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.
Precision Drilling announces 2021 second quarter
financial results:
- Revenue of $201 million was an
increase of 6% compared with the second quarter of 2020.
- Net loss of $76 million or $5.71
per share compared with a net loss of $49 million or $3.56 per
share in the second quarter of 2020.
- Earnings before income taxes, loss
(gain) on repurchase of unsecured senior notes, finance charges,
foreign exchange, gain on asset disposals and depreciation and
amortization (Adjusted EBITDA, see “NON-GAAP MEASURES”) of $29
million was 50% lower than the second quarter of 2020. Excluding
the impact of $26 million of share-based compensation charges, our
second quarter Adjusted EBITDA was $55 million.
- Generated cash and funds provided
by operations (see “NON-GAAP MEASURES”) of $42 million and $13
million, respectively.
- Second quarter ending cash balance
was $63 million.
- Extended the maturity of the Senior
Credit Facility to June 18, 2025.
- Issued US$400 million of 6.875%
unsecured senior notes due in 2029 and redeemed in full our 2023
and 2024 unsecured senior notes.
- Second quarter and year to date
debt reduction of $23 million and $52 million, respectively.
- Second quarter capital expenditures
were $20 million.
- Recognized the Canadian
government’s Canada Emergency Wage Subsidy (CEWS)
program assistance of $9 million.
Precision’s President and CEO Kevin Neveu
stated:
“Precision delivered higher than expected second
quarter revenue of $201 million, supported by increased activity
and improved pricing resulting from strengthening energy
fundamentals and higher oil and natural gas prices. In addition,
field margins were better than expected in our contract drilling
business with strict cost control, Alpha technology revenues, and
the benefit of operating leverage from higher than expected
activity. Adjusted EBITDA excluding the $26 million share-based
compensation accrual was $55 million, significantly higher than our
expectations, and reflective of our focus on cost management and
maximizing our operating leverage.”
“Our Canadian operations produced second quarter
activity up three-fold from 2020 levels and the strength of the
market continues to surprise to the upside. Currently, we are
running 52 rigs, well above both our 2019 pre-pandemic levels and
in-line with our 2021 first quarter activity peak. We expect to
activate several more rigs over the coming weeks, and early in the
third quarter, we agreed to a multi-year contract to redeploy an AC
Super Triple rig from Colorado to the Montney, enhancing our
leadership position in this important Canadian play. In addition to
the Montney, we are experiencing increased customer demand for our
Super Single rigs in heavy oil applications where our rigs deliver
outstanding performance in these industrialized drilling
operations. Our Canadian well service business is also experiencing
a similar rebound with activity up over five-fold from July of
2020, supported by commodity prices and the Canadian well
abandonment program. The outlook for the overall Canadian market
over the next 12 months remains exceptionally bright.”
“In the U.S., we are experiencing growing
customer demand with second quarter activity up over 30% from the
same period last year and up 21% sequentially. Activity is trending
in line with our expectations with 42 rigs running today, an
increase from 37 at the end of the first quarter. We expect steady
U.S. activity growth to continue throughout 2021 and are gaining
confidence in accelerated rig additions to start 2022 as customers
deploy fresh budget capital for drilling projects to address
declining drilled but uncompleted well inventories.”
“Our international drilling operations remain
steady with six rigs active in Kuwait and the Kingdom of Saudi
Arabia. Bidding activity is trending upwards as the national oil
companies plan for the relaxation of OPEC production and export
limits in 2022. We continue to see opportunities to activate
several of our idle rigs in the region later this year or early
next year and are increasingly confident in our likelihood of
success.”
“Our recent debt refinancing and revolver
extension activities pushed out our debt maturities, reduced our
cash interest expenses and sustained our high liquidity level with
the success of the transactions reflecting capital markets and bank
confidence in Precision. Importantly, the refinancing left
approximately $200 million of prepayable debt, the amount we are
committed to repay by the end of 2022 to achieve our goal of
reducing debt by $800 million over a five-year period. Debt
reduction in the quarter was $23 million and year to date we have
reduced debt by $52 million. We utilized cash from operations and
cash on the balance sheet to offset costs associated with our debt
refinancing, including call premiums and transaction costs. We
expect robust cash flow in the second half of the year with an
improving business and only $22 million of cash interest expense
remaining in 2021. 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.”
“We believe our AlphaAutomation and AlphaApps
offerings crossed a tipping point with customer acceptance at the
beginning of this year, and now we are finding virtually all new
rig activations for our AC Super Triple rigs include our full suite
of services. With quarter-over-quarter growth almost doubling our
app revenue days, and a 30% increase in paid AlphaAutomation days,
we are well on track to deliver on our Alpha technology strategic
objective. Our customers are clearly maintaining capital discipline
and are utilizing industrial scale, digital technologies and
operational efficiency to drive cash flow. With this market
backdrop, we expect our Alpha technology offering will continue to
be attractive to our customers and increasingly necessary for our
customers to achieve their goals.”
“I continue to be encouraged by the progress
Precision is making on our ESG initiatives including our recently
published Corporate Responsibility Report. The report details our
activities and commitments to reduce our environmental footprint
and GHG emissions, and improve the diversity, opportunities and
experiences for our workforce and the communities where we operate.
I am particularly pleased with the formation of our E-Team and
S-Team, which are cross-functional teams working across Precision’s
business units to develop and implement our strategies and tactics
as we continue our ESG journey.”
“I would like to conclude by thanking all the
employees of Precision Drilling once again for their hard work and
the very good results they delivered for all of Precision’s
stakeholders,” concluded Mr. Neveu.
