter of
2020. Our Adjusted EBITDA was negatively impacted by higher
share-based compensation costs as a result of our improved share
price performance in 2021 and lower CEWS program assistance,
partially offset by lower restructuring charges. During the
quarter, CEWS program assistance offset general and administrative
costs by $0.4 million as compared with $1 million in 2020. In the
third quarter of 2020, we incurred $2 million of restructuring
charges.
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 2020 Annual
Report.
A summary of amounts expensed under these plans
during the reporting periods are as follows:
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
(Stated in thousands of Canadian dollars) |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Cash settled share-based incentive plans |
|
11,839 |
|
|
|
971 |
|
|
|
46,537 |
|
|
|
(50 |
) |
Equity settled share-based
incentive plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive PSU |
|
1,468 |
|
|
|
2,434 |
|
|
|
3,639 |
|
|
|
8,128 |
|
Stock option plan |
|
34 |
|
|
|
160 |
|
|
|
199 |
|
|
|
714 |
|
Total share-based incentive compensation plan expense
(recovery) |
|
13,341 |
|
|
|
3,565 |
|
|
|
50,375 |
|
|
|
8,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
3,272 |
|
|
|
740 |
|
|
|
11,437 |
|
|
|
1,754 |
|
General and Administrative |
|
10,069 |
|
|
|
2,825 |
|
|
|
38,938 |
|
|
|
7,038 |
|
|
|
13,341 |
|
|
|
3,565 |
|
|
|
50,375 |
|
|
|
8,792 |
|
Cash settled share-based compensation expense
increased by $11 million in the current quarter primarily due to
our increasing share price and the reclassification of Executive
PSUs as a cash settled share-based incentive plan. Our equity
settled share-based compensation expense for the third quarter of
2021 decreased by $1 million as fewer Executive PSUs were
outstanding as compared with 2020.
Finance Charges
Net finance charges were $21 million as compared
with $28 million in the third quarter of 2020. Interest charges on
our U.S. denominated long-term debt in the third quarter of 2021
were US$15 million ($19 million) as compared with US$18 million
($24 million) in 2020.
Income Tax
Income tax recovery for the quarter was $4
million as compared with an income tax expense of $1 million in
2020. During the third quarter of 2021 and 2020, we did not
recognize deferred tax assets on certain Canadian and international
operating losses.
LIQUIDITY AND CAPITAL
RESOURCES
Liquidity
Amount |
|
Availability |
|
Used for |
|
Maturity |
Senior credit facility (secured) |
|
|
|
|
|
|
US$500 million1 (extendible, revolvingterm credit facility with
US$300 million accordion feature) |
|
US$161 million drawn and US$31 million in outstanding letters of
credit |
|
General corporate purposes |
|
June 18, 20251 |
Real estate credit facilities (secured) |
|
|
|
|
|
|
US$10 million |
|
Fully drawn |
|
General corporate purposes |
|
November 19, 2025 |
$19 million |
|
Fully drawn |
|
General corporate purposes |
|
March 16, 2026 |
Operating facilities (secured) |
|
|
|
|
|
|
$40 million |
|
Undrawn, except $7 million inoutstanding letters of credit |
|
Letters of credit and generalcorporate purposes |
|
|
US$15 million |
|
Undrawn |
|
Short-term working capitalrequirements |
|
|
Demand letter of credit facility (secured) |
|
|
|
|
|
|
US$30 million |
|
Undrawn, except US$3 million inoutstanding letters of credit |
|
Letters of credit |
|
|
Unsecured senior notes (unsecured) |
|
|
|
|
|
|
US$348 million – 7.125% |
|
Fully drawn |
|
Debt redemption and repurchases |
|
January 15, 2026 |
US$400 million – 6.875% |
|
Fully drawn |
|
Debt redemption and repurchases |
|
January 15, 2029 |
(1) US$53 million expires on
November 21, 2023.
At September 30, 2021, we had $1,183 million
outstanding under our Senior Credit Facility, Real Estate Credit
Facilities and unsecured senior notes as compared with $1,250
million at December 31, 2020.
The current blended cash interest cost of our
debt is approximately 6.3%.
