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, 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. Amounts presented
are in Canadian dollars, unless otherwise stated.
Precision Drilling announces 2020 fourth quarter and year end
highlights:
- Revenue of $202
million was a decrease of 46% compared with the fourth quarter of
2019.
- Net loss of $38
million or $2.74 per diluted share compared to a net loss of $1
million or $0.08 per diluted share in 2019.
- Earnings before
income taxes, gain on repurchase of unsecured senior notes, finance
charges, foreign exchange, impairment reversal, loss on asset
decommissioning, gain on asset disposals and depreciation and
amortization (Adjusted EBITDA, see “NON-GAAP MEASURES”) of $55
million compared with $105 million in the fourth quarter of
2019.
- Generated cash and
funds provided by operations (see “NON-GAAP MEASURES”) of $5
million and $35 million, respectively, in the fourth quarter of
2020.
- End of year cash
balance was $109 million, an increase of $34 million from December
31, 2019.
- Fourth quarter
capital expenditures were $23 million.
- Reduced our
unsecured senior notes balance by $50 million, recognizing a gain
on repurchase of $14 million, repaid $34 million on our Senior
Credit Facility and established a US$11 million Real Estate Credit
Facility.
- Completed a 20:1
consolidation of our common shares.
- Repurchased and
cancelled 265,382 common shares for $6 million. Subsequent to
December 31, 2020, we repurchased an additional 108,962 common
shares for $3 million.
- Recognized the
Canadian government’s Canada Emergency Wage Subsidy (“CEWS”)
program assistance of $10 million in the fourth quarter of
2020.
Precision’s President and CEO, Kevin Neveu
stated:
“Precision’s fourth quarter and full year 2020
financial results demonstrate the resiliency of our business model
and strong cash generating capabilities of our High Performance rig
fleet. Despite unprecedented obstacles caused by the COVID-19
pandemic and oil price collapse, we exceeded the targets set out in
our 2020 strategic priorities. I am thrilled with our
organization’s performance and the outstanding business execution
that our people delivered during these incredibly challenging
times. Notably, during the year, we delivered our best safety
performance in the history of Precision, improved our capital
structure and strengthened Precision’s overall competitive
positioning through targeted investments in our assets, people and
our Alpha digital technologies.”
“Precision generated $55 million of Adjusted
EBITDA and $5 million of cash provided by operations in the fourth
quarter of 2020, with results driven by improving market share and
intense cost control throughout the organization. During the year,
we reduced our fixed costs by over 35% and lowered general and
administrative expenses by over $30 million. We believe these
reductions are sustainable in a recovering market. We reduced debt
levels by $171 million, exceeding the high end of our annual
targeted range for the third consecutive year and we increased our
long-term debt reduction target from $700 million to $800 million
from 2018 through 2022, targeting a debt leverage level of less
than two-times net debt to Adjusted EBITDA. At the end of 2020, we
have reduced debt by $550 million in just three years, leaving $250
million remaining over the next two years for us to achieve this
target.”
“Precision’s operational excellence was further
evidenced by several key performance indicators including our
reported market share and resilient field margins. In Canada,
Precision sustained fourth quarter market share levels above 30%,
led by outstanding performance in heavy oil and the deeper
liquid-rich gas plays where we expect to remain strong in 2021. In
the U.S., Precision achieved a 9% fourth quarter market share and
sustained strong margins by leveraging our contract book and
reducing operating costs. Internationally, our operations continued
to deliver High Performance operating results and steady cash flow
from our six contracted rigs.”
“Precision’s Completion and Production Services
business demonstrated a notable uptick in activity throughout 2020,
driven by improving customer demand and Precision’s participation
in the Government of Canada’s $1.7 billion well abandonment
program. During the fourth quarter, almost one-third of Precision’s
well service work was derived from well abandonment projects.”
“2020 marked another year of strong progress for
our suite of Alpha digital technologies, as we consistently
reported growing demand and value creation for our customers,
achieving record performance and new efficiency benchmarks
throughout North America. We increased our AlphaAutomation market
penetration of Precision wells drilled, from 23% in 2019 to 41% in
2020. In 2020, our commercial suite of AlphaApps generated over
2,300 App-days, while our AlphaAnalytics data analysis platform
delivered over 800 Analytics-days. We believe our digital drilling
technology momentum represents an important competitive
differentiator and revenue driver for Precision as customers
continue to prioritize digital strategies and operational
efficiencies.”
“Looking forward, we see improving oil
fundamentals supported by OPEC+ curtailments and modestly
recovering oil demand and anticipate this recovery continuing with
further vaccine rollouts. North American natural gas fundamentals
are also strengthening with domestic and LNG demand increasing and
storage levels decreasing. While we believe our customers’
commitment to capital discipline will hold, we expect continued
improvements to rig demand as inventories of drilled but
uncompleted wells are further depleted. Internationally, we remain
optimistic in our ability to secure re-activations as our customers
return to pre-pandemic operations.”
“For 2021, Precision’s strategic priorities
include further market penetration of our Alpha Digital
Technologies, utilizing operational leverage to generate free cash
flow for continued de-leveraging and adding a strategic focus on
our ESG performance to strengthen our customer and stakeholder
positioning. Precision has long been a strong performer on ESG
business elements, and we have a unique opportunity to both support
our customers efforts to reduce their GHG emissions with our
technologies and provide stakeholders additional disclosure on how
Precision is managing these initiatives. In addition to our stated
strategic priorities and in light of the additional health risks of
COVID-19, the health and wellbeing of our employees and our
communities will remain a key focus, while Precision continues to
deliver our customary industry leading High Performance, High Value
services to our customers,” concluded Mr. Neveu.
IMPACT OF COVID-19
In March 2020, the Novel Coronavirus
(“COVID-19”) outbreak was declared a pandemic by the World Health
Organization. Governments worldwide, including those countries in
which Precision operates, have enacted emergency measures to combat
the spread of the virus. These measures, which include the
implementation of lockdowns, travel bans, quarantine periods and
social distancing, have caused a material disruption to businesses
globally resulting in an economic slowdown and decreased demand for
oil. Governments and central banks have reacted with significant
monetary and fiscal interventions designed to stabilize economic
conditions; however, the long-term success of these interventions
is not yet determinable.
As a result of the decrease in demand, worldwide
inventories of oil increased significantly. However, voluntary
production restraint from national oil companies and governments of
oil-producing nations along with curtailments in the U.S. and
Canada have shifted global oil markets from a position of over
supply to inventory draws. The situation remains dynamic and the
ultimate duration and magnitude of the impact on the economy and
the financial effect on Precision remains unknown at this time.
Financial impacts
The current challenging economic climate has or
may have significant adverse impacts on Precision including, but
not exclusively:
- material declines
in revenue and cash flows, as our customers are concentrated in the
oil and natural gas industry;
- future impairment
charges to our property, plant and equipment and intangible
assets;
- risk of
non-collection of accounts receivable and customer defaults;
and
- additional
restructuring charges as we align our structure and personnel to
the dynamic environment.
Our estimates and judgements made in the
preparation of our financial statements are increasingly difficult
and subject to a higher degree of measurement uncertainty during
this volatile period.
Precision took the following measures in 2020 to
align our cost structure and maximize cash preservation as a result
of the current market conditions, including:
- Compensation
reductions for the Board of Directors and management;
- Staff headcount
reductions;
- Elimination of all
non-essential travel, entertaining and other discretionary
spending;
- Reductions to our
2020 capital expenditure plan; and
- Discontinued our
U.S. directional drilling operations.
We review the carrying value of our long-lived
assets for indications of impairment at the end of each reporting
period. At March 31, 2020, we tested all cash-generating units
(“CGU”) for impairment and no impairment charges were identified.
At December 31, 2020, we reviewed each CGU and did not identify any
indications of impairment. Accordingly, we did not test our CGUs
for impairment.
Operational impacts
During this pandemic, in regions where the local
authorities have ordered non-essential business closures and
implemented “stay at home” orders, the oil and natural gas
extractive services industry has been classified as an “essential
service.” As a result, Precision’s operations remain open. This
includes all of Precision’s field operations, technical support
centres and administration groups. The vertical integration of our
operations has resulted in minimal supply chain constraints and
disruptions during the pandemic.
To manage the additional safety risks presented
by COVID-19, Precision implemented a comprehensive infectious
disease plan to keep our field crews, support staff and customers
safe and well-informed. Precision has implemented additional
safety, sanitization and physical distancing procedures, including
remote work sites where possible and ceased all non-essential
business travel. Precision’s procedures are in accordance with
recommendations from the World Health Organization, Center for
Disease Control and various federal, state and provincial
government health authorities.
Liquidity
Despite the enormous challenges posed by
COVID-19, we maintained our strong liquidity position. We exited
the quarter with a cash balance of $109 million and $552 million of
available borrowing capacity under our secured credit facilities,
providing us with $661 million of total liquidity as compared with
$725 million at September 30, 2020, which was comprised of cash of
$178 million and available borrowing capacity of $547 million. To
provide additional liquidity, we established a real estate term
credit facility in the amount of US$11 million in the fourth
quarter of 2020.
At December 31, 2020, our available borrowing
capacity of $552 million was comprised of our Senior Credit
Facility of US$500 million less drawn amounts of US$75 million and
US$32 million of outstanding letters of credit, our undrawn
Canadian operating facility of $40 million less $7 million of
outstanding letters of credit and our undrawn U.S. operating
facility of US$15 million. Our available borrowing capacity
calculation excludes our US$30 demand letter of credit
facility.