SELECT FINANCIAL AND OPERATING
INFORMATION
Financial Highlights
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
Revenue |
|
201,359 |
|
|
|
189,759 |
|
|
|
6.1 |
|
|
|
437,832 |
|
|
|
569,243 |
|
|
|
(23.1 |
) |
Adjusted EBITDA(1) |
|
28,944 |
|
|
|
58,465 |
|
|
|
(50.5 |
) |
|
|
83,483 |
|
|
|
160,369 |
|
|
|
(47.9 |
) |
Operating earnings
(loss)(1) |
|
(39,856 |
) |
|
|
(19,189 |
) |
|
|
107.7 |
|
|
|
(55,271 |
) |
|
|
3,410 |
|
|
|
(1,720.9 |
) |
Net loss |
|
(75,912 |
) |
|
|
(48,867 |
) |
|
|
55.3 |
|
|
|
(112,018 |
) |
|
|
(54,144 |
) |
|
|
106.9 |
|
Cash provided by
operations |
|
42,219 |
|
|
|
104,478 |
|
|
|
(59.6 |
) |
|
|
57,641 |
|
|
|
179,431 |
|
|
|
(67.9 |
) |
Funds provided by
operations(1) |
|
12,607 |
|
|
|
26,639 |
|
|
|
(52.7 |
) |
|
|
56,037 |
|
|
|
107,956 |
|
|
|
(48.1 |
) |
Capital spending: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expansion and upgrade |
|
6,446 |
|
|
|
12,111 |
|
|
|
(46.8 |
) |
|
|
9,883 |
|
|
|
13,764 |
|
|
|
(28.2 |
) |
Maintenance and infrastructure |
|
13,809 |
|
|
|
11,816 |
|
|
|
16.9 |
|
|
|
18,808 |
|
|
|
21,648 |
|
|
|
(13.1 |
) |
Intangibles |
|
- |
|
|
|
- |
|
|
n.m. |
|
|
|
- |
|
|
|
57 |
|
|
|
(100.0 |
) |
Proceeds on sale |
|
(2,590 |
) |
|
|
(5,021 |
) |
|
|
(48.4 |
) |
|
|
(5,914 |
) |
|
|
(10,711 |
) |
|
|
(44.8 |
) |
Net capital spending |
|
17,665 |
|
|
|
18,906 |
|
|
|
(6.6 |
) |
|
|
22,777 |
|
|
|
24,758 |
|
|
|
(8.0 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
(5.71 |
) |
|
|
(3.56 |
) |
|
|
60.3 |
|
|
|
(8.41 |
) |
|
|
(3.94 |
) |
|
|
113.5 |
|
Diluted |
|
(5.71 |
) |
|
|
(3.56 |
) |
|
|
60.3 |
|
|
|
(8.41 |
) |
|
|
(3.94 |
) |
|
|
113.5 |
|
(1) See “NON-GAAP
MEASURES.”n.m. Not meaningful
Operating Highlights
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
Contract drilling rig fleet |
|
227 |
|
|
|
227 |
|
|
|
- |
|
|
|
227 |
|
|
|
227 |
|
|
|
- |
|
Drilling rig utilization
days: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
3,579 |
|
|
|
2,743 |
|
|
|
30.5 |
|
|
|
6,530 |
|
|
|
7,727 |
|
|
|
(15.5 |
) |
Canada |
|
2,497 |
|
|
|
834 |
|
|
|
199.4 |
|
|
|
6,315 |
|
|
|
6,603 |
|
|
|
(4.4 |
) |
International |
|
546 |
|
|
|
687 |
|
|
|
(20.5 |
) |
|
|
1,086 |
|
|
|
1,415 |
|
|
|
(23.3 |
) |
Revenue per utilization
day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.(1) (US$) |
|
20,497 |
|
|
|
29,370 |
|
|
|
(30.2 |
) |
|
|
21,236 |
|
|
|
25,828 |
|
|
|
(17.8 |
) |
Canada (Cdn$) |
|
20,634 |
|
|
|
22,940 |
|
|
|
(10.1 |
) |
|
|
20,935 |
|
|
|
21,633 |
|
|
|
(3.2 |
) |
International (US$) |
|
54,269 |
|
|
|
54,779 |
|
|
|
(0.9 |
) |
|
|
53,512 |
|
|
|
54,529 |
|
|
|
(1.9 |
) |
Operating cost per utilization
day: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. (US$) |
|
13,745 |
|
|
|
14,172 |
|
|
|
(3.0 |
) |
|
|
14,360 |
|
|
|
14,406 |
|
|
|
(0.3 |
) |
Canada (Cdn$) |
|
13,510 |
|
|
|
13,898 |
|
|
|
(2.8 |
) |
|
|
13,216 |
|
|
|
14,196 |
|
|
|
(6.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service rig fleet |
|
123 |
|
|
|
123 |
|
|
|
- |
|
|
|
123 |
|
|
|
123 |
|
|
|
- |
|
Service
rig operating hours |
|
26,630 |
|
|
|
4,702 |
|
|
|
466.4 |
|
|
|
61,533 |
|
|
|
39,067 |
|
|
|
57.5 |
|
(1) Includes revenue from
idle but contracted rig days.
Financial Position
(Stated in thousands of Canadian dollars, except ratios) |
June 30, 2021 |
|
|
December 31, 2020 |
|
Working capital(1) |
|
115,507 |
|
|
|
175,423 |
|
Cash |
|
63,437 |
|
|
|
108,772 |
|
Long-term debt |
|
1,145,317 |
|
|
|
1,236,210 |
|
Total long-term financial
liabilities |
|
1,217,662 |
|
|
|
1,304,162 |
|
Total assets |
|
2,696,309 |
|
|
|
2,898,878 |
|
Long-term debt to long-term debt plus equity ratio |
|
0.47 |
|
|
|
0.47 |
|
(1) See “NON-GAAP
MEASURES.”
Summary for the three months ended June
30, 2021:
- Revenue for the second quarter was
$201 million, 6% higher than in 2020 and was the result of
increased drilling and service activity, partially offset by lower
drilling day rates. Drilling rig utilization days increased by 30%
in the U.S. and 199% in Canada as compared with the second quarter
of 2020. Our international drilling activity decreased 21% from
2020 due to the expiration of drilling contracts.
- Adjusted EBITDA (see “NON-GAAP
MEASURES”) for the quarter was $29 million, $30 million lower than
2020. Our Adjusted EBITDA as a percentage of revenue was 14% this
quarter, compared with 31% 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 $26 million of share-based compensation
charges, our Adjusted EBITDA was $55 million in the second quarter
of 2021. See additional discussion on share-based compensation
under “Other Items” later in this release.
- Operating loss (see “NON-GAAP
MEASURES”) for the quarter was $40 million compared with $19
million in 2020.
- General and administrative expenses
this quarter were $31 million, $13 million higher than in 2020 due
to our increased share-based compensation charges and lower CEWS
program assistance. Excluding share-based compensation and CEWS
program assistance, our general and administrative expenses
decreased by 12% as compared with the second quarter of 2020.
