Precision Drilling

Precision Drilling Reports 2023 Fourth Quarter and Year-End Unaudited Financial Results

CALGARY, Alberta, Feb. 06, 2024 — 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 certain Financial Measures and Ratios, including Adjusted EBITDA (earnings before income taxes, loss (gain) on investments and other assets, gain on acquisition, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, loss on asset decommissioning, gain on asset disposals, and depreciation and amortization), Funds Provided by (Used in) Operations, Net Capital Spending 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 “Financial Measures and Ratios” later in this news release.

Precision Drilling announces strong 2023 fourth quarter results plus 2024 capital budget and shareholder return targets:

  • Revenue and Adjusted EBITDA(1) were $507 million and $151 million, respectively, as compared with $511 million and $91 million in 2022.
  • Net earnings were $147 million ($10.42 per share) as compared with $3 million ($0.27 per share) in 2022. Our 2023 results included the following non-recurring items:
    • transaction costs and severance of $6 million;
    • non-cash charge of $10 million from the decommissioning of 27 drilling rigs;
    • $26 million gain from our acquisition of CWC Energy Services Corp. (CWC); and
    • an income tax recovery of $69 million, as we recognized a deferred income tax asset of $73 million related to the expected future use of certain Canadian operating losses.
  • Our fourth quarter Adjusted EBITDA of $151 million included share-based compensation of $13 million and $6 million of transaction costs and severance. In comparison, our 2022 Adjusted EBITDA of $91 million included $75 million of share-based compensation and nil transaction costs and severance.
  • Grew fourth quarter revenue per utilization day 16% in Canada to $34,616 and 10% in the U.S. to US$34,452 as compared with 2022.
  • Internationally, we activated an additional rig in the fourth quarter and have a total of eight active rigs working in the Middle East on term contracts. In 2024, we expect our average active international rig count to increase approximately 40% as compared with 2023.
  • Completion and Production Services generated fourth quarter revenue of $62 million and Adjusted EBITDA of $12 million, both comparable to the same period last year.
  • We completed our acquisition of CWC and have realized approximately $12 million of our anticipated annualized synergies of $20 million.
  • Our fourth quarter cash provided by operations of $170 million helped fund capital expenditures of $79 million, debt repayment of $87 million, which included the full repayment of CWC’s $51 million syndicated loan, and share repurchases of $17 million.
  • Continued to strengthen our financial position, ending the year with $54 million of cash, a Net Debt to Adjusted EBITDA ratio(1) of approximately 1.4 times, and more than $600 million of available liquidity.
  • For the year ended December 31, 2023, we achieved our annual debt reduction and return of shareholder capital targets, reducing debt by $152 million and repurchasing $30 million of common shares.
  • Based on our current free cash flow outlook, we expect to reduce debt by $150 million to $200 million in 2024 and allocate 25% to 35% of free cash flow before debt repayments toward share repurchases.
  • Our 2024 capital budget is $195 million, which is lower than the $227 million invested in 2023.

(1) See “FINANCIAL MEASURES AND RATIOS”.

Precision’s President and CEO, Kevin Neveu, stated:

“Precision continued to deliver strong results in the fourth quarter, generating revenue of $507 million, Adjusted EBITDA of $151 million and net earnings of $147 million. This concluded one of our most profitable years in the past decade and allowed us to exceed our cash flow expectations. During the year, we not only met our debt reduction and shareholder capital return targets but also funded two accretive acquisitions. Our High Performance, High Value strategy along with our Super Series rigs, AlphaTM technologies, and EverGreenTM suite of environmental solutions continue to differentiate our services.

“We are pleased with the broad market acceptance of our AlphaTM technologies with 75% of our Super Triple drilling days during 2023 including AlphaAutomationTM and several AlphaAppsTM. Our customers see the benefits of predictable and repeatable drilling performance and the inherent efficiencies this creates on pad drilling projects. Our EverGreenTM suite of environmental solutions including Battery Energy Storage Systems (BESS), grid power connections, diesel fuel emission and reduction systems, and low-emission location lighting solutions has also gained widespread adoption, with approximately 65% of our Super Triple fleet employing one or more of these solutions. We believe both our AlphaTM and EverGreenTM product lines will continue to drive market share gains and deliver strong financial returns for Precision on these investments.