We expect that cash provided by operations, cash
on hand and our sources of financing, including our Senior Credit
Facility, will be sufficient to meet our debt obligations and fund
committed and future capital expenditures.
Amendments to Senior Credit
Facility
On April 9, 2020 we agreed with the lenders of
our Senior Credit Facility to amend our interest expense coverage
ratio financial covenant in future periods. The amending agreement
also restricts Precision’s distributions in the form of dividends,
distributions and share repurchases. Despite obtaining financial
covenant relief on our Senior Credit Facility through March 31,
2022, if the global economic slowdown continues for a prolonged
period, there may be an increased risk to Precision’s ability to
comply with these financial covenants.
Additional discussion of amendments to our
Senior Credit Facility can be found in the “LIQUIDITY AND CAPITAL
RESOURCES” section later in this release.
SELECT FINANCIAL AND OPERATING
INFORMATION
Financial Highlights
|
For the three months ended December 31, |
|
|
For the year ended December 31, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
2020 |
|
|
2019 |
|
|
% Change |
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
Revenue |
|
201,688 |
|
|
|
372,301 |
|
|
|
(45.8 |
) |
|
|
935,753 |
|
|
|
1,541,320 |
|
|
|
(39.3 |
) |
Adjusted EBITDA(1) |
|
55,263 |
|
|
|
105,006 |
|
|
|
(47.4 |
) |
|
|
263,403 |
|
|
|
391,905 |
|
|
|
(32.8 |
) |
Operating earnings
(loss)(1) |
|
(17,613 |
) |
|
|
7,699 |
|
|
|
(328.8 |
) |
|
|
(40,988 |
) |
|
|
94,577 |
|
|
|
(143.3 |
) |
Net earnings (loss) |
|
(37,518 |
) |
|
|
(1,061 |
) |
|
|
3,436.1 |
|
|
|
(120,138 |
) |
|
|
6,618 |
|
|
|
(1,915.3 |
) |
Cash provided by
operations |
|
4,737 |
|
|
|
74,981 |
|
|
|
(93.7 |
) |
|
|
226,118 |
|
|
|
288,159 |
|
|
|
(21.5 |
) |
Funds provided by
operations(1) |
|
35,282 |
|
|
|
75,779 |
|
|
|
(53.4 |
) |
|
|
170,727 |
|
|
|
292,652 |
|
|
|
(41.7 |
) |
Capital spending: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expansion and upgrade |
|
13,094 |
|
|
|
8,115 |
|
|
|
61.4 |
|
|
|
26,858 |
|
|
|
120,910 |
|
|
|
(77.8 |
) |
Maintenance and infrastructure |
|
9,818 |
|
|
|
13,426 |
|
|
|
(26.9 |
) |
|
|
34,677 |
|
|
|
38,976 |
|
|
|
(11.0 |
) |
Intangibles |
|
- |
|
|
|
332 |
|
|
|
(100.0 |
) |
|
|
57 |
|
|
|
808 |
|
|
|
(92.9 |
) |
Proceeds on sale |
|
(4,678 |
) |
|
|
(4,931 |
) |
|
|
(5.1 |
) |
|
|
(21,094 |
) |
|
|
(90,768 |
) |
|
|
(76.8 |
) |
Net capital spending |
|
18,234 |
|
|
|
16,942 |
|
|
|
7.6 |
|
|
|
40,498 |
|
|
|
69,926 |
|
|
|
(42.1 |
) |
Net earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
(2.74 |
) |
|
|
(0.08 |
) |
|
|
3,325.0 |
|
|
|
(8.76 |
) |
|
|
0.46 |
|
|
|
(2,004.3 |
) |
Diluted |
|
(2.74 |
) |
|
|
(0.08 |
) |
|
|
3,325.0 |
|
|
|
(8.76 |
) |
|
|
0.45 |
|
|
|
(2,046.7 |
) |
(1) See “NON-GAAP
MEASURES.”
Operating Highlights
|
For the three months ended December 31, |
|
|
For the year ended December 31, |
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
Contract drilling rig fleet |
|
227 |
|
|
|
226 |
|
|
|
0.4 |
|
|
|
227 |
|
|
|
226 |
|
|
|
0.4 |
|
Drilling rig utilization
days: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
2,396 |
|
|
|
5,814 |
|
|
|
(58.8 |
) |
|
|
12,080 |
|
|
|
26,544 |
|
|
|
(54.5 |
) |
Canada |
|
2,578 |
|
|
|
3,919 |
|
|
|
(34.2 |
) |
|
|
10,794 |
|
|
|
14,498 |
|
|
|
(25.5 |
) |
International |
|
552 |
|
|
|
818 |
|
|
|
(32.5 |
) |
|
|
2,526 |
|
|
|
3,093 |
|
|
|
(18.3 |
) |
Revenue per utilization
day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.(1) (US$) |
|
25,577 |
|
|
|
23,949 |
|
|
|
6.8 |
|
|
|
26,184 |
|
|
|
23,397 |
|
|
|
11.9 |
|
Canada (Cdn$) |
|
21,670 |
|
|
|
22,182 |
|
|
|
(2.3 |
) |
|
|
21,611 |
|
|
|
21,569 |
|
|
|
0.2 |
|
International (US$) |
|
55,453 |
|
|
|
52,283 |
|
|
|
6.1 |
|
|
|
54,811 |
|
|
|
51,360 |
|
|
|
6.7 |
|
Operating cost per utilization
day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. (US$) |
|
14,419 |
|
|
|
14,073 |
|
|
|
2.5 |
|
|
|
14,666 |
|
|
|
14,447 |
|
|
|
1.5 |
|
Canada (Cdn$) |
|
12,291 |
|
|
|
14,791 |
|
|
|
(16.9 |
) |
|
|
13,546 |
|
|
|
15,240 |
|
|
|
(11.1 |
) |
Service rig fleet |
|
123 |
|
|
|
123 |
|
|
|
- |
|
|
|
123 |
|
|
|
123 |
|
|
|
- |
|
Service
rig operating hours |
|
27,286 |
|
|
|
39,865 |
|
|
|
(31.6 |
) |
|
|
81,952 |
|
|
|
147,154 |
|
|
|
(44.3 |
) |
(1) Includes revenue from
idle but contracted rig days and contract cancellation fees.
Financial Position
(Stated in thousands of Canadian dollars, except ratios) |
December 31, 2020 |
|
|
December 31, 2019 |
|
Working capital(1) |
|
175,423 |
|
|
|
201,696 |
|
Cash |
|
108,772 |
|
|
|
74,701 |
|
Long-term debt |
|
1,236,210 |
|
|
|
1,427,181 |
|
Total long-term financial
liabilities |
|
1,304,162 |
|
|
|
1,500,950 |
|
Total assets |
|
2,898,878 |
|
|
|
3,269,840 |
|
Long-term debt to long-term debt plus equity ratio |
|
0.47 |
|
|
|
0.48 |
|
(1) See “NON-GAAP
MEASURES.”
Summary for the three months ended December 31,
2020:
- Revenue was $202
million, 46% lower than the fourth quarter of 2019, resulting from
lower activity across all operating segments with reduced customer
drilling programs responding to the global economic slowdown. Our
activity, as measured by drilling rig utilization days, decreased
by 59% in the U.S., 34% in Canada and 33% internationally compared
with the fourth quarter of 2019.
- Adjusted EBITDA
(see “NON-GAAP MEASURES”) of $55 million decreased $50 million from
the prior year quarter. Adjusted EBITDA as a percentage of revenue
was 27%, slightly lower than the comparative quarter.
- Operating loss (see
“NON-GAAP MEASURES”) was $18 million compared with operating
earnings of $8 million in the fourth quarter of 2019. Our operating
earnings in the current year were negatively impacted by lower
activity levels as a result of the global economic slowdown caused
by the COVID-19 pandemic.
- General and
administrative expenses were $21 million, $5 million lower than in
the fourth quarter of 2019, primarily due to lower fixed costs from
our realigned cost structure and the impact of CEWS program
assistance, partially offset by higher share-based incentive
compensation.
- Share-based
compensation was $11 million, an increase of $4 million from the
comparable 2019 quarter, as a result of our improved share price
and higher vesting multiplier applied to outstanding performance
share units (PSU) and Executive PSUs.
- Net finance charges
were $24 million, a decrease of $4 million compared with the fourth
quarter of 2019, primarily due to reduced interest expense related
to retired debt.
- Our U.S. contract
drilling revenue per utilization day increased to US$25,577 from
US$23,949 in fourth quarter of 2019, primarily resulting from
higher revenue from idle but contracted rigs and turnkey drilling,
which were US$7 million and US$5 million, respectively, compared
with US$3 million and US$3 million, respectively, in 2019.
Operating costs on a per day basis of $14,419 were higher compared
with the prior year of $14,073, primarily due to higher turnkey
activity and fixed operating overheads spread over fewer
utilization days. On a sequential basis, revenue per utilization
day, excluding revenue from idle but contracted rigs and turnkey
activity decreased by US$1,331 as compared with the third quarter
of 2020. Operating costs per day decreased by US$1,618 due to lower
repairs and maintenance and fixed operating overheads spread over
more utilization days, offset by higher turnkey activity.