- In the second quarter of 2020, we
incurred restructuring charges of $6 million, comprised of
severance, as we aligned our cost structure to reflect reduced
global activity, and certain costs associated with the shutdown of
our U.S. directional drilling operations. No restructuring charges
were incurred in 2021.
- Net finance charges for the quarter
were $28 million, consistent with 2020. As compared with 2020, our
second quarter interest charges on our long-term debt decreased by
$6 million but was offset by higher debt issue costs as we
accelerated the amortization of issue costs on our fully redeemed
unsecured senior notes.
- In the U.S., revenue per
utilization day in the second quarter of 2021 decreased to
US$20,497 compared with US$29,370 in 2020. The decrease was
primarily the result of lower revenue from idle but contracted rigs
and lower fleet average day rates, partially offset by higher Alpha
revenue. Our second quarter revenue from turnkey projects and idle
but contracted rigs of US$3 million and nil, respectively, compared
with US$3 million and US$16 million in 2020. Our second quarter
operating costs on a per day basis decreased to US$13,745, compared
with US$14,172 in 2020, and was mainly due to lower rig operating
costs and lower fixed costs, partially offset by higher rig repairs
and rig activations. We activated six rigs in the quarter as
compared with nil in 2020. On a sequential basis, revenue per
utilization day, excluding revenue from turnkey drilling and idle
but contracted rigs, decreased by US$872 primarily due to lower
fleet average day rates, while operating costs per day decreased by
US$1,360 due to lower turnkey activity and the impact of fixed
operating costs being spread over higher activity days.
- In Canada, average revenue per
utilization day for contract drilling rigs for the quarter was
$20,634 compared with $22,940 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 decreased to $13,510 compared with $13,898 in 2020. The
decrease was mainly due to fixed costs being spread over higher
activity days and lower repairs and maintenance.
- During the quarter, we recognized
CEWS program assistance of $9 million, consistent with 2020. CEWS
program assistance was presented as offsets to operating and
general and administrative costs of $8 million and $1 million,
respectively, as compared with $6 million and $3 million in
2020.
- We realized second quarter revenue
from international contract drilling of US$30 million of 2021, as
compared with US$38 million in 2020. The lower revenue in 2021 was
primarily due to lower activity. Average revenue per utilization
day for the quarter was US$54,269, consistent with 2020.
- Cash and funds provided by
operations (see “NON-GAAP MEASURES”) in the second quarter of 2021
were $42 million and $13 million, respectively, compared with $104
million and $27 million in 2020.
- Capital expenditures were $20
million, $4 million lower than the second 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 second quarter of 2021,
we reduced long-term debt by $23 million.
Summary for the six months ended June 30,
2021:
- Revenue for the first six months of
2021 was $438 million, a decrease of 23% from 2020.
- Operating loss (see “NON-GAAP
MEASURES”) was $55 million, compared with operating earnings of $3
million in 2020. Operating results this year were negatively
impacted by lower drilling activity and average day rates.
- General and administrative costs
were $53 million, an increase of $15 million from 2020. The
increase was the result of higher share-based compensation charges.
Excluding share-based compensation and CEWS program assistance, our
general and administrative costs for the first half of 2021
decreased 27% as compared with 2020.
- In the first half of 2020, we
incurred restructuring charges of $16 million, comprised of
severance and shutdown costs for our U.S. directional drilling
operations. No restructuring charges were incurred in 2021.
- Net finance charges were $50
million, a decrease of $6 million from 2020 primarily due to a
reduction in interest expense related to retired debt, partially
offset by higher amortized debt issue costs.
- Cash provided by operations was $58
million in 2021 as compared with $179 million in 2020. Funds
provided by operations (see “NON-GAAP MEASURES”) in the first half
of 2021 were $56 million, a decrease of $52 million from the prior
year comparative period of $108 million.
- Capital expenditures were $29
million for the first half of 2021, a decrease of $7 million for
the same period in 2020. Capital spending for the first half of
2021 included $10 million for expansion and upgrade capital and $19
million for the maintenance of existing assets, infrastructure
spending and intangibles.
- During the first half of 2021, we
reduced long-term debt by $52 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 second quarter with 44 AC
Super Triple Alpha-rigs equipped with our AlphaAutomation platform
and 16 commercialized AlphaApps. Our second quarter paid AlphaApp
days increased 89% compared with the first 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 two new AlphaAutomation customers and increased
paid AlphaAutomation days, AlphaApp days and AlphaAnalytics days
quarter-over-quarter by 30%, 89% and 71%, respectively.
- Demonstrate
operational leverage to generate free cash flow and reduce
debt – In the second quarter of 2021, Precision generated
$42 million of cash provided by operations (see “NON-GAAP
MEASURES”) and $3 million of cash proceeds from the divestiture of
non-core assets. We issued US$400 million of 6.875% unsecured
senior notes due 2029, redeemed in full our 2023 and 2024 unsecured
senior notes and extended the maturity of our Senior Credit
Facility. Through these transactions, we extended our debt
maturities, reduced our average cost of borrowing and increased the
amount of prepayable debt under our Senior Credit Facility. As of
June 30, 2021, we have reduced debt levels by $52 million, leaving
$48 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 $63 million, US$167 million
drawn on our US$500 million Senior Credit Facility and available
liquidity of approximately $500 million.
- Deliver
leading ESG (environmental, social and governance) performance to
strengthen customer and stakeholder positioning – On July
15, 2021, we released our second annual Corporate Responsibility
Report that highlights our progress in ESG efforts and outlines our
ESG strategies, focus areas and performance. Furthermore, we
announced the launch of our EverGreen suite of environmental
solutions, bolstering our commitment to reduce the environmental
impact of oilfield operations. Our EverGreen suite of environmental
solutions is comprised of our EverGreen Monitoring, EverGreen
Energy, and EverGreen Fuel Cell initiatives. We remain committed to
partnering with suppliers, customers, industry groups and
government agencies to innovate and implement green drilling
technologies. This collaborative approach, along with our position
as a drilling technology leader, will continue to result in more
eco-friendly drilling solutions, returns on investment and improved
social perception for Precision’s customers. For additional
information on our ESG initiatives and our Corporate Responsibility
Report, please see our website.