Covenants
At September 30, 2021, we were in compliance
with the covenants of our Senior Credit Facility and Real Estate
Credit Facilities.
|
Covenant |
|
At September 30, 2021 |
|
Senior Credit Facility |
|
|
|
|
|
Consolidated senior debt to consolidated covenant EBITDA(1) |
< 2.50 |
|
|
1.33 |
|
Consolidated covenant EBITDA to consolidated interest expense |
> 1.75 |
|
|
1.96 |
|
Real Estate Credit
Facilities |
|
|
|
|
|
Consolidated covenant EBITDA to consolidated interest expense |
> 1.75 |
|
|
1.96 |
|
(1) For purposes of calculating the leverage ratio consolidated
senior debt only includes secured indebtedness.
Average shares outstanding
The following table reconciles the weighted
average shares outstanding used in computing basic and diluted net
loss per share:
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
(Stated in thousands) |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Weighted average shares outstanding – basic |
|
13,304 |
|
|
|
13,724 |
|
|
|
13,319 |
|
|
|
13,736 |
|
Effect
of stock options and other equity compensation plans |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Weighted average shares outstanding – diluted |
|
13,304 |
|
|
|
13,724 |
|
|
|
13,319 |
|
|
|
13,736 |
|
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share
amounts) |
|
2020 |
|
|
2021 |
|
Quarters ended |
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
Revenue |
|
|
201,688 |
|
|
|
236,473 |
|
|
|
201,359 |
|
|
|
253,813 |
|
Adjusted EBITDA(1) |
|
|
55,263 |
|
|
|
54,539 |
|
|
|
28,944 |
|
|
|
45,408 |
|
Net loss |
|
|
(37,518 |
) |
|
|
(36,106 |
) |
|
|
(75,912 |
) |
|
|
(38,032 |
) |
Net loss per basic and diluted
share |
|
|
(2.74 |
) |
|
|
(2.70 |
) |
|
|
(5.71 |
) |
|
|
(2.86 |
) |
Funds provided by
operations(1) |
|
|
35,282 |
|
|
|
43,430 |
|
|
|
12,607 |
|
|
|
33,525 |
|
Cash
provided by operations |
|
|
4,737 |
|
|
|
15,422 |
|
|
|
42,219 |
|
|
|
21,871 |
|
(Stated in thousands of Canadian dollars, except per share
amounts) |
|
2019 |
|
|
2020 |
|
Quarters ended |
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
Revenue |
|
|
372,301 |
|
|
|
379,484 |
|
|
|
189,759 |
|
|
|
164,822 |
|
Adjusted EBITDA(1) |
|
|
105,006 |
|
|
|
101,904 |
|
|
|
58,465 |
|
|
|
47,771 |
|
Net loss |
|
|
(1,061 |
) |
|
|
(5,277 |
) |
|
|
(48,867 |
) |
|
|
(28,476 |
) |
Net loss per basic and diluted
share |
|
|
(0.08 |
) |
|
|
(0.38 |
) |
|
|
(3.56 |
) |
|
|
(2.08 |
) |
Funds provided by
operations(1) |
|
|
75,779 |
|
|
|
81,317 |
|
|
|
26,639 |
|
|
|
27,489 |
|
Cash
provided by operations |
|
|
74,981 |
|
|
|
74,953 |
|
|
|
104,478 |
|
|
|
41,950 |
|
(1) See “NON-GAAP
MEASURES.”
NON-GAAP MEASURES
In this release we reference non-GAAP (Generally
Accepted Accounting Principles) measures. Adjusted EBITDA, Covenant
EBITDA, Operating Earnings (Loss), Funds Provided by (Used in)
Operations and Working Capital are terms used by us to assess
performance as we believe they provide useful supplemental
information to investors. These terms do not have standardized
meanings prescribed under International Financial Reporting
Standards (IFRS) and may not be comparable to similar measures used
by other companies.
Adjusted EBITDA
We believe that Adjusted EBITDA (earnings before
income taxes, loss (gain) on repurchase of unsecured senior notes,
loss (gain) on investments and other assets, finance charges,
foreign exchange, gain on assets disposals and depreciation and
amortization), as reported in the Interim Consolidated Statement of
Net Loss, 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.
Covenant EBITDA
Covenant EBITDA, as defined in our Senior Credit
Facility agreement, is used in determining the Corporation’s
compliance with its covenants. Covenant EBITDA differs from
Adjusted EBITDA by the exclusion of bad debt expense, restructuring
costs, certain foreign exchange amounts and the deduction of cash
lease payments incurred after December 31, 2018.