- Our Canadian
contract drilling revenue per utilization day decreased to $21,670
from $22,182 in the fourth quarter of 2019, primarily due to our
rig mix. We recognized $1 million of contract shortfall revenue as
compared with nil in 2019. Operating costs per utilization day
decreased to $12,291 compared with the prior year quarter of
$14,791, mainly due to the impact of the CEWS program assistance,
offset by fixed operating overheads spread over fewer utilization
days.
- During the quarter,
we recognized CEWS program assistance of $10 million, of which $8
million and $2 million were presented as reductions to our
operating and general and administrative costs, respectively.
- Our international
contract drilling division realized revenue of US$31 million, as
compared with US$43 million in the prior year quarter with the
decrease due to lower activity levels. Revenue per utilization day
increased 6% to US$55,453 from the comparable quarter, primarily
due to our rig mix.
- Cash and funds
provided by operations (see “NON-GAAP MEASURES”) in the fourth
quarter of 2020 were $5 million and $35 million, respectively,
compared to $75 million and $76 million in 2019.
- Capital
expenditures of $23 million in the fourth quarter were consistent
with the same period in 2019.
Summary for the year ended December 31,
2020:
- Revenue for the
year ended December 31, 2020 was $936 million, a decrease of 39%
from the prior year.
- Operating loss (see
“NON-GAAP MEASURES”) was $41 million compared with operating
earnings of $95 million in 2019. Our operating earnings in the
current year were negatively impacted by lower activity levels as a
result of the global economic slowdown caused by the COVID-19
pandemic.
- General and
administrative costs were $71 million, a decrease of $33 million
from 2019. The decrease was due to lower fixed costs from our
restructuring activities and the impact of CEWS program assistance
of $5 million.
- Net finance charges
were $107 million, a decrease of $11 million from 2019 primarily
due to a reduction in interest expense related to retired debt
partially offset by the weakening of the Canadian dollar on our
U.S. dollar denominated interest expense.
- Cash provided by
operations was $226 million as compared with $288 million in 2019.
Funds provided by operations (see “NON-GAAP MEASURES”) were $171
million, a decrease of $122 million from the prior year comparative
period of $293 million.
- Capital
expenditures were $62 million, a decrease of $99 million compared
with 2019. Capital spending in 2020 included $27 million for
upgrade and expansion capital and $35 million for the maintenance
of existing assets, infrastructure spending and intangibles.
STRATEGY
Precision’s strategic priorities for 2020 were:
- Generate
strong free cash flow and reduce debt by $100 million to $150
million in 2020 – In the fourth quarter of 2020, Precision
generated $5 million of cash provided by operations (see “NON-GAAP
MEASURES”) and $5 million of cash proceeds from the divestiture of
non-core assets. We lowered debt levels by $65 million, recognizing
$14 million of captured discounts on debt repurchases, leaving
reported full year debt reduction at $171 million. As a result of
accelerated de-leveraging achieved to date, Precision increased its
long-term debt reduction target from $700 million to $800 million
from 2018 through 2022. As of December 31, 2020, the Company has
reduced debt by approximately $550 million. Precision reported a
cash balance of $109 million at December 31, 2020, compared with
$75 million at December 31, 2019, and when combined with available
credit facilities, has access to $661 million in liquidity.
- Demonstrate
operational excellence in all aspects of our business – In
the U.S., we sustained strong market share, lowered field costs and
leveraged our contract book to generate reported fourth quarter
operating margins of US$11,158 per utilization day. In Canada, we
continued at record level market share and reported fourth quarter
operating margins (revenue less operating costs) of $9,379 per
utilization day. Internationally, we maintained stable activity,
averaging six active drilling rigs, and recorded average day rates
of US$55,453.
- Leverage
our Alpha Technology platform as a competitive differentiator and
source of financial returns – At December 31, 2020, we had
39 pad-walking, AC Super Triple Alpha-Rigs equipped with our
AlphaAutomation platform, which drilled approximately 650 wells in
2020. Since 2017, we have drilled approximately 1,800 wells with
AlphaAutomation and currently have 18 AlphaApps available, of which
six are commercial. In 2020, we drilled approximately 200 wells
with AlphaApps, generating over 2,300 AlphaApp-days, further
allowing us to differentiate our High Performance, High Value
offering.
Precision’s strategic priorities for 2021
are:
- Grow
revenue and market share through our digital leadership
position.
-
Demonstrate operational leverage to generate free cash flow
and reduce debt.
- Deliver
leading ESG (environmental, social and governance) performance to
strengthen customer and stakeholder positioning.
OUTLOOK
The oilfield services industry outlook and
customer sentiment has improved in recent months, largely due to
vaccine announcements, reopening of economies and steadily
increasing commodity prices. Although longer-term visibility
remains limited, improved fundamentals from recovering global oil
demand should further stabilize commodity prices and result in
customers continuing to increase activity levels throughout the
year. In this environment, our customers are expected
to remain focused on capital discipline and maximizing
operational efficiencies. We anticipate these industry dynamics
will accelerate the industry’s transition towards service providers
with the highest performing assets and competitive digital
technology offerings. Pursuit of predictable and repeatable
results will further drive field application of drilling automation
processes to create additional cost efficiencies and performance
value for customers.
Precision continues to closely monitor
announcements of available government financial support and
economic stimulus programs. We remain encouraged by the Government
of Canada’s $1.7 billion well site abandonment and rehabilitation
program, which will support industry activity levels and provide
thousands of jobs throughout western Canada. The program will run
through the end of 2022 with government funds provided in stages.
As the use of service rigs is an integral part of the well
abandonment process, our well servicing business is positioned to
capture these opportunities as a result of our scale, operational
performance and strong safety record. During the fourth quarter, we
saw a continued rise in the number of approved abandonment
applications and further distribution of program funding to
oilfield service providers. Our abandonment service activity
increased in the fourth quarter of 2020 compared with the third
quarter and we expect further increases through the end of the well
site abandonment and rehabilitation program in 2022.
On April 1, 2020, the Government of Canada
announced the CEWS program, which subsidizes a portion of employee
wages for Canadian employers whose businesses have been adversely
affected by COVID-19. The program is intended to help employers
re-hire previously laid off workers, prevent further job losses and
better position Canadian businesses to resume normal operations.
For the year ended December 31, 2020, we recognized $26 million in
CEWS program assistance, reducing operating and general and
administrative expenses by $21 million and $5 million,
respectively. The CEWS program has benefitted both Precision and
our employees as it has allowed us to retain a higher employment
level for Canadian positions within our organization. We remain
highly supportive of this effective government program that extends
to June of 2021.
Commodity Prices
In the fourth quarter of 2020, the average West
Texas Intermediate oil price was 25% lower compared with 2019 while
the average Western Canadian Select oil price increased 5%. Henry
Hub and AECO natural gas prices were 15% and 8% higher than the
comparative period, respectively.
|
For the three months ended December 31, |
|
|
For the year ended December 31, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Average oil and natural gas prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Texas Intermediate (per barrel) (US$) |
|
42.63 |
|
|
|
57.02 |
|
|
|
39.40 |
|
|
|
57.07 |
|
Western Canadian Select (per barrel) (US$) |
|
43.37 |
|
|
|
41.12 |
|
|
|
35.59 |
|
|
|
44.28 |
|
Natural
gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry Hub (per MMBtu) (US$) |
|
2.76 |
|
|
|
2.40 |
|
|
|
2.13 |
|
|
|
2.56 |
|
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AECO (per MMBtu) (CDN$) |
|
2.66 |
|
|
|
2.47 |
|
|
|
2.24 |
|
|
|
1.77 |
|
Contracts
During 2020, we entered into 21 term contracts.
The following chart outlines the average number of drilling rigs by
quarter that we had under contract for 2020 and 2021 as of February
9, 2021. For those quarters ended after December 31, 2020, this
chart represents the minimum number of term contracts where we will
be earning revenue. We expect the actual number of contracted rigs
to vary in future periods as we sign additional contracts and
certain customers elect to pay contract cancellation fees.
|
|
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 February 9, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
41 |
|
|
|
32 |
|
|
|
26 |
|
|
|
24 |
|
|
|
21 |
|
|
|
19 |
|
|
|
13 |
|
|
|
9 |
|
Canada |
|
|
5 |
|
|
|
4 |
|
|
|
3 |
|
|
|
4 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
International |
|
|
8 |
|
|
|
8 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
Total |
|
|
54 |
|
|
|
44 |
|
|
|
35 |
|
|
|
34 |
|
|
|
33 |
|
|
|
31 |
|
|
|
25 |
|
|
|
21 |
|
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 February 9,
2021.
|
|
Average for the year ended |
|
|
|
|
2020 |
|
|
2021 |
|
|
|
Average rigs under term contract |
|
|
|
|
|
|
|
|
|
|
as of February 9, 2021: |
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
31 |
|
|
|
16 |
|
|
|
Canada |
|
|
4 |
|
|
|
6 |
|
|
|
International |
|
|
7 |
|
|
|
6 |
|
|
|
Total |
|
|
42 |
|
|
|
28 |
|
|
|
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 2019 |
|
Average for the quarter ended 2020 |
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
|
Mar. 31 |
|
|
June 30 |
|
|
Sept. 30 |
|
|
Dec. 31 |
|
Average Precision active rig count: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
79 |
|
|
|
77 |
|
|
|
72 |
|
|
|
63 |
|
|
|
55 |
|
|
|
30 |
|
|
|
21 |
|
|
|
26 |
|
Canada |
|
48 |
|
|
|
27 |
|
|
|
42 |
|
|
|
43 |
|
|
|
63 |
|
|
|
9 |
|
|
|
18 |
|
|
|
28 |
|
International |
|
8 |
|
|
|
8 |
|
|
|
9 |
|
|
|
9 |
|
|
|
8 |
|
|
|
8 |
|
|
|
6 |
|
|
|
6 |
|
Total |
|
135 |
|
|
|
112 |
|
|
|
123 |
|
|
|
115 |
|
|
|
126 |
|
|
|
47 |
|
|
|
45 |
|
|
|
60 |
|
To start 2021, drilling activity has decreased
relative to the prior year in the U.S. and Canada. According to
industry sources, as of February 9, 2021, the U.S. active land
drilling rig count is down 51% from the same point last year and
the Canadian active land drilling rig count is down 25%. To date in
2021, approximately 76% of the U.S. industry’s active rigs and 54%
of the Canadian industry’s active rigs were drilling for oil
targets, compared with 85% for the U.S. and 61% for Canada at the
same time last year.