OUTLOOK
The oilfield services industry outlook and
customer sentiment both continue to improve as global COVID-19
vaccination rates increase, economies reopen and commodity prices
strengthen. Improved fundamentals from recovering global oil demand
have resulted in higher commodity prices and increased activity
levels. We anticipate our customers will remain focused on capital
discipline and maximize operational efficiencies. We expect these
industry dynamics to accelerate the industry’s transition toward
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.
Contracts
Year to date in 2021 we have entered into 20
term contracts. The following chart outlines the average number of
drilling rigs under contract by quarter as of July 21, 2021. For
those quarters ending after June 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 July 21, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
41 |
|
|
|
32 |
|
|
|
26 |
|
|
|
24 |
|
|
|
21 |
|
|
|
24 |
|
|
|
20 |
|
|
|
17 |
|
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 |
|
|
|
33 |
|
|
|
30 |
|
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 July 21,
2021.
|
|
Average for the year ended |
|
|
|
|
|
2020 |
|
|
2021 |
|
|
|
Average rigs under term contract as of July 21, 2021: |
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
31 |
|
|
|
21 |
|
|
|
Canada |
|
|
4 |
|
|
|
7 |
|
|
|
International |
|
|
7 |
|
|
|
6 |
|
|
|
Total |
|
|
42 |
|
|
|
34 |
|
|
|
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 |
|
Average Precision active rig count: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
55 |
|
|
|
30 |
|
|
|
21 |
|
|
|
26 |
|
|
|
33 |
|
|
|
39 |
|
Canada |
|
63 |
|
|
|
9 |
|
|
|
18 |
|
|
|
28 |
|
|
|
42 |
|
|
|
27 |
|
International |
|
8 |
|
|
|
8 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
Total |
|
126 |
|
|
|
47 |
|
|
|
45 |
|
|
|
60 |
|
|
|
81 |
|
|
|
72 |
|
According to industry sources, as of July 21,
2021, the U.S. active land drilling rig count has increased 93%
from the same point last year while the Canadian active land
drilling rig count increased by 369%. To date in 2021,
approximately 82% of the U.S. industry’s active rigs and 53% of the
Canadian industry’s active rigs were drilling for oil targets,
compared with 82% for the U.S. and 58% for Canada at the same time
last year.
Capital Spending
Capital spending in 2021 is expected to be $63
million and includes $41 million for sustaining, infrastructure and
intangibles and $22 million for expansion and upgrades. We expect
that the $63 million will be split $59 million in the Contract
Drilling Services segment, $3 million in the Completion and
Production Services segment and $1 million to the Corporate
segment. At June 30, 2021, Precision had capital commitments of
$127 million with payments expected through 2023.
SEGMENTED FINANCIAL RESULTS
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
|
181,256 |
|
|
|
184,738 |
|
|
|
(1.9 |
) |
|
|
386,075 |
|
|
|
531,287 |
|
|
|
(27.3 |
) |
Completion and Production Services |
|
20,667 |
|
|
|
5,525 |
|
|
|
274.1 |
|
|
|
53,211 |
|
|
|
39,188 |
|
|
|
35.8 |
|
Inter-segment eliminations |
|
(564 |
) |
|
|
(504 |
) |
|
|
11.9 |
|
|
|
(1,454 |
) |
|
|
(1,232 |
) |
|
|
18.0 |
|
|
|
201,359 |
|
|
|
189,759 |
|
|
|
6.1 |
|
|
|
437,832 |
|
|
|
569,243 |
|
|
|
(23.1 |
) |
Adjusted EBITDA:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
|
47,703 |
|
|
|
74,613 |
|
|
|
(36.1 |
) |
|
|
107,734 |
|
|
|
185,346 |
|
|
|
(41.9 |
) |
Completion and Production Services |
|
4,252 |
|
|
|
(1,220 |
) |
|
|
(448.5 |
) |
|
|
12,054 |
|
|
|
2,015 |
|
|
|
498.2 |
|
Corporate and Other |
|
(23,011 |
) |
|
|
(14,928 |
) |
|
|
54.1 |
|
|
|
(36,305 |
) |
|
|
(26,992 |
) |
|
|
34.5 |
|
|
|
28,944 |
|
|
|
58,465 |
|
|
|
(50.5 |
) |
|
|
83,483 |
|
|
|
160,369 |
|
|
|
(47.9 |
) |
(1) See “NON-GAAP
MEASURES.”
SEGMENT REVIEW OF CONTRACT DRILLING
SERVICES
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars, except where noted) |
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
% Change |
|
Revenue |
|
181,256 |
|
|
|
184,738 |
|
|
|
(1.9 |
) |
|
|
386,075 |
|
|
|
531,287 |
|
|
|
(27.3 |
) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
126,394 |
|
|
|
101,498 |
|
|
|
24.5 |
|
|
|
264,515 |
|
|
|
323,827 |
|
|
|
(18.3 |
) |
General and administrative |
|
7,159 |
|
|
|
6,083 |
|
|
|
17.7 |
|
|
|
13,826 |
|
|
|
14,853 |
|
|
|
(6.9 |
) |
Restructuring |
|
- |
|
|
|
2,544 |
|
|
|
(100.0 |
) |
|
|
- |
|
|
|
7,261 |
|
|
|
(100.0 |
) |
Adjusted EBITDA(1) |
|
47,703 |
|
|
|
74,613 |
|
|
|
(36.1 |
) |
|
|
107,734 |
|
|
|
185,346 |
|
|
|
(41.9 |
) |
Depreciation |
|
63,101 |
|
|
|
74,062 |
|
|
|
(14.8 |
) |
|
|
128,333 |
|
|
|
149,786 |
|
|
|
(14.3 |
) |
Gain on asset disposals |
|
(595 |
) |
|
|
(3,091 |
) |
|
|
(80.8 |
) |
|
|
(2,320 |
) |
|
|
(5,933 |
) |
|
|
(60.9 |
) |
Operating earnings (loss)(1) |
|
(14,803 |
) |
|
|
3,642 |
|
|
|
(506.5 |
) |
|
|
(18,279 |
) |
|
|
41,493 |
|
|
|
(144.1 |
) |
Operating earnings (loss)(1) as a percentage of revenue |
|
(8.2 |
)% |
|
|
2.0 |
% |
|
|
|
|
|
|
(4.7 |
)% |
|
|
7.8 |
% |
|
|
|
|
(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 |
|
Year to date average |
|
36 |
|
|
|
408 |
|
|
|
42 |
|
|
|
571 |
|
(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 |
|
Year to date average |
|
35 |
|
|
|
109 |
|
|
|
36 |
|
|
|
110 |
|
(1) Canadian operations
only.(2) Baker Hughes rig counts.