“Precision’s Canadian drilling business in 2023 displayed high utilization, expanded profitability and deeper relationships with our customers. We completed several customer requested upgrades to our fleet and secured multiple term contracts throughout the year, averaging 23 in the fourth quarter, a 44% increase over the fourth quarter of 2022. We currently have 80 rigs active, which exceeds our highest rig count in 2023. We expect demand to remain firm through the winter drilling season and ramp up after spring breakup as the Trans Mountain pipeline expansion becomes operational and Coastal GasLink begins to support LNG Canada start-up activities. This additional takeaway capacity is expected to continue to drive demand for our Super Triples and pad-capable Super Singles, which we expect to be in high demand for the balance of 2024 and beyond.

“In the U.S., industry drilling activity in 2023 was impacted by weak natural gas prices, oil price volatility, and merger and acquisition activity, resulting in a 21% decline in the active rig count year over year. Since mid-2023 Precision’s active rig count has remained steady near the low-40s. We continue to sign contracts with customers and based on recent conversations, we expect activity to begin to increase later in the second quarter.

“Internationally, we recertified and reactivated four Kuwait rigs in 2023 and now have eight active rigs working in the Kingdom of Saudi Arabia and Kuwait. With these additional rigs, we expect our activity to increase approximately 40% year over year and provide predictable future cash flow as the majority of these rigs are under five-year term contracts that extend into 2027 and 2028. We continue to explore opportunities to deploy our remaining idle rigs in the region.

“Precision’s Completion and Production Services segment generated $51 million of Adjusted EBITDA during the year, representing a 34% increase over the prior year, driven by an 18% increase in activity from Precision well servicing. With strong Canadian fundamentals, the timely acquisition of CWC in late-2023 is proving to be highly successful. We have fully integrated operations and have realized approximately $12 million of the expected $20 million in annual synergies. With the acquisitions of CWC in 2023 and High Arctic’s well servicing assets in 2022, Precision has solidified its position as the premier well service provider in Canada and transformed this portion of our business into a meaningful contributor to Precision’s free cash flow.

“I am proud of our accomplishments in 2023. We successfully delivered on our three strategic priorities: generated significant free cash flow; strengthened our financial position by reducing our debt by $152 million; and increased direct returns to shareholders by allocating 15% of our free cash flow to share repurchases. In 2024, we plan to increase our direct shareholder capital return program by allocating 25% to 35% of our free cash flow, before debt repayments, to share repurchases. Our focus on our debt reduction strategy remains firmly in place and in 2024, we plan to reduce debt by another $150 million to $200 million. This positions us to achieve our sustained Net Debt to Adjusted EBITDA ratio target of below 1.0 times by the end of 2025 and meet our long-term debt reduction target of $500 million between 2022 and 2025. As of December 31, 2023, we have repaid $258 million of this $500 million target.

“Looking ahead, we expect sustained free cash flow to be a feature of the business and will continue to assess the best route to drive shareholder returns. We currently believe this will be a function of increasing direct capital returns to shareholders while continuing to strengthen the balance sheet. As a result, we plan to reduce debt another $100 million by the end of 2026 and continue to move our direct shareholder capital returns towards 50% of free cash flow.

“I would like to thank our employees for their dedication and our shareholders for their support. With constructive long-term fundamentals for energy, combined with our High Performance, High Value strategy, I am confident we will continue to drive shareholder value,” concluded Mr. Neveu.

SELECT FINANCIAL AND OPERATING INFORMATION (UNAUDITED)

Financial Highlights (Unaudited)

(Stated in thousands of Canadian dollars, For the three months ended December 