Capital Spending
Capital spending in 2021 is expected to be $54
million and includes $16 million for upgrade and expansion and $38
million for sustaining, infrastructure and intangibles. We expect
the $54 million will be split $50 million in the Contract Drilling
Services segment, $3 million in the Completion and Production
Services segment and $1 million to the Corporate segment. At
December 31, 2020, Precision had capital commitments of $113
million with payments expected through 2023.
SEGMENTED FINANCIAL RESULTS
Precision’s operations are reported in two
segments: Contract Drilling Services, which includes our drilling
rig, directional drilling, 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 December 31, |
|
|
For the year ended December 31, |
|
(Stated
in thousands of Canadian dollars) |
2020 |
|
|
2019 |
|
|
% Change |
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
|
179,142 |
|
|
|
338,886 |
|
|
|
(47.1 |
) |
|
|
861,202 |
|
|
|
1,399,068 |
|
|
|
(38.4 |
) |
Completion and Production Services |
|
23,620 |
|
|
|
34,985 |
|
|
|
(32.5 |
) |
|
|
77,251 |
|
|
|
147,829 |
|
|
|
(47.7 |
) |
Inter-segment eliminations |
|
(1,074 |
) |
|
|
(1,570 |
) |
|
|
(31.6 |
) |
|
|
(2,700 |
) |
|
|
(5,577 |
) |
|
|
(51.6 |
) |
|
|
201,688 |
|
|
|
372,301 |
|
|
|
(45.8 |
) |
|
|
935,753 |
|
|
|
1,541,320 |
|
|
|
(39.3 |
) |
Adjusted EBITDA:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
|
63,485 |
|
|
|
112,566 |
|
|
|
(43.6 |
) |
|
|
300,425 |
|
|
|
429,483 |
|
|
|
(30.0 |
) |
Completion and Production Services |
|
5,297 |
|
|
|
6,259 |
|
|
|
(15.4 |
) |
|
|
11,257 |
|
|
|
24,155 |
|
|
|
(53.4 |
) |
Corporate and Other |
|
(13,519 |
) |
|
|
(13,819 |
) |
|
|
(2.2 |
) |
|
|
(48,279 |
) |
|
|
(61,733 |
) |
|
|
(21.8 |
) |
|
|
55,263 |
|
|
|
105,006 |
|
|
|
(47.4 |
) |
|
|
263,403 |
|
|
|
391,905 |
|
|
|
(32.8 |
) |
(1) See “NON-GAAP
MEASURES.”
SEGMENT REVIEW OF CONTRACT DRILLING
SERVICES
|
For the three months ended December 31, |
|
|
For the year ended December 31, |
|
(Stated
in thousands of Canadian dollars, except where noted) |
2020 |
|
|
2019 |
|
|
% Change |
|
|
2020 |
|
|
2019 |
|
|
% Change |
|
Revenue |
|
179,142 |
|
|
|
338,886 |
|
|
|
(47.1 |
) |
|
|
861,202 |
|
|
|
1,399,068 |
|
|
|
(38.4 |
) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
109,220 |
|
|
|
216,305 |
|
|
|
(49.5 |
) |
|
|
526,716 |
|
|
|
927,612 |
|
|
|
(43.2 |
) |
General and administrative |
|
6,437 |
|
|
|
10,015 |
|
|
|
(35.7 |
) |
|
|
26,441 |
|
|
|
38,927 |
|
|
|
(32.1 |
) |
Restructuring |
|
- |
|
|
|
- |
|
|
n/m |
|
|
|
7,620 |
|
|
|
3,046 |
|
|
|
150.2 |
|
Adjusted EBITDA(1) |
|
63,485 |
|
|
|
112,566 |
|
|
|
(43.6 |
) |
|
|
300,425 |
|
|
|
429,483 |
|
|
|
(30.0 |
) |
Depreciation |
|
67,928 |
|
|
|
73,196 |
|
|
|
(7.2 |
) |
|
|
288,389 |
|
|
|
300,882 |
|
|
|
(4.2 |
) |
Gain on asset disposals |
|
(1,554 |
) |
|
|
(3,621 |
) |
|
|
(57.1 |
) |
|
|
(10,171 |
) |
|
|
(46,849 |
) |
|
|
(78.3 |
) |
Loss on asset
decommissioning |
|
- |
|
|
|
20,263 |
|
|
|
(100.0 |
) |
|
|
- |
|
|
|
20,263 |
|
|
|
(100.0 |
) |
Impairment reversal |
|
- |
|
|
|
- |
|
|
n/m |
|
|
|
- |
|
|
|
(5,810 |
) |
|
|
(100.0 |
) |
Operating earnings (loss)(1) |
|
(2,889 |
) |
|
|
22,728 |
|
|
|
(112.7 |
) |
|
|
22,207 |
|
|
|
160,997 |
|
|
|
(86.2 |
) |
Operating earnings (loss)(1) as a percentage of revenue |
|
(1.6 |
)% |
|
|
6.7 |
% |
|
|
|
|
|
|
2.6 |
% |
|
|
11.5 |
% |
|
|
|
|
(1) See “NON-GAAP
MEASURES.”n/m Not meaningful
United
States onshore drilling statistics:(1) |
2020 |
|
|
2019 |
|
|
Precision |
|
|
Industry(2) |
|
|
Precision |
|
|
Industry(2) |
|
Average number of active land rigs for quarters ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
55 |
|
|
|
764 |
|
|
|
79 |
|
|
|
1,023 |
|
June 30 |
|
30 |
|
|
|
378 |
|
|
|
77 |
|
|
|
967 |
|
September 30 |
|
21 |
|
|
|
241 |
|
|
|
72 |
|
|
|
896 |
|
December 31 |
|
26 |
|
|
|
297 |
|
|
|
63 |
|
|
|
798 |
|
Year to date average |
|
33 |
|
|
|
420 |
|
|
|
73 |
|
|
|
921 |
|
(1) United States lower
48 operations only.(2) Baker Hughes rig
counts.
Canadian onshore drilling statistics:(1) |
2020 |
|
|
2019 |
|
|
Precision |
|
|
Industry(2) |
|
|
Precision |
|
|
Industry(2) |
|
Average number of active land rigs for quarters ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
63 |
|
|
|
196 |
|
|
|
48 |
|
|
|
183 |
|
June 30 |
|
9 |
|
|
|
25 |
|
|
|
27 |
|
|
|
82 |
|
September 30 |
|
18 |
|
|
|
47 |
|
|
|
42 |
|
|
|
132 |
|
December 31 |
|
28 |
|
|
|
88 |
|
|
|
43 |
|
|
|
138 |
|
Year to date average |
|
29 |
|
|
|
89 |
|
|
|
40 |
|
|
|
134 |
|
(1) Canadian operations
only.(2) Baker Hughes rig counts.
Revenue from Contract Drilling Services was $179
million this quarter, or 47% lower than the fourth quarter of 2019,
while Adjusted EBITDA (see “NON-GAAP MEASURES”) decreased by 44% to
$63 million. The decrease in revenue was due to lower activity
across all geographic operating locations.
In the U.S., we had fourth quarter revenue from
idle but contracted rigs and turnkey projects of US$7 million and
US$5 million, respectively. Whereas in 2019, we had revenue from
idle but contracted rigs and turnkey projects of US$3 million and
US$3 million, respectively. During the quarter, we recognized $1
million of contract shortfall revenue in Canada as compared with
nil in 2019.
In the fourth quarter of 2020, industry drilling
activity remained low due to the COVID-19 economic slowdown.
Accordingly, our U.S. drilling rig utilization days (drilling days
plus move days) were 2,396, 59% lower than 2019 while our Canadian
utilization days were 2,578, 34% lower than 2019. Drilling rig
utilization days in our international business were 552 in the
fourth quarter of 2020, 33% lower than 2019 due to the expiration
of drilling contracts.
Drilling rig revenue per utilization day for the
quarter in the U.S. was up 7% compared with the prior year as we
realized higher revenue from idle but contracted rigs and turnkey
projects. Compared with the same quarter in 2019, drilling rig
revenue per utilization day in Canada decreased 2%, primarily due
to our rig mix. International revenue per utilization day increased
6% due to changes in our rig mix as compared with the fourth
quarter of 2019.