SEGMENT REVIEW OF COMPLETION AND
PRODUCTION SERVICES
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars, except where noted) |
2021 |
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
Revenue |
|
20,667 |
|
|
|
5,525 |
|
|
|
274.1 |
|
|
|
53,211 |
|
|
|
39,188 |
|
|
|
35.8 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
15,125 |
|
|
|
5,558 |
|
|
|
172.1 |
|
|
|
38,515 |
|
|
|
32,184 |
|
|
|
19.7 |
|
General and administrative |
|
1,290 |
|
|
|
915 |
|
|
|
41.0 |
|
|
|
2,642 |
|
|
|
2,394 |
|
|
|
10.4 |
|
Restructuring |
|
- |
|
|
|
272 |
|
|
|
(100.0 |
) |
|
|
- |
|
|
|
2,595 |
|
|
|
(100.0 |
) |
Adjusted EBITDA(1) |
|
4,252 |
|
|
|
(1,220 |
) |
|
|
(448.5 |
) |
|
|
12,054 |
|
|
|
2,015 |
|
|
|
498.2 |
|
Depreciation |
|
3,854 |
|
|
|
4,119 |
|
|
|
(6.4 |
) |
|
|
7,855 |
|
|
|
8,402 |
|
|
|
(6.5 |
) |
Gain on asset disposals |
|
(213 |
) |
|
|
(262 |
) |
|
|
(18.7 |
) |
|
|
(456 |
) |
|
|
(1,001 |
) |
|
|
(54.4 |
) |
Operating earnings (loss)(1) |
|
611 |
|
|
|
(5,077 |
) |
|
|
(112.0 |
) |
|
|
4,655 |
|
|
|
(5,386 |
) |
|
|
(186.4 |
) |
Operating earnings (loss)(1) as a percentage of revenue |
|
3.0 |
% |
|
|
(91.9 |
)% |
|
|
|
|
|
|
8.7 |
% |
|
|
(13.7 |
)% |
|
|
|
|
Well servicing statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of service rigs (end of period) |
|
123 |
|
|
|
123 |
|
|
|
- |
|
|
|
123 |
|
|
|
123 |
|
|
|
- |
|
Service rig operating hours |
|
26,630 |
|
|
|
4,702 |
|
|
|
466.4 |
|
|
|
61,533 |
|
|
|
39,067 |
|
|
|
57.5 |
|
Service rig operating hour utilization |
|
24 |
% |
|
|
4 |
% |
|
|
|
|
|
|
56 |
% |
|
|
35 |
% |
|
|
|
|
(1) See “NON-GAAP
MEASURES.”
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
$23 million as compared with $15 million in the second quarter of
2020. Our Adjusted EBITDA was negatively impacted by higher
share-based compensation costs as a result of our increased share
price and lower CEWS program assistance. During the quarter, CEWS
program assistance offset general and administrative costs by $1
million as compared with $2 million in 2020.
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 June 30, |
|
|
For the six months ended June 30, |
|
(Stated in thousands of Canadian dollars) |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Cash settled share-based incentive plans |
|
24,830 |
|
|
|
5,372 |
|
|
|
34,698 |
|
|
|
(1,021 |
) |
Equity settled share-based
incentive plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive PSU |
|
1,398 |
|
|
|
2,959 |
|
|
|
2,171 |
|
|
|
5,694 |
|
Stock option plan |
|
34 |
|
|
|
168 |
|
|
|
165 |
|
|
|
554 |
|
Total share-based incentive compensation plan expense
(recovery) |
|
26,262 |
|
|
|
8,499 |
|
|
|
37,034 |
|
|
|
5,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
5,901 |
|
|
|
1,987 |
|
|
|
8,165 |
|
|
|
1,014 |
|
General and Administrative |
|
20,361 |
|
|
|
6,512 |
|
|
|
28,869 |
|
|
|
4,213 |
|
|
|
26,262 |
|
|
|
8,499 |
|
|
|
37,034 |
|
|
|
5,227 |
|
Cash settled share-based compensation expense
increased by $19 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 second quarter of
2021 decreased by $2 million as fewer Executive PSUs were
outstanding as compared with 2020.
Finance Charges
Net finance charges were $28 million, consistent
with the second quarter of 2020. Interest charges on our U.S.
denominated long-term debt in the second quarter of 2021 were US$16
million ($19 million) as compared with US$19 million ($26 million)
in 2020. We recognized $7 million of debt issue costs as compared
with $1 million in 2020. The increased debt issue cost was
primarily related to the accelerated amortization of issue costs
associated with the fully redeemed unsecured senior notes in the
second quarter of 2021.
Income Tax
Income tax recovery for the quarter was $1
million as compared with an income tax expense of $4 million in
2020. During the second 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$167 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 |
$20 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 June 30, 2021, we had $1,166 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.
On June 15, 2021, we issued US$400 million of
6.875% unsecured senior notes due in 2029 in a private offering.
These unsecured senior notes were issued at a price equal to
99.253% of the face value.
The net proceeds from the issuance, along with
amounts drawn on our Senior Credit Facility, were used to redeem in
full US$286 million aggregate principal amount of the 7.750%
unsecured senior notes due 2023 and redeem in full US$263 million
aggregate principal amount of the 5.250% unsecured senior notes due
2024 for US$557 million, plus accrued and unpaid interest,
resulting in a loss on redemption of US$8 million.
The current blended cash interest cost of our
debt is approximately 6.2%.
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 June 18, 2021, we agreed with the lenders of
our Senior Credit Facility to extend the facility’s maturity date
and extend and amend certain financial covenants during the
Covenant Relief Period. The maturity date of the Senior Credit
Facility was extended to June 18, 2025; however, US$53 million of
the US$500 million will expire on November 21, 2023.