Operating Earnings (Loss)
We believe that operating earnings (loss) is a
useful measure because it provides an indication of the results of
our principal business activities before consideration of how those
activities are financed and the impact of foreign exchange and
taxation. Operating earnings is calculated as follows:
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
(Stated
in thousands of Canadian dollars) |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Revenue |
|
253,813 |
|
|
|
164,822 |
|
|
|
691,645 |
|
|
|
734,065 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
184,422 |
|
|
|
103,147 |
|
|
|
485,998 |
|
|
|
457,926 |
|
General and administrative |
|
23,983 |
|
|
|
11,954 |
|
|
|
76,756 |
|
|
|
49,938 |
|
Restructuring |
|
— |
|
|
|
1,950 |
|
|
|
— |
|
|
|
18,061 |
|
Depreciation and
amortization |
|
69,431 |
|
|
|
77,588 |
|
|
|
211,148 |
|
|
|
241,626 |
|
Gain on
asset disposals |
|
(3,261 |
) |
|
|
(3,032 |
) |
|
|
(6,224 |
) |
|
|
(10,111 |
) |
Operating earnings (loss) |
|
(20,762 |
) |
|
|
(26,785 |
) |
|
|
(76,033 |
) |
|
|
(23,375 |
) |
Foreign exchange |
|
464 |
|
|
|
1,161 |
|
|
|
104 |
|
|
|
2,924 |
|
Finance charges |
|
20,639 |
|
|
|
27,613 |
|
|
|
70,783 |
|
|
|
83,276 |
|
Gain on investments and other
assets |
|
(327 |
) |
|
|
— |
|
|
|
(327 |
) |
|
|
— |
|
Loss
(gain) on repurchase of unsecured notes |
|
— |
|
|
|
(27,971 |
) |
|
|
9,520 |
|
|
|
(29,942 |
) |
Loss before income taxes |
|
(41,538 |
) |
|
|
(27,588 |
) |
|
|
(156,113 |
) |
|
|
(79,633 |
) |
Funds Provided By (Used In)
Operations
We believe that funds provided by (used in)
operations, as reported in the Interim Consolidated Statements of
Cash Flow, is a useful measure because it provides an indication of
the funds our principal business activities generate prior to
consideration of working capital, which is primarily made up of
highly liquid balances.
Working Capital
We define working capital as current assets less
current liabilities as reported on the Interim Consolidated
Statement of Financial Position.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements contained in this release,
including statements that contain words such as "could", "should",
"can", "anticipate", "estimate", "intend", "plan", "expect",
"believe", "will", "may", "continue", "project", "potential" and
similar expressions and statements relating to matters that are not
historical facts constitute "forward-looking information" within
the meaning of applicable Canadian securities legislation and
"forward-looking statements" within the meaning of the "safe
harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995 (collectively, "forward-looking
information and statements").
In particular, forward looking information and
statements include, but are not limited to, the following:
- our strategic priorities for 2021;
- our capital expenditure plans for 2021;
- anticipated activity levels in 2021;
- anticipated demand for our drilling rigs;
- the average number of term contracts in place for 2021;
- anticipated cash savings and liquidity;
- customer adoption of Alpha technologies;
- 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:
- the fluctuation in oil prices may pressure customers into
reducing or limiting their drilling budgets;
- the success of our response to the COVID-19 global
pandemic;
- the status of current negotiations with our customers and
vendors;
- customer focus on safety performance;
- existing term contracts are neither renewed nor terminated
prematurely;
- our ability to deliver rigs to customers on a timely basis;
and
- the general stability of the economic and political
environments in the jurisdictions where we operate.