In the U.S., 62% of utilization days were
generated from rigs under term contract as compared with 66% in the
fourth quarter of 2019. In Canada, 11% of our utilization days in
the quarter were generated from rigs under term contract, compared
with 9% in the fourth quarter of 2019.
Operating costs were 61% of revenue for the
quarter, as compared to 64% in the prior year period. In the U.S.,
operating costs for the quarter on a per day basis were higher than
the prior year period primarily due to higher turnkey activity and
fixed operating overheads spread over fewer utilization days. On a
per utilization day basis, operating costs in Canada were lower
than the 2019 quarter due to the impact of the CEWS program
assistance, partially offset by fixed operating overheads spread
over fewer utilization days. During the quarter, we recognized CEWS
program assistance of $7 million, of which $6 million and $1
million were presented as reductions to our operating and general
and administrative costs, respectively.
Depreciation expense in the quarter was 7% lower
than the fourth quarter of 2019 primarily because of a lower
capital asset base as assets become fully depreciated,
decommissioned or disposed.
In the fourth quarter of 2020, through the
completion of normal course business operations, we sold used
assets recognizing a gain on disposal of $2 million, compared with
$4 million in 2019.
SEGMENT REVIEW OF COMPLETION AND
PRODUCTION SERVICES
|
For the three months ended December 31, |
|
|
For the year ended December 31, |
|
(Stated in thousands of Canadian dollars, except where noted) |
2020 |
|
|
2019 |
|
|
% Change |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
Revenue |
|
23,620 |
|
|
|
34,985 |
|
|
|
(32.5 |
) |
|
|
77,251 |
|
|
|
147,829 |
|
|
|
(47.7 |
) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
17,348 |
|
|
|
26,982 |
|
|
|
(35.7 |
) |
|
|
59,404 |
|
|
|
116,932 |
|
|
|
(49.2 |
) |
General and administrative |
|
975 |
|
|
|
1,744 |
|
|
|
(44.1 |
) |
|
|
3,995 |
|
|
|
6,285 |
|
|
|
(36.4 |
) |
Restructuring |
|
- |
|
|
|
- |
|
|
n/m |
|
|
|
2,595 |
|
|
|
457 |
|
|
|
467.8 |
|
Adjusted EBITDA(1) |
|
5,297 |
|
|
|
6,259 |
|
|
|
(15.4 |
) |
|
|
11,257 |
|
|
|
24,155 |
|
|
|
(53.4 |
) |
Depreciation |
|
3,959 |
|
|
|
4,309 |
|
|
|
(8.1 |
) |
|
|
16,375 |
|
|
|
17,881 |
|
|
|
(8.4 |
) |
Gain on asset disposals |
|
(210 |
) |
|
|
(201 |
) |
|
|
4.5 |
|
|
|
(1,447 |
) |
|
|
(3,767 |
) |
|
|
(61.6 |
) |
Operating earnings (loss)(1) |
|
1,548 |
|
|
|
2,151 |
|
|
|
(28.0 |
) |
|
|
(3,671 |
) |
|
|
10,041 |
|
|
|
(136.6 |
) |
Operating earnings (loss)(1) as a percentage of revenue |
|
6.6 |
% |
|
|
6.1 |
% |
|
|
|
|
|
|
(4.8 |
)% |
|
|
6.8 |
% |
|
|
|
|
Well servicing statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of service rigs (end of period) |
|
123 |
|
|
|
123 |
|
|
|
- |
|
|
|
123 |
|
|
|
123 |
|
|
|
- |
|
Service rig operating hours |
|
27,286 |
|
|
|
39,865 |
|
|
|
(31.6 |
) |
|
|
81,952 |
|
|
|
147,154 |
|
|
|
(44.3 |
) |
Service rig operating hour utilization |
|
24 |
% |
|
|
35 |
% |
|
|
|
|
|
|
18 |
% |
|
|
32 |
% |
|
|
|
|
(1) See “NON-GAAP
MEASURES.”n/m Not meaningful
Completion and Production Services revenue
decreased 33% compared with the fourth quarter of 2019 due to lower
activity in each of our service lines. Our service rig operating
hours in the quarter were down 32% from the fourth quarter of 2019,
consistent with lower industry activity. Approximately 73% of our
fourth quarter Canadian service rig activity was oil related.
During the quarter, Completion and Production
Services generated 21% of its revenue from U.S. operations compared
with 19% in the comparative period.
In the fourth quarter of 2020, operating and
general and administrative costs as a percentage of revenue were
lower as compared with 2019. The lower percentage in 2020 was
primarily due to the impact of our reduced cost structure and CEWS
program assistance, partially offset by fixed overhead costs spread
over a lower revenue base.
During the quarter, we recognized CEWS program
assistance of $3 million, which was presented as reductions to our
operating and general and administrative costs of $2 million and $1
million, respectively.
Adjusted EBITDA (see “NON-GAAP MEASURES”) was
lower than the fourth quarter of 2019 due to lower segment
activity.
Depreciation expense in the quarter was 8% lower
than the comparative period, primarily because of a lower capital
asset base as assets become fully depreciated or disposed.
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
$14 million, consistent with 2019. In the fourth quarter of 2020,
our improved cost structure and CEWS program assistance were offset
by higher share-based compensation expense. During the fourth
quarter of 2020, we recognized $1 million of CEWS program
assistance.
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 2019 Annual
Report.
A summary of amounts expensed under these plans
during the reporting periods are as follows:
|
For the three months ended December 31, |
|
|
For the year ended December 31, |
|
(Stated in thousands of Canadian dollars) |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Cash settled share-based incentive plans |
|
4,404 |
|
|
|
3,529 |
|
|
|
4,354 |
|
|
|
8,193 |
|
Equity settled share-based
incentive plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive PSU |
|
6,454 |
|
|
|
3,149 |
|
|
|
14,582 |
|
|
|
11,648 |
|
Stock option plan |
|
197 |
|
|
|
524 |
|
|
|
911 |
|
|
|
2,275 |
|
Total share-based incentive compensation plan expense |
|
11,055 |
|
|
|
7,202 |
|
|
|
19,847 |
|
|
|
22,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
2,057 |
|
|
|
1,711 |
|
|
|
3,811 |
|
|
|
5,025 |
|
General and Administrative |
|
8,998 |
|
|
|
5,491 |
|
|
|
16,036 |
|
|
|
17,091 |
|
|
|
11,055 |
|
|
|
7,202 |
|
|
|
19,847 |
|
|
|
22,116 |
|
Cash settled shared-based compensation expense
increased by $1 million in the current quarter primarily due to our
higher share price. Our total equity settled share-based
compensation expense for the fourth quarter of 2020 was $7 million,
compared to $4 million in 2019. The increased expense in 2020 was
primarily due to a higher vesting multiplier applied to our
Executive PSUs compared with the prior year.
On December 31, 2020, we reclassified our
Executive PSU equity settled share-based compensation plan to cash
settled as we intend to settle vesting units in cash. Accordingly,
we reclassified $7 million from contributed surplus to establish a
financial liability at December 31, 2020. The reclassification did
not impact our net earnings for the current year periods.
Finance Charges
Net finance charges were $24 million, a decrease
of $4 million compared with the fourth quarter of 2019, primarily
due to reduced interest expense related to retired debt.
Interest charges on our U.S. denominated
long-term debt in the fourth quarter of 2020 were US$16 million
($21 million) as compared with US$20 million ($26 million) in
2019.
Income Tax
Income tax expense for the quarter was $8
million compared with a recovery of $12 million in the same quarter
in 2019. In the fourth quarter of 2020, we did not recognize
deferred tax assets in Canada and certain international
jurisdictions, resulting in a higher income tax expense as compared
with 2019.
Share Consolidation
On November 12, 2020, we completed a 20:1
consolidation of our common shares. No fractional shares were
issued pursuant to the share consolidation. In lieu of any such
fractional shares, each registered shareholder otherwise entitled
to a fractional share following the implementation of the share
consolidation received the nearest whole number of
post-consolidation shares. All comparative share and per share
figures have been adjusted.
Normal Course Issuer Bid
During the third quarter of 2020, the Toronto
Stock Exchange approved our application to renew our Normal Course
Issuer Bid (“NCIB”). Under the terms of the NCIB, we may purchase
and cancel up to a maximum of 1,199,883 common shares, representing
10% of the public float of common shares as of August 14, 2020. The
NCIB will terminate no later than August 26, 2021. For the year
ended December 31, 2020, we repurchased and cancelled a total of
420,588 common shares. Subsequent to December 31, 2020, we
repurchased and cancelled an additional 108,962 common shares for
$3 million.
LIQUIDITY AND CAPITAL
RESOURCES
The oilfield services business is inherently
cyclical in nature. To manage this, we focus on maintaining a
strong balance sheet so we have the financial flexibility we need
to continue 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 by and highly responsive to changes in activity levels
with additional cost savings achieved through our internal
manufacturing and supply divisions. Term contracts on expansion
capital and upgrade rig programs provide more certainty of future
revenues and return on our capital investments.