The lenders agreed to extend the Covenant Relief
Period to September 30, 2022 and amend the consolidated Covenant
EBITDA to consolidated interest coverage ratio for the most recent
four consecutive quarters to be greater than or equal to 1.75:1 for
the periods ending June 30, 2021 and September 30, 2021, 2.0:1, for
the periods ending December 31, 2021 and March 31, 2022, 2.25:1 for
the periods ending June 30, 2022 and September 30, 2022 and 2.5:1
for periods ending thereafter.
During the Covenant Relief Period, our
distributions in the form of dividends, distributions and share
repurchases are restricted to a maximum of 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.
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. We also have the
option to voluntarily terminate the Covenant Relief Period prior
September 30, 2022.
Unsecured Senior Notes
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, 2017 for the 2026 unsecured senior notes and
from July 1, 2021 for the 2029 unsecured 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.
For further information, please see the
unsecured senior note indentures which are available on SEDAR and
EDGAR.
Covenants
Following is a listing of applicable financial
covenants and their calculations for our Senior Credit Facility and
Real Estate Credit Facilities:
|
Covenant |
|
At June 30, 2021 |
|
Senior Credit Facility |
|
|
|
|
|
Consolidated senior debt to consolidated covenant EBITDA(1) |
< 2.50 |
|
|
1.30 |
|
Consolidated covenant EBITDA to consolidated interest expense |
> 1.75 |
|
|
1.94 |
|
Real Estate Credit
Facilities |
|
|
|
|
|
Consolidated covenant EBITDA to consolidated interest expense |
> 1.75 |
|
|
1.94 |
|
(1) For purposes of calculating the leverage ratio consolidated
senior debt only includes secured indebtedness.
At June 30, 2021, we were in compliance with the
covenants of our Senior Credit Facility and Real Estate Credit
Facilities.
Average shares outstanding
The following table reconciles the weighted
average shares outstanding used in computing basic and diluted net
loss per share:
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
(Stated in thousands) |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Weighted average shares outstanding – basic |
|
13,304 |
|
|
|
13,712 |
|
|
|
13,327 |
|
|
|
13,741 |
|
Effect
of stock options and other equity compensation plans |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Weighted average shares outstanding – diluted |
|
13,304 |
|
|
|
13,712 |
|
|
|
13,327 |
|
|
|
13,741 |
|
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share
amounts) |
|
2020 |
|
|
2021 |
|
Quarters ended |
|
September 30 |
|
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
Revenue |
|
|
164,822 |
|
|
|
201,688 |
|
|
|
236,473 |
|
|
|
201,359 |
|
Adjusted EBITDA(1) |
|
|
47,771 |
|
|
|
55,263 |
|
|
|
54,539 |
|
|
|
28,944 |
|
Net loss |
|
|
(28,476 |
) |
|
|
(37,518 |
) |
|
|
(36,106 |
) |
|
|
(75,912 |
) |
Net loss per basic and diluted
share |
|
|
(2.08 |
) |
|
|
(2.74 |
) |
|
|
(2.70 |
) |
|
|
(5.71 |
) |
Funds provided by
operations(1) |
|
|
27,489 |
|
|
|
35,282 |
|
|
|
43,430 |
|
|
|
12,607 |
|
Cash
provided by operations |
|
|
41,950 |
|
|
|
4,737 |
|
|
|
15,422 |
|
|
|
42,219 |
|
(Stated in thousands of Canadian dollars, except per share
amounts) |
|
2019 |
|
|
2020 |
|
Quarters ended |
|
September 30 |
|
|
December 31 |
|
|
March 31 |
|
|
June 30 |
|
Revenue |
|
|
375,552 |
|
|
|
372,301 |
|
|
|
379,484 |
|
|
|
189,759 |
|
Adjusted EBITDA(1) |
|
|
97,895 |
|
|
|
105,006 |
|
|
|
101,904 |
|
|
|
58,465 |
|
Net loss |
|
|
(3,534 |
) |
|
|
(1,061 |
) |
|
|
(5,277 |
) |
|
|
(48,867 |
) |
Net loss per basic and diluted
share |
|
|
(0.23 |
) |
|
|
(0.08 |
) |
|
|
(0.38 |
) |
|
|
(3.56 |
) |
Funds provided by
operations(1) |
|
|
79,930 |
|
|
|
75,779 |
|
|
|
81,317 |
|
|
|
26,639 |
|
Cash
provided by operations |
|
|
66,556 |
|
|
|
74,981 |
|
|
|
74,953 |
|
|
|
104,478 |
|
(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,
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 June 30, |
|
|
For the six months ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Revenue |
|
201,359 |
|
|
|
189,759 |
|
|
|
437,832 |
|
|
|
569,243 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
140,955 |
|
|
|
106,552 |
|
|
|
301,576 |
|
|
|
354,779 |
|
General and administrative |
|
31,460 |
|
|
|
18,449 |
|
|
|
52,773 |
|
|
|
37,984 |
|
Restructuring |
|
— |
|
|
|
6,293 |
|
|
|
— |
|
|
|
16,111 |
|
Depreciation and
amortization |
|
69,704 |
|
|
|
81,124 |
|
|
|
141,717 |
|
|
|
164,038 |
|
Gain on
asset disposals |
|
(904 |
) |
|
|
(3,470 |
) |
|
|
(2,963 |
) |
|
|
(7,079 |
) |
Operating earnings (loss) |
|
(39,856 |
) |
|
|
(19,189 |
) |
|
|
(55,271 |
) |
|
|
3,410 |
|
Foreign exchange |
|
(296 |
) |
|
|
(928 |
) |
|
|
(360 |
) |
|
|
1,763 |
|
Finance charges |
|
27,698 |
|
|
|
28,083 |
|
|
|
50,144 |
|
|
|
55,663 |