Undue reliance should not be placed on
forward-looking information and statements. Whether actual results,
performance or achievements will conform to our expectations and
predictions is subject to a number of known and unknown risks and
uncertainties which could cause actual results to differ materially
from our expectations. Such risks and uncertainties include, but
are not limited to:
- volatility in the price and demand
for oil and natural gas;
- fluctuations in the level of oil
and natural gas exploration and development activities;
- fluctuations in the demand for
contract drilling, well servicing and ancillary oilfield
services;
- our customers’ inability to obtain
adequate credit or financing to support their drilling and
production activity;
- the success of vaccinations for
COVID-19 worldwide;
- changes in drilling and well
servicing technology, which could reduce demand for certain rigs or
put us at a competitive advantage;
- shortages, delays and interruptions
in the delivery of equipment supplies and other key inputs;
- liquidity of the capital markets to
fund customer drilling programs;
- availability of cash flow, debt and
equity sources to fund our capital and operating requirements, as
needed;
- the impact of weather and seasonal
conditions on operations and facilities;
- competitive operating risks
inherent in contract drilling, well servicing and ancillary
oilfield services;
- ability to improve our rig
technology to improve drilling efficiency;
- general economic, market or
business conditions;
- the availability of qualified
personnel and management;
- a decline in our safety performance
which could result in lower demand for our services;
- changes in laws or regulations,
including changes in environmental laws and regulations such as
increased regulation of hydraulic fracturing or restrictions on the
burning of fossil fuels and greenhouse gas emissions, which could
have an adverse impact on the demand for oil and natural gas;
- terrorism, social, civil and
political unrest in the foreign jurisdictions where we
operate;
- fluctuations in foreign exchange,
interest rates and tax rates; and
- other unforeseen conditions which
could impact the use of services supplied by Precision and
Precision’s ability to respond to such conditions.
Readers are cautioned that the forgoing list of
risk factors is not exhaustive. Additional information on these and
other factors that could affect our business, operations or
financial results are included in reports on file with applicable
securities regulatory authorities, including but not limited to
Precision’s Annual Information Form for the year ended December 31,
2020, which may be accessed on Precision’s SEDAR profile at
www.sedar.com or under Precision’s EDGAR profile at www.sec.gov.
The forward-looking information and statements contained in this
release are made as of the date hereof and Precision undertakes no
obligation to update publicly or revise any forward-looking
statements or information, whether as a result of new information,
future events or otherwise, except as required by law.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED)
(Stated in thousands of Canadian dollars) |
|
September 30, 2021 |
|
|
December 31, 2020 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
57,096 |
|
|
$ |
108,772 |
|
Accounts receivable |
|
|
249,553 |
|
|
|
207,209 |
|
Inventory |
|
|
25,770 |
|
|
|
26,282 |
|
Total current assets |
|
|
332,419 |
|
|
|
342,263 |
|
Non-current assets: |
|
|
|
|
|
|
|
|
Deferred tax assets |
|
|
1,098 |
|
|
|
1,098 |
|
Right-of-use assets |
|
|
52,337 |
|
|
|
55,168 |
|
Property, plant and equipment |
|
|
2,301,873 |
|
|
|
2,472,683 |
|
Intangibles |