Liquidity
Amount |
|
Availability |
|
Used for |
|
Maturity |
Senior credit facility (secured) |
|
|
|
|
|
|
US$500 million (extendible, revolvingterm credit facility with
US$300 million accordion feature) |
|
US$75 million drawn and US$32 million in outstanding letters of
credit |
|
General corporate purposes |
|
November 21, 2023 |
Real estate credit facility (secured) |
|
|
|
|
|
|
US$11 million |
|
Fully drawn |
|
General corporate purposes |
|
November 19, 2025 |
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$2 million inoutstanding letters of credit |
|
Letters of credit |
|
|
Unsecured senior notes (unsecured) |
|
|
|
|
|
|
US$286 million – 7.75% |
|
Fully drawn |
|
Debt redemption and repurchases |
|
December 15, 2023 |
US$263 million – 5.25% |
|
Fully drawn |
|
Capital expenditures and generalcorporate purposes |
|
November 15, 2024 |
US$348 million – 7.125% |
|
Fully drawn |
|
Debt redemption and repurchases |
|
January 15, 2026 |
As at December 31, 2020, we had US$982 million
($1,250 million) outstanding under our Senior Credit Facility, Real
Estate Credit Facility and unsecured senior notes as compared with
US$1,113 million ($1,445 million) at December 31, 2019.
During the year, we retired our 6.50% unsecured
senior notes due 2021 through redemptions of US$88 million
principal amount and repurchases and cancellations of US$3
million.
In addition, we repurchased and cancelled US$59
million of our 7.75% unsecured senior notes due 2023, US$44 million
of our 5.25% unsecured senior notes due 2024 and US$22 million of
our 7.125% unsecured senior notes due 2026. We recognized a gain of
$44 million on the repurchase of unsecured senior notes. At
December 31, 2020, we had US$75 million drawn on our Senior Credit
Facility and US$11 million outstanding on our Real Estate Credit
Facility.
The current blended cash interest cost of our
debt is approximately 6.5%.
Covenants
Following is a listing of applicable Senior
Credit Facility and Real Estate Credit Facility financial covenants
and calculations as at December 31, 2020:
|
Covenant |
|
At December 31, 2020 |
|
Senior Credit Facility |
|
|
|
|
|
Consolidated senior debt to consolidated covenant EBITDA(1) |
< 2.50 |
|
|
0.23 |
|
Consolidated covenant EBITDA to consolidated interest expense |
> 1.75 |
|
|
2.68 |
|
Real Estate Credit
Facility |
|
|
|
|
|
Consolidated covenant EBITDA to consolidated interest expense |
> 1.75 |
|
|
2.68 |
|
(1) For purposes of calculating the
leverage ratio consolidated senior debt only includes secured
indebtedness.
At December 31, 2020, we were in compliance with
the covenants of our Senior Credit Facility and Real Estate Credit
Facility.
Senior Credit Facility
The Senior Credit Facility requires we comply
with certain covenants including a leverage ratio of consolidated
senior debt to consolidated Covenant EBITDA (see “NON-GAAP
MEASURES”) of less than 2.5:1. For purposes of calculating the
leverage ratio consolidated senior debt only includes secured
indebtedness.
On April 9, 2020 we agreed with the lenders of
our Senior Credit Facility to reduce the consolidated Covenant
EBITDA to consolidated interest expense coverage ratio for the most
recent four consecutive quarters of greater than or equal to 2.5:1
to 2.0:1 for the period ending September 30, 2020, 1.75:1 for the
period ending December 31, 2020, 1.25:1 for the periods ending
March 31, June 30 and September 30, 2021, 1.75:1, for the period
ending December 31, 2021, 2.0:1 for the period ending March 31,
2022 and 2.5:1 for periods ending thereafter.
During the covenant relief period, Precision’s
distributions in the form of dividends, distributions and share
repurchases are restricted to a maximum of US$15 million in 2020
and US$25 million in each of 2021 and 2022, subject to a pro forma
senior net leverage ratio (as defined in the credit agreement) of
less than or equal to 1.75:1. Distributions are not permitted if
the borrowings under the Senior Credit Facility exceed US$250
million.
In addition, during 2021, the North American and
acceptable secured foreign assets must directly account for at
least 65% of consolidated Covenant EBITDA calculated quarterly on a
rolling twelve-month basis, increasing to 70% thereafter. Precision
also has the option to voluntarily terminate the covenant relief
period prior to its March 31, 2022 end date.
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.
In addition, the Senior Credit Facility contains
certain covenants that place restrictions on our ability to incur
or assume additional indebtedness; dispose of assets; change our
primary business; incur liens on assets; engage in transactions
with affiliates; enter into mergers, consolidations or
amalgamations; and enter into speculative swap agreements.
Real Estate Credit Facility
In November 2020, Precision established a Real
Estate Credit Facility in the amount of US$11 million. The facility
matures in November 2025 and is secured by real property located in
Houston, Texas. Principal plus interest payments are due monthly,
based on 15-year straight-line amortization with any unpaid
principal and accrued interest due at maturity. Interest is
calculated using a LIBOR rate plus margin.
The Real Estate Credit Facility contains certain
affirmative and negative covenants and events of default, customary
for this type of transactions. Under the terms of the Real Estate
Credit Facility, Precision must maintain a consolidated Covenant
EBITDA to consolidated interest expense coverage ratio in
accordance with the Senior Credit Facility, described above, as of
the last day of each period of four consecutive fiscal quarters
commencing December 31, 2020. In the event the consolidated
Covenant EBITDA to consolidated interest expense coverage ratio is
waived or removed from the Senior Credit Facility, a minimum
threshold of 1.15:1 is required.
Unsecured Senior Notes
The unsecured senior notes require we comply
with 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 senior notes
restrict our ability to incur additional indebtedness.
The unsecured senior notes contain a restricted
payment covenant that limits our ability to make payments in the
nature of dividends, distributions and for share repurchases from
shareholders. This restricted payment basket grows from a starting
point of October 1, 2010 for the 2024 senior notes, from October 1,
2016 for the 2023 senior notes and October 1, 2017 for the 2026
senior notes by, among other things, 50% of consolidated cumulative
net earnings and decreases by 100% of consolidated cumulative net
losses, as defined in the senior note agreements, and payments made
to shareholders. The governing net restricted payments basket is
currently negative, limiting our ability to declare and make
dividend payments until such time as the restricted payments
baskets become positive.
In addition, the unsecured senior notes contain
certain covenants that limit our ability, and the ability of
certain subsidiaries, to incur additional indebtedness and issue
preferred shares; create liens; create or permit to exist
restrictions on our ability or certain subsidiaries to make certain
payments and distributions; engage in amalgamations, mergers or
consolidations; make certain dispositions and engage in
transactions with affiliates.
For further information, please see the
unsecured senior note indentures which are available on SEDAR and
EDGAR.
Impact of foreign exchange
rates
The strengthening of the Canadian dollar in 2020
results in lower translated U.S. denominated revenue and costs. In
the fourth quarter of 2020, the Canadian dollar strengthened by 2%
from the comparable 2019 period. On average, for the year ended
December 31, 2020, the Canadian dollar weakened by 1% compared with
2019. The following table summarizes the average and closing
Canada-U.S. foreign exchanges rates.
|
For the three months ended December 31, |
|
|
For the Year Ended December 31, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Canada-U.S. foreign exchange rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
1.30 |
|
|
|
1.32 |
|
|
|
1.34 |
|
|
|
1.33 |
|
Closing |
|
1.27 |
|
|
|
1.30 |
|
|
|
1.27 |
|
|
|
1.30 |
|
Average shares outstanding
The following table reconciles the weighted
average shares outstanding used in computing basic and diluted net
earnings (loss) per share:
|
For the three months ended December 31, |
|
|
For the year ended December 31, |
|
(Stated
in thousands) |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Weighted average shares outstanding – basic |
|
13,679 |
|
|
|
14,143 |
|
|
|
13,722 |
|
|
|
14,539 |
|
Effect
of stock options and other equity compensation plans |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
320 |
|
Weighted average shares outstanding – diluted |
|
13,679 |
|
|
|
14,143 |
|
|
|
13,722 |
|
|
|
14,859 |
|
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share
amounts) |
|
2020 |
|
Quarters ended |
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
|
December 31 |
|
Revenue |
|
|
379,484 |
|
|
|
189,759 |
|
|
|
164,822 |
|
|
|
201,688 |
|
Adjusted EBITDA(1) |
|
|
101,904 |
|
|
|
58,465 |
|
|
|
47,771 |
|
|
|
55,263 |
|
Net loss |
|
|
(5,277 |
) |
|
|
(48,867 |
) |
|
|
(28,476 |
) |
|
|
(37,518 |
) |
Net loss per basic share |
|
|
(0.38 |
) |
|
|
(3.56 |
) |
|
|
(2.08 |
) |
|
|
(2.74 |
) |
Net loss per diluted
share |
|
|
(0.38 |
) |
|
|
(3.56 |
) |
|
|
(2.08 |
) |
|
|
(2.74 |
) |
Funds provided by
operations(1) |
|
|
81,317 |
|
|
|
26,639 |
|
|
|
27,489 |
|
|
|
35,282 |
|
Cash
provided by operations |
|
|
74,953 |
|
|
|
104,478 |
|
|
|
41,950 |
|
|
|
4,737 |
|
(Stated in thousands of Canadian dollars, except per share
amounts) |
|
2019 |
|
Quarters ended |
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
|
December 31 |
|
Revenue |
|
|
434,043 |
|
|
|
359,424 |
|
|
|
375,552 |
|
|
|
372,301 |
|
Adjusted EBITDA(1) |
|
|
107,967 |
|
|
|
81,037 |
|
|
|
97,895 |
|
|
|
105,006 |
|
Net earnings (loss) |
|
|
25,014 |
|
|
|
(13,801 |
) |
|
|
(3,534 |
) |
|
|
(1,061 |
) |
Net earnings (loss) per basic
share |
|
|
1.70 |
|
|
|
(0.93 |
) |
|
|
(0.23 |
) |
|
|
(0.08 |
) |
Net earnings (loss) per
diluted share |
|
|
1.67 |
|
|
|
(0.93 |
) |
|
|
(0.23 |
) |
|
|
(0.08 |
) |
Funds provided by
operations(1) |
|
|
95,993 |
|
|
|
40,950 |
|
|
|
79,930 |
|
|
|
75,779 |
|
Cash
provided by operations |
|
|
40,587 |
|
|
|
106,035 |
|
|
|
66,556 |
|
|
|
74,981 |
|
(1) See “NON-GAAP MEASURES.”