|
Loss
(gain) on repurchase of unsecured notes |
|
9,520 |
|
|
|
(1,121 |
) |
|
|
9,520 |
|
|
|
(1,971 |
) |
Loss before income taxes |
|
(76,778 |
) |
|
|
(45,223 |
) |
|
|
(114,575 |
) |
|
|
(52,045 |
) |
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, 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 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, 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 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
report are made as of the date hereof and Precision undertakes no
obligation to update publicly or revise any forward-looking
statements or information, whether as a result of new information,
future events or otherwise, except as required by law.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED)
(Stated in thousands of Canadian dollars) |
|
June 30, 2021 |
|
|
December 31, 2020 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
63,437 |
|
|
$ |
108,772 |
|
Accounts receivable |
|
|
207,743 |
|
|
|
207,209 |
|
Inventory |
|
|
24,761 |
|
|
|
26,282 |
|
Total current assets |
|
|
295,941 |
|
|
|
342,263 |
|
Non-current assets: |
|
|
|
|
|
|
|
|
Deferred tax assets |
|
|
1,098 |
|
|
|
1,098 |
|
Right-of-use assets |
|
|
51,869 |
|
|
|
55,168 |
|
Property, plant and equipment |
|
|
2,321,160 |
|
|
|
2,472,683 |
|
Intangibles |
|
|
26,241 |
|
|
|
27,666 |
|
Total non-current assets |
|
|
2,400,368 |
|
|
|
2,556,615 |
|
Total assets |
|
$ |
2,696,309 |
|
|
$ |
2,898,878 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
166,300 |
|
|
$ |
150,957 |
|
Income taxes payable |
|
|
885 |
|
|
|
3,702 |
|
Current portion of lease obligations |
|
|
11,043 |
|
|
|
11,285 |
|
Current portion of long-term debt |
|
|
2,206 |
|
|
|
896 |
|
Total current liabilities |
|
|
180,434 |
|
|
|
166,840 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
19,605 |
|
|
|
11,507 |
|
Provisions and other |
|
|
6,787 |
|
|
|
7,563 |
|
Lease obligations |
|
|
45,953 |
|
|
|
48,882 |
|
Long-term debt |
|
|
1,145,317 |
|
|
|
1,236,210 |
|
Deferred tax liabilities |
|
|
16,557 |
|
|
|
21,236 |
|
Total non-current liabilities |
|
|
1,234,219 |
|
|
|
1,325,398 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Shareholders’ capital |
|
|
2,281,444 |
|
|
|
2,285,738 |
|
Contributed surplus |
|
|
75,250 |
|
|
|
72,915 |
|
Deficit |
|
|
(1,201,612 |
) |
|
|
(1,089,594 |
) |
Accumulated other comprehensive income |
|
|
126,574 |
|
|
|
137,581 |
|
Total shareholders’ equity |
|
|
1,281,656 |
|
|
|
1,406,640 |
|
Total liabilities and shareholders’ equity |
|
$ |
2,696,309 |
|
|
$ |
2,898,878 |
|
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF NET LOSS (UNAUDITED)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
201,359 |
|
|
$ |
189,759 |
|
|
$ |
437,832 |
|
|
$ |
569,243 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
140,955 |
|
|
|
106,552 |
|
|
|
301,576 |
|
|
|
354,779 |
|
General and administrative |
|
|
31,460 |
|
|
|
18,449 |
|
|
|
52,773 |
|
|
|
37,984 |
|
Restructuring |
|
|
— |
|
|
|
6,293 |
|
|
|
— |
|
|
|
16,111 |
|
Earnings before income taxes, loss (gain) on repurchase of
unsecured senior notes, finance charges, foreign exchange, gain on
asset disposals and depreciation and amortization |
|
|
28,944 |
|
|
|
58,465 |
|
|
|
83,483 |
|
|
|
160,369 |
|
Depreciation and
amortization |
|
|
69,704 |
|
|
|
81,124 |
|
|
|
141,717 |
|
|
|
164,038 |
|
Gain on asset disposals |
|
|
(904 |
) |
|
|
(3,470 |
) |
|
|
(2,963 |
) |
|
|
(7,079 |
) |
Foreign exchange |
|
|
(296 |
) |
|
|
(928 |
) |
|
|
(360 |
) |
|
|
1,763 |
|
Finance charges |
|
|
27,698 |
|
|
|
28,083 |
|
|
|
50,144 |
|
|
|
55,663 |
|
Loss (gain) on repurchase of unsecured senior notes |
|
|
9,520 |
|
|
|
(1,121 |
) |
|
|
9,520 |
|
|
|
(1,971 |
) |
Loss before income taxes |
|
|
(76,778 |
) |
|
|
(45,223 |
) |
|
|
(114,575 |
) |
|
|
(52,045 |
) |
Income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
788 |
|
|
|
2,116 |
|
|
|
1,572 |
|
|
|
3,175 |
|
Deferred |
|
|
(1,654 |
) |
|
|
1,528 |
|
|
|
(4,129 |
) |
|
|
(1,076 |
) |
|
|
|
(866 |
) |
|
|
3,644 |
|
|
|
(2,557 |
) |
|
|
2,099 |
|
Net loss |
|
$ |
(75,912 |
) |
|
$ |
(48,867 |
) |
|
$ |
(112,018 |
) |
|
$ |
(54,144 |
) |
Net
loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(5.71 |
) |
|
$ |
(3.56 |
) |
|
$ |
(8.41 |
) |
|
$ |
(3.94 |
) |
Diluted |
|
$ |
(5.71 |
) |
|
$ |
(3.56 |
) |
|
$ |
(8.41 |
) |
|
$ |
(3.94 |
) |
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Net loss |
|
$ |
(75,912 |
) |
|
$ |
(48,867 |
) |
|
$ |
(112,018 |
) |
|
$ |
(54,144 |
) |
Unrealized gain (loss) on translation of assets and
liabilities of operations denominated in foreign currency |
|
|
(21,548 |
) |
|
|
(71,311 |
) |
|
|
(42,546 |
) |
|
|
85,697 |
|
Foreign exchange gain (loss) on net investment hedge
with U.S. denominated debt |
|
|
15,630 |
|
|
|
53,920 |
|
|
|
31,539 |
|
|
|
(64,236 |
) |
Tax expense related to net investment hedge of long-term debt |