|
|
25,087 |
|
|
|
27,666 |
|
Investments and other assets |
|
|
7,601 |
|
|
|
— |
|
Total non-current assets |
|
|
2,387,996 |
|
|
|
2,556,615 |
|
Total assets |
|
$ |
2,720,415 |
|
|
$ |
2,898,878 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
198,129 |
|
|
$ |
150,957 |
|
Income taxes payable |
|
|
654 |
|
|
|
3,702 |
|
Current portion of lease obligations |
|
|
11,152 |
|
|
|
11,285 |
|
Current portion of long-term debt |
|
|
2,225 |
|
|
|
896 |
|
Total current liabilities |
|
|
212,160 |
|
|
|
166,840 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
25,430 |
|
|
|
11,507 |
|
Provisions and other |
|
|
6,934 |
|
|
|
7,563 |
|
Lease obligations |
|
|
46,503 |
|
|
|
48,882 |
|
Long-term debt |
|
|
1,162,841 |
|
|
|
1,236,210 |
|
Deferred tax liabilities |
|
|
12,600 |
|
|
|
21,236 |
|
Total non-current liabilities |
|
|
1,254,308 |
|
|
|
1,325,398 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Shareholders’ capital |
|
|
2,281,444 |
|
|
|
2,285,738 |
|
Contributed surplus |
|
|
76,753 |
|
|
|
72,915 |
|
Deficit |
|
|
(1,239,644 |
) |
|
|
(1,089,594 |
) |
Accumulated other comprehensive income |
|
|
135,394 |
|
|
|
137,581 |
|
Total shareholders’ equity |
|
|
1,253,947 |
|
|
|
1,406,640 |
|
Total liabilities and shareholders’ equity |
|
$ |
2,720,415 |
|
|
$ |
2,898,878 |
|
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF NET LOSS (UNAUDITED)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
253,813 |
|
|
$ |
164,822 |
|
|
$ |
691,645 |
|
|
$ |
734,065 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
184,422 |
|
|
|
103,147 |
|
|
|
485,998 |
|
|
|
457,926 |
|
General and administrative |
|
|
23,983 |
|
|
|
11,954 |
|
|
|
76,756 |
|
|
|
49,938 |
|
Restructuring |
|
|
— |
|
|
|
1,950 |
|
|
|
— |
|
|
|
18,061 |
|
Earnings before income taxes, loss (gain) on repurchase of
unsecured senior notes, gain on investments and other assets,
finance charges, foreign exchange, gain on asset disposals and
depreciation and amortization |
|
|
45,408 |
|
|
|
47,771 |
|
|
|
128,891 |
|
|
|
208,140 |
|
Depreciation and amortization |
|
|
69,431 |
|
|
|
77,588 |
|
|
|
211,148 |
|
|
|
241,626 |
|
Gain on
asset disposals |
|
|
(3,261 |
) |
|
|
(3,032 |
) |
|
|
(6,224 |
) |
|
|
(10,111 |
) |
Foreign
exchange |
|
|
464 |
|
|
|
1,161 |
|
|
|
104 |
|
|
|
2,924 |
|
Finance
charges |
|
|
20,639 |
|
|
|
27,613 |
|
|
|
70,783 |
|
|
|
83,276 |
|
Gain on
investments and other assets |
|
|
(327 |
) |
|
|
— |
|
|
|
(327 |
) |
|
|
— |
|
Loss (gain) on repurchase of unsecured senior notes |
|
|
— |
|
|
|
(27,971 |
) |
|
|
9,520 |
|
|
|
(29,942 |
) |
Loss before income taxes |
|
|
(41,538 |
) |
|
|
(27,588 |
) |
|
|
(156,113 |
) |
|
|
(79,633 |
) |
Income
taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
890 |
|
|
|
2,946 |
|
|
|
2,462 |
|
|
|
6,121 |
|
Deferred |
|
|
(4,396 |
) |
|
|
(2,058 |
) |
|
|
(8,525 |
) |
|
|
(3,134 |
) |
|
|
|
(3,506 |
) |
|
|
888 |
|
|
|
(6,063 |
) |
|
|
2,987 |
|
Net loss |
|
$ |
(38,032 |
) |
|
$ |
(28,476 |
) |
|
$ |
(150,050 |
) |
|
$ |
(82,620 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.86 |
) |
|
$ |
(2.08 |
) |
|
$ |
(11.27 |
) |
|
$ |
(6.02 |
) |
Diluted |
|
$ |
(2.86 |
) |
|
$ |
(2.08 |
) |
|
$ |
(11.27 |
) |
|
$ |
(6.02 |
) |
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
(Stated
in thousands of Canadian dollars) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Net loss |
|
$ |
(38,032 |
) |
|
$ |
(28,476 |
) |
|
$ |
(150,050 |
) |
|
$ |
(82,620 |
) |
Unrealized gain (loss) on translation of assets and
liabilities of operations denominated in foreign currency |
|
|
33,364 |
|
|
|
(36,384 |
) |
|
|
(9,182 |
) |
|
|
49,313 |
|
Foreign exchange gain (loss) on net investment hedge