CRITICAL ACCOUNTING JUDGEMENTS AND
ESTIMATES
Because of the nature of our business, we are
required to make judgments and estimates in preparing our Condensed
Interim Consolidated Financial Statements that could materially
affect the amounts recognized. Our judgments and estimates are
based on our past experiences and assumptions we believe are
reasonable in the circumstances. The critical judgments and
estimates used in preparing the Condensed Interim Consolidated
Financial Statements are described in our 2019 Annual Report.
The COVID-19 global pandemic and commodity price
volatility has created a challenging economic climate that may have
significant adverse impacts on Precision. As the situation remains
dynamic and the ultimate duration and magnitude of the impact on
the economy and the financial effect on Precision is not known at
this time. Our estimates and judgements made in the preparation of
our Condensed Interim Consolidated Financial Statements are
increasingly difficult and subject to a higher degree of
measurement uncertainty during this volatile period. For additional
discussion on the potential risks and impacts of the global
economic downturn, see section “IMPACT OF COVID-19” earlier in this
news release.
NON-GAAP MEASURES
In this release, we reference non-GAAP
(Generally Accepted Accounting Principles) measures. 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, gain on repurchase of unsecured senior notes, finance
charges, foreign exchange, impairment reversal, loss on asset
decommissioning, gain on assets disposals and depreciation and
amortization), as reported in the Condensed Interim Consolidated
Statement of Net Earnings (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 (loss) is calculated as follows:
|
For the three months ended December 31, |
|
|
For the year ended December 31, |
|
(Stated
in thousands of Canadian dollars) |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Revenue |
|
201,688 |
|
|
|
372,301 |
|
|
|
935,753 |
|
|
|
1,541,320 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
125,494 |
|
|
|
241,717 |
|
|
|
583,420 |
|
|
|
1,038,967 |
|
General and administrative |
|
20,931 |
|
|
|
25,578 |
|
|
|
70,869 |
|
|
|
104,010 |
|
Restructuring |
|
— |
|
|
|
— |
|
|
|
18,061 |
|
|
|
6,438 |
|
Depreciation and
amortization |
|
74,696 |
|
|
|
80,932 |
|
|
|
316,322 |
|
|
|
333,616 |
|
Gain on asset disposals |
|
(1,820 |
) |
|
|
(3,888 |
) |
|
|
(11,931 |
) |
|
|
(50,741 |
) |
Loss on asset
decommissioning |
|
— |
|
|
|
20,263 |
|
|
|
— |
|
|
|
20,263 |
|
Impairment reversal |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,810 |
) |
Operating earnings (loss) |
|
(17,613 |
) |
|
|
7,699 |
|
|
|
(40,988 |
) |
|
|
94,577 |
|
Foreign exchange |
|
1,618 |
|
|
|
(4,306 |
) |
|
|
4,542 |
|
|
|
(8,722 |
) |
Finance charges |
|
24,192 |
|
|
|
28,275 |
|
|
|
107,468 |
|
|
|
118,453 |
|
Gain on
repurchase of unsecured notes |
|
(13,872 |
) |
|
|
(3,178 |
) |
|
|
(43,814 |
) |
|
|
(6,815 |
) |
Loss before income taxes |
|
(29,551 |
) |
|
|
(13,092 |
) |
|
|
(109,184 |
) |
|
|
(8,339 |
) |
Funds Provided By (Used In)
Operations
We believe that funds provided by (used in)
operations, as reported in the 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, 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 Condensed 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 and
2022;
- anticipated cash savings and liquidity;
- 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, directional
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 our response to the COVID-19 global
pandemic;
- 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,
directional 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,
2019, 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) |
|
December 31, 2020 |
|
|
December 31, 2019 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
108,772 |
|
|
$ |
74,701 |
|
Accounts receivable |
|
|
207,209 |
|
|
|
310,204 |
|
Inventory |
|
|
26,282 |
|
|
|
31,718 |
|
Income tax recoverable |
|
|
— |
|
|
|
1,142 |
|
Total current assets |
|
|
342,263 |
|
|
|
417,765 |
|
Non-current assets: |
|
|
|
|
|
|
|
|
Deferred tax assets |
|
|
1,098 |
|
|
|
4,724 |
|
Right of use assets |
|
|
55,168 |
|
|
|
66,142 |
|
Property, plant and equipment |
|
|
2,472,683 |
|
|
|
2,749,463 |
|
Intangibles |
|
|
27,666 |
|
|
|
31,746 |
|
Total non-current assets |
|
|
2,556,615 |
|
|
|
2,852,075 |
|
Total assets |
|
$ |
2,898,878 |
|
|
$ |
3,269,840 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
150,957 |
|
|
$ |
199,478 |
|
Income taxes payable |
|
|
3,702 |
|
|
|
4,142 |
|
Current portion of lease obligation |
|
|
11,285 |
|
|
|
12,449 |
|
Current portion of long-term debt |
|
|
896 |
|
|
|
— |
|
Total current liabilities |
|
|
166,840 |
|
|
|
216,069 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
11,507 |
|
|
|
8,830 |
|
Provisions and other |
|
|
7,563 |
|
|
|
9,959 |
|
Lease obligation |
|
|
48,882 |
|
|
|
54,980 |
|
Long-term debt |
|
|
1,236,210 |
|
|
|
1,427,181 |
|
Deferred tax liabilities |
|
|
21,236 |
|
|
|
25,389 |
|
Total non-current liabilities |
|
|
1,325,398 |
|
|
|
1,526,339 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Shareholders’ capital |
|
|
2,285,738 |
|
|
|
2,296,378 |
|
Contributed surplus |
|
|
72,915 |
|
|
|
66,255 |
|
Deficit |
|
|
(1,089,594 |
) |
|
|
(969,456 |
) |
Accumulated other comprehensive income |
|
|
137,581 |
|
|
|
134,255 |
|
Total shareholders’ equity |
|
|
1,406,640 |
|
|
|
1,527,432 |
|
Total liabilities and shareholders’ equity |
|
$ |
2,898,878 |
|
|
$ |
3,269,840 |
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS)
(UNAUDITED)
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
201,688 |
|
|
$ |
372,301 |
|
|
$ |
935,753 |
|
|
$ |
1,541,320 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
125,494 |
|
|
|
241,717 |
|
|
|
583,420 |
|
|
|
1,038,967 |
|
General and administrative |
|
|
20,931 |
|
|
|
25,578 |
|
|
|
70,869 |
|
|
|
104,010 |
|
Restructuring |
|
|
— |
|
|
|
— |
|
|
|
18,061 |
|
|
|
6,438 |
|
Earnings before income taxes, gain on repurchase of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unsecured senior notes, finance charges, foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exchange, impairment reversal, loss on asset |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
decommissioning, gain on asset disposals and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation and amortization |
|
|
55,263 |
|
|
|
105,006 |
|
|
|
263,403 |
|
|
|
391,905 |
|
Depreciation and amortization |
|
|
74,696 |
|
|
|
80,932 |
|
|
|
316,322 |
|
|
|
333,616 |
|
Gain on asset disposals |
|
|
(1,820 |
) |
|
|
(3,888 |
) |
|
|
(11,931 |
) |
|
|
(50,741 |
) |
Loss on asset decommissioning |
|
|
— |
|
|
|
20,263 |
|
|
|
— |
|
|
|
20,263 |
|
Impairment reversal |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,810 |
) |
Foreign exchange |
|
|
1,618 |
|
|
|
(4,306 |
) |
|
|
4,542 |
|
|
|
(8,722 |
) |
Finance charges |
|
|
24,192 |
|
|
|
28,275 |
|
|
|
107,468 |
|
|
|
118,453 |
|
Gain on repurchase of unsecured senior notes |
|
|
(13,872 |
) |
|
|
(3,178 |
) |
|
|
(43,814 |
) |
|
|
(6,815 |
) |
Earnings (loss) before income taxes |
|
|
(29,551 |
) |
|
|
(13,092 |
) |
|
|
(109,184 |
) |
|
|
(8,339 |
) |