|
|
(285 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Comprehensive loss |
|
$ |
(82,115 |
) |
|
$ |
(66,258 |
) |
|
$ |
(123,025 |
) |
|
$ |
(32,683 |
) |
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(75,912 |
) |
|
$ |
(48,867 |
) |
|
$ |
(112,018 |
) |
|
$ |
(54,144 |
) |
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term compensation
plans |
|
|
13,653 |
|
|
|
6,324 |
|
|
|
20,801 |
|
|
|
5,621 |
|
Depreciation and
amortization |
|
|
69,704 |
|
|
|
81,124 |
|
|
|
141,717 |
|
|
|
164,038 |
|
Gain on asset
disposals |
|
|
(904 |
) |
|
|
(3,470 |
) |
|
|
(2,963 |
) |
|
|
(7,079 |
) |
Foreign exchange |
|
|
464 |
|
|
|
(1,718 |
) |
|
|
1,022 |
|
|
|
1,154 |
|
Finance charges |
|
|
27,698 |
|
|
|
28,083 |
|
|
|
50,144 |
|
|
|
55,663 |
|
Income taxes |
|
|
(866 |
) |
|
|
3,644 |
|
|
|
(2,557 |
) |
|
|
2,099 |
|
Other |
|
|
(567 |
) |
|
|
(823 |
) |
|
|
(564 |
) |
|
|
(763 |
) |
Loss (gain) on repurchase
of unsecured senior notes |
|
|
9,520 |
|
|
|
(1,121 |
) |
|
|
9,520 |
|
|
|
(1,971 |
) |
Income taxes paid |
|
|
(3,905 |
) |
|
|
(3,128 |
) |
|
|
(4,066 |
) |
|
|
(3,948 |
) |
Income taxes
recovered |
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
Interest paid |
|
|
(26,412 |
) |
|
|
(33,548 |
) |
|
|
(45,178 |
) |
|
|
(53,043 |
) |
Interest received |
|
|
131 |
|
|
|
139 |
|
|
|
176 |
|
|
|
329 |
|
Funds provided by operations |
|
|
12,607 |
|
|
|
26,639 |
|
|
|
56,037 |
|
|
|
107,956 |
|
Changes in non-cash working capital balances |
|
|
29,612 |
|
|
|
77,839 |
|
|
|
1,604 |
|
|
|
71,475 |
|
|
|
|
42,219 |
|
|
|
104,478 |
|
|
|
57,641 |
|
|
|
179,431 |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and
equipment |
|
|
(20,255 |
) |
|
|
(23,927 |
) |
|
|
(28,691 |
) |
|
|
(35,412 |
) |
Purchase of intangibles |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(57 |
) |
Proceeds on sale of property,
plant and equipment |
|
|
2,590 |
|
|
|
5,021 |
|
|
|
5,914 |
|
|
|
10,711 |
|
Changes in non-cash working capital balances |
|
|
7,515 |
|
|
|
(1,880 |
) |
|
|
2,713 |
|
|
|
(5,406 |
) |
|
|
|
(10,150 |
) |
|
|
(20,786 |
) |
|
|
(20,064 |
) |
|
|
(30,164 |
) |
Financing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt |
|
|
676,341 |
|
|
|
5,030 |
|
|
|
696,341 |
|
|
|
5,030 |
|
Repayments of long-term debt |
|
|
(712,034 |
) |
|
|
(4,911 |
) |
|
|
(761,459 |
) |
|
|
(45,465 |
) |
Repurchase of share capital |
|
|
— |
|
|
|
(15 |
) |
|
|
(4,294 |
) |
|
|
(5,259 |
) |
Debt issuance costs |
|
|
(9,550 |
) |
|
|
— |
|
|
|
(9,794 |
) |
|
|
— |
|
Debt amendment fees |
|
|
(910 |
) |
|
|
(647 |
) |
|
|
(910 |
) |
|
|
(668 |
) |
Lease payments |
|
|
(1,709 |
) |
|
|
(1,897 |
) |
|
|
(3,330 |
) |
|
|
(3,625 |
) |
Changes in non-cash working capital balances |
|
|
1,829 |
|
|
|
— |
|
|
|
1,829 |
|
|
|
— |
|
|
|
|
(46,033 |
) |
|
|
(2,440 |
) |
|
|
(81,617 |
) |
|
|
(49,987 |
) |
Effect of exchange rate changes on cash |
|
|
(430 |
) |
|
|
(3,129 |
) |
|
|
(1,295 |
) |
|
|
1,144 |
|
Increase (decrease) in cash |
|
|
(14,394 |
) |
|
|
78,123 |
|
|
|
(45,335 |
) |
|
|
100,424 |
|
Cash, beginning of period |
|
|
77,831 |
|
|
|
97,002 |
|
|
|
108,772 |
|
|
|
74,701 |
|
Cash, end of period |
|
$ |
63,437 |
|
|
$ |
175,125 |
|
|
$ |
63,437 |
|
|
$ |
175,125 |
|
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 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(112,018 |
) |
|
|
(112,018 |
) |
Other comprehensive loss for the
period |
|
|
— |
|
|
|
— |
|
|
|
(11,007 |
) |
|
|
— |
|
|
|
(11,007 |
) |
Share repurchases |
|
|
(4,294 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,294 |
) |
Share-based compensation
reclassification |
|
|
— |
|
|
|
(1,958 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,958 |
) |
Share-based compensation expense |
|
|
— |
|
|
|
4,293 |
|
|
|
— |
|
|
|
— |
|
|
|
4,293 |
|
Balance at June 30, 2021 |
|
$ |
2,281,444 |
|
|
$ |
75,250 |
|
|
$ |
126,574 |
|
|
$ |
(1,201,612 |
) |
|
$ |
1,281,656 |
|
(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 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(54,144 |
) |
|
|
(54,144 |
) |
Other comprehensive income for
the period |
|
|
— |
|
|
|
— |
|
|
|
21,461 |
|
|
|
— |
|
|
|
21,461 |
|
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 |
|
|
— |
|
|
|
6,248 |
|
|
|
— |
|
|
|
— |
|
|
|
6,248 |
|
Balance at June 30, 2020 |
|
$ |
2,291,796 |
|
|
$ |
70,503 |
|
|
$ |
155,716 |
|
|
$ |
(1,023,600 |
) |
|
$ |
1,494,415 |
|
SECOND 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, July 22, 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.” 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 July 26, 2021 by dialing 855-859-2056
or 404-537-3406, passcode 4636469.
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
800, 525 - 8th Avenue S.W.Calgary, Alberta,
Canada T2P 1G1Website: www.precisiondrilling.com
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