with U.S. denominated debt |
|
|
(24,544 |
) |
|
|
29,404 |
|
|
|
6,995 |
|
|
|
(34,832 |
) |
Comprehensive loss |
|
$ |
(29,212 |
) |
|
$ |
(35,456 |
) |
|
$ |
(152,237 |
) |
|
$ |
(68,139 |
) |
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
(Stated
in thousands of Canadian dollars) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(38,032 |
) |
|
$ |
(28,476 |
) |
|
$ |
(150,050 |
) |
|
$ |
(82,620 |
) |
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term compensation plans |
|
|
7,887 |
|
|
|
3,106 |
|
|
|
28,688 |
|
|
|
8,727 |
|
Depreciation and amortization |
|
|
69,431 |
|
|
|
77,588 |
|
|
|
211,148 |
|
|
|
241,626 |
|
Gain on
asset disposals |
|
|
(3,261 |
) |
|
|
(3,032 |
) |
|
|
(6,224 |
) |
|
|
(10,111 |
) |
Foreign
exchange |
|
|
415 |
|
|
|
1,293 |
|
|
|
1,437 |
|
|
|
2,447 |
|
Finance
charges |
|
|
20,639 |
|
|
|
27,613 |
|
|
|
70,783 |
|
|
|
83,276 |
|
Income
taxes |
|
|
(3,506 |
) |
|
|
888 |
|
|
|
(6,063 |
) |
|
|
2,987 |
|
Other |
|
|
2 |
|
|
|
(142 |
) |
|
|
(562 |
) |
|
|
(905 |
) |
Gain on
investments and other assets |
|
|
(327 |
) |
|
|
— |
|
|
|
(327 |
) |
|
|
— |
|
Loss
(gain) on repurchase of unsecured senior notes |
|
|
— |
|
|
|
(27,971 |
) |
|
|
9,520 |
|
|
|
(29,942 |
) |
Income
taxes paid |
|
|
(1,134 |
) |
|
|
(2,137 |
) |
|
|
(5,200 |
) |
|
|
(6,085 |
) |
Income
taxes recovered |
|
|
44 |
|
|
|
1,228 |
|
|
|
47 |
|
|
|
1,228 |
|
Interest
paid |
|
|
(18,804 |
) |
|
|
(22,644 |
) |
|
|
(63,982 |
) |
|
|
(75,687 |
) |
Interest received |
|
|
171 |
|
|
|
175 |
|
|
|
347 |
|
|
|
504 |
|
Funds provided by operations |
|
|
33,525 |
|
|
|
27,489 |
|
|
|
89,562 |
|
|
|
135,445 |
|
Changes in non-cash working capital balances |
|
|
(11,654 |
) |
|
|
14,461 |
|
|
|
(10,050 |
) |
|
|
85,936 |
|
|
|
|
21,871 |
|
|
|
41,950 |
|
|
|
79,512 |
|
|
|
221,381 |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment |
|
|
(19,500 |
) |
|
|
(3,211 |
) |
|
|
(48,191 |
) |
|
|
(38,623 |
) |
Purchase
of intangibles |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(57 |
) |
Proceeds
on sale of property, plant and equipment |
|
|
4,476 |
|
|
|
5,705 |
|
|
|
10,390 |
|
|
|
16,416 |
|
Purchase
of investments and other assets |
|
|
(3,000 |
) |
|
|
— |
|
|
|
(3,000 |
) |
|
|
— |
|
Changes in non-cash working capital balances |
|
|
500 |
|
|
|
(1,367 |
) |
|
|
3,213 |
|
|
|
(6,773 |
) |
|
|
|
(17,524 |
) |
|
|
1,127 |
|
|
|
(37,588 |
) |
|
|
(29,037 |
) |
Financing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of long-term debt |
|
|
— |
|
|
|
123,029 |
|
|
|
696,341 |
|
|
|
128,059 |
|
Repayments of long-term debt |
|
|
(8,209 |
) |
|
|
(158,921 |
) |
|
|
(769,668 |
) |
|
|
(204,386 |
) |
Repurchase of share capital |
|
|
— |
|
|
|
— |
|
|
|
(4,294 |
) |
|
|
(5,259 |
) |
Debt
issuance costs |
|
|
344 |
|
|
|
— |
|
|
|
(9,450 |
) |
|
|
— |
|
Debt
amendment fees |
|
|
(3 |
) |
|
|
(22 |
) |
|
|
(913 |
) |
|
|
(690 |
) |
Lease
payments |
|
|
(1,633 |
) |
|
|
(1,987 |
) |
|
|
(4,963 |
) |
|
|
(5,612 |
) |
Changes in non-cash working capital balances |
|
|
(1,829 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
(11,330 |
) |
|
|
(37,901 |
) |
|
|
(92,947 |
) |
|
|
(87,888 |
) |
Effect of exchange rate changes on cash |
|
|
642 |
|
|
|
(2,516 |
) |
|
|
(653 |
) |
|
|
(1,372 |
) |
Increase (decrease) in cash |
|
|
(6,341 |
) |
|
|
2,660 |
|
|
|
(51,676 |
) |
|
|
103,084 |
|
Cash, beginning of period |
|
|
63,437 |
|
|
|
175,125 |
|
|
|
108,772 |
|
|
|
74,701 |
|
Cash, end of period |
|
$ |
57,096 |
|
|
$ |
177,785 |
|
|
$ |
57,096 |
|
|
$ |
177,785 |
|
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Stated
in thousands of Canadian dollars) |
|
Shareholders’Capital |
|
|
ContributedSurplus |
|
|