Income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
(831 |
) |
|
|
(3,473 |
) |
|
|
5,290 |
|
|
|
1,080 |
|
Deferred |
|
|
8,798 |
|
|
|
(8,558 |
) |
|
|
5,664 |
|
|
|
(16,037 |
) |
|
|
|
7,967 |
|
|
|
(12,031 |
) |
|
|
10,954 |
|
|
|
(14,957 |
) |
Net earnings (loss) |
|
$ |
(37,518 |
) |
|
$ |
(1,061 |
) |
|
$ |
(120,138 |
) |
|
$ |
6,618 |
|
Net earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.74 |
) |
|
$ |
(0.08 |
) |
|
$ |
(8.76 |
) |
|
$ |
0.46 |
|
Diluted |
|
$ |
(2.74 |
) |
|
$ |
(0.08 |
) |
|
$ |
(8.76 |
) |
|
$ |
0.45 |
|
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|
(Stated
in thousands of Canadian dollars) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net earnings (loss) |
|
$ |
(37,518 |
) |
|
$ |
(1,061 |
) |
|
$ |
(120,138 |
) |
|
$ |
6,618 |
|
Unrealized
loss on translation of assets and
liabilities of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations denominated in foreign currency |
|
|
(75,238 |
) |
|
|
(41,849 |
) |
|
|
(25,925 |
) |
|
|
(106,781 |
) |
Foreign exchange gain on net investment hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with U.S. denominated debt |
|
|
58,685 |
|
|
|
28,941 |
|
|
|
23,853 |
|
|
|
79,022 |
|
Net investment hedge of
long-term debt related tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
benefit |
|
|
5,398 |
|
|
|
— |
|
|
|
5,398 |
|
|
|
— |
|
Comprehensive loss |
|
$ |
(48,673 |
) |
|
$ |
(13,969 |
) |
|
$ |
(116,812 |
) |
|
$ |
(21,141 |
) |
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|
(Stated
in thousands of Canadian dollars) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
(37,518 |
) |
|
$ |
(1,061 |
) |
|
$ |
(120,138 |
) |
|
$ |
6,618 |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term compensation plans |
|
|
9,042 |
|
|
|
6,072 |
|
|
|
17,769 |
|
|
|
19,457 |
|
Depreciation and amortization |
|
|
74,696 |
|
|
|
80,932 |
|
|
|
316,322 |
|
|
|
333,616 |
|
Gain on asset disposals |
|
|
(1,820 |
) |
|
|
(3,888 |
) |
|
|
(11,931 |
) |
|
|
(50,741 |
) |
Loss on asset decommissioning |
|
|
— |
|
|
|
20,263 |
|
|
|
— |
|
|
|
20,263 |
|
Impairment reversal |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,810 |
) |
Foreign exchange |
|
|
2,361 |
|
|
|
(4,263 |
) |
|
|
4,808 |
|
|
|
(8,585 |
) |
Finance charges |
|
|
24,192 |
|
|
|
28,275 |
|
|
|
107,468 |
|
|
|
118,453 |
|
Income taxes |
|
|
7,967 |
|
|
|
(12,031 |
) |
|
|
10,954 |
|
|
|
(14,957 |
) |
Other |
|
|
(1,487 |
) |
|
|
(783 |
) |
|
|
(2,392 |
) |
|
|
(981 |
) |
Gain on repurchase of unsecured senior notes |
|
|
(13,872 |
) |
|
|
(3,178 |
) |
|
|
(43,814 |
) |
|
|
(6,815 |
) |
Income taxes paid |
|
|
(383 |
) |
|
|
(316 |
) |
|
|
(6,468 |
) |
|
|
(5,060 |
) |
Income taxes recovered |
|
|
157 |
|
|
|
1,337 |
|
|
|
1,385 |
|
|
|
2,479 |
|
Interest paid |
|
|
(28,164 |
) |
|
|
(35,919 |
) |
|
|
(103,851 |
) |
|
|
(116,655 |
) |
Interest received |
|
|
111 |
|
|
|
339 |
|
|
|
615 |
|
|
|
1,370 |
|
Funds provided by operations |
|
|
35,282 |
|
|
|
75,779 |
|
|
|
170,727 |
|
|
|
292,652 |
|
Changes
in non-cash working capital balances |
|
|
(30,545 |
) |
|
|
(798 |
) |
|
|
55,391 |
|
|
|
(4,493 |
) |
|
|
|
4,737 |
|
|
|
74,981 |
|
|
|
226,118 |
|
|
|
288,159 |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(22,912 |
) |
|
|
(21,541 |
) |
|
|
(61,535 |
) |
|
|
(159,886 |
) |
Purchase of intangibles |
|
|
— |
|
|
|
(332 |
) |
|
|
(57 |
) |
|
|
(808 |
) |
Proceeds on sale of property, plant and equipment |
|
|
4,678 |
|
|
|
4,931 |
|
|
|
21,094 |
|
|
|
90,768 |
|
Changes in non-cash working capital balances |
|
|
6,754 |
|
|
|
609 |
|
|
|
(19 |
) |
|
|
(4,574 |
) |
|
|
|
(11,480 |
) |
|
|
(16,333 |
) |
|
|
(40,517 |
) |
|
|
(74,500 |
) |
Financing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt |
|
|
23,007 |
|
|
|
— |
|
|
|
151,066 |
|
|
|
— |
|
Repayment of long-term debt |
|
|
(73,726 |
) |
|
|
(55,812 |
) |
|
|
(278,112 |
) |
|
|
(198,387 |
) |
Repurchase of share capital |
|
|
(6,058 |
) |
|
|
(17,719 |
) |
|
|
(11,317 |
) |
|
|
(25,902 |
) |
Debt amendment fees |
|
|
— |
|
|
|
(702 |
) |
|
|
(690 |
) |
|
|
(702 |
) |
Debt issuance costs |
|
|
(354 |
) |
|
|
— |
|
|
|
(354 |
) |
|
|
— |
|
Lease payments |
|
|
(605 |
) |
|
|
(1,699 |
) |
|
|
(6,217 |
) |
|
|
(6,823 |
) |
|
|
|
(57,736 |
) |
|
|
(75,932 |
) |
|
|
(145,624 |
) |
|
|
(231,814 |
) |
Effect of exchange rate changes on cash |
|
|
(4,534 |
) |
|
|
(1,776 |
) |
|
|
(5,906 |
) |
|
|
(3,770 |
) |
Increase (decrease) in cash |
|
|
(69,013 |
) |
|
|
(19,060 |
) |
|
|
34,071 |
|
|
|
(21,925 |
) |
Cash,
beginning of period |
|
|
177,785 |
|
|
|
93,761 |
|
|
|
74,701 |
|
|
|
96,626 |
|
Cash, end of period |
|
$ |
108,772 |
|
|
$ |
74,701 |
|
|
$ |
108,772 |
|
|
$ |
74,701 |
|
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, 2020 |
|
$ |
2,296,378 |
|
|
$ |
66,255 |
|
|
$ |
134,255 |
|
|
$ |
(969,456 |
) |
|
$ |
1,527,432 |
|
Net loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(120,138 |
) |
|
|
(120,138 |
) |
Other comprehensive income for
the period |
|
|
— |
|
|
|
— |
|
|
|
3,326 |
|
|
|
— |
|
|
|
3,326 |
|
Share repurchases |
|
|
(11,317 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,317 |
) |
Redemption of non-management
director DSUs |
|
|
677 |
|
|
|
(502 |
) |
|
|
— |
|
|
|
— |
|
|
|
175 |
|
Share-based compensation
reclassification |
|
|
— |
|
|
|
(8,331 |
) |
|
|
— |
|
|
|
— |
|
|
|
(8,331 |
) |
Share-based compensation expense |
|
|
— |
|
|
|
15,493 |
|
|
|
— |
|
|
|
— |
|
|
|
15,493 |
|
Balance at December 31, 2020 |
|
$ |
2,285,738 |
|
|
$ |
72,915 |
|
|
$ |
137,581 |
|
|
$ |
(1,089,594 |
) |
|
$ |
1,406,640 |
|
(Stated
in thousands of Canadian dollars) |
|
Shareholders’Capital |
|
|
ContributedSurplus |
|
|
AccumulatedOtherComprehensiveIncome |
|
|
Deficit |
|
|
TotalEquity |
|
Balance at January 1, 2019 |
|
$ |
2,322,280 |
|
|
$ |
52,332 |
|
|
$ |
162,014 |
|
|
$ |
(978,874 |
) |
|
$ |
1,557,752 |
|
Lease transition
adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,800 |
|
|
|
2,800 |
|
Net earnings for the
period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,618 |
|
|
|
6,618 |
|
Other comprehensive loss for
the period |
|
|
— |
|
|
|
— |
|
|
|
(27,759 |
) |
|
|
— |
|
|
|
(27,759 |
) |
Share repurchases |
|
|
(25,902 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(25,902 |
) |
Share-based compensation expense |
|
|
— |
|
|
|
13,923 |
|
|
|
— |
|
|
|
— |
|
|
|
13,923 |
|
Balance at December 31, 2019 |
|
$ |
2,296,378 |
|
|
$ |
66,255 |
|
|
$ |
134,255 |
|
|
$ |
(969,456 |
) |
|
$ |
1,527,432 |
|
FOURTH QUARTER 2020 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
Wednesday, February 10, 2021.
The conference call dial in numbers are
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.”
Shortly after the live webcast, an archived version will be
available for approximately 60 days.
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 February 14, 2021 by dialing
855-859-2056 or 404-537-3406, passcode 4951415.
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 and directional drilling services 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
Dustin Honing, Manager, Investor Relations and
Corporate Development403.716.4500
800, 525 - 8th Avenue S.W.Calgary, Alberta,
Canada T2P 1G1Website: www.precisiondrilling.com
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