AccumulatedOtherComprehensiveIncome |
|
|
Deficit |
|
|
TotalEquity |
|
Balance at January 1, 2021 |
|
$ |
2,285,738 |
|
|
$ |
72,915 |
|
|
$ |
137,581 |
|
|
$ |
(1,089,594 |
) |
|
$ |
1,406,640 |
|
Net loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(150,050 |
) |
|
|
(150,050 |
) |
Other comprehensive loss for the
period |
|
|
— |
|
|
|
— |
|
|
|
(2,187 |
) |
|
|
— |
|
|
|
(2,187 |
) |
Share repurchases |
|
|
(4,294 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,294 |
) |
Share-based compensation
reclassification |
|
|
— |
|
|
|
(2,349 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,349 |
) |
Share-based compensation expense |
|
|
— |
|
|
|
6,187 |
|
|
|
— |
|
|
|
— |
|
|
|
6,187 |
|
Balance at September 30, 2021 |
|
$ |
2,281,444 |
|
|
$ |
76,753 |
|
|
$ |
135,394 |
|
|
$ |
(1,239,644 |
) |
|
$ |
1,253,947 |
|
(Stated
in thousands of Canadian dollars) |
|
Shareholders’Capital |
|
|
ContributedSurplus |
|
|
AccumulatedOtherComprehensiveIncome |
|
|
Deficit |
|
|
TotalEquity |
|
Balance at January 1, 2020 |
|
$ |
2,296,378 |
|
|
$ |
66,255 |
|
|
$ |
134,255 |
|
|
$ |
(969,456 |
) |
|
$ |
1,527,432 |
|
Net loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(82,620 |
) |
|
|
(82,620 |
) |
Other comprehensive income for
the period |
|
|
— |
|
|
|
— |
|
|
|
14,481 |
|
|
|
— |
|
|
|
14,481 |
|
Share repurchases |
|
|
(5,259 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,259 |
) |
Redemption of non-management
director DSUs |
|
|
677 |
|
|
|
(502 |
) |
|
|
— |
|
|
|
— |
|
|
|
175 |
|
Share-based compensation
reclassification |
|
|
— |
|
|
|
(1,498 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,498 |
) |
Share-based compensation expense |
|
|
— |
|
|
|
8,842 |
|
|
|
— |
|
|
|
— |
|
|
|
8,842 |
|
Balance at September 30, 2020 |
|
$ |
2,291,796 |
|
|
$ |
73,097 |
|
|
$ |
148,736 |
|
|
$ |
(1,052,076 |
) |
|
$ |
1,461,553 |
|
THIRD QUARTER 2021 EARNINGS CONFERENCE
CALL AND WEBCAST
Precision Drilling Corporation has scheduled a conference call
and webcast to begin promptly at 12:00 noon MT (2:00 p.m. ET) on
Thursday, October 21, 2021.
The conference call dial in numbers are
1-844-515-9176 or 614-999-9312.
A live webcast of the conference call will be
accessible on Precision’s website at www.precisiondrilling.com by
selecting “Investor Relations”, then “Webcasts &
Presentations.”
An archived version of the webcast will be
available for approximately 60 days. An archived recording of the
conference call will be available approximately one hour after the
completion of the call until October 25, 2021 by dialing
855-859-2056 or 404-537-3406, passcode 8393532.
About Precision
Precision is a leading provider of safe and
environmentally responsible High Performance, High Value services
to the energy industry, offering customers access to an extensive
fleet of Super Series drilling rigs. Precision has commercialized
an industry-leading digital technology portfolio known as “Alpha”
that utilizes advanced automation software and analytics to
generate efficient, predictable, and repeatable results for energy
customers. Additionally, Precision offers well service rigs, camps
and rental equipment all backed by a comprehensive mix of technical
support services and skilled, experienced personnel.
Precision is headquartered in Calgary, Alberta,
Canada and is listed on the Toronto Stock Exchange under the
trading symbol “PD” and on the New York Stock Exchange under the
trading symbol “PDS.”
For further information, please contact:
Carey Ford, Senior Vice President and Chief
Financial Officer713.435.6100
800, 525 - 8th Avenue S.W.Calgary, Alberta,
Canada T2P 1G1Website: www.precisiondrilling.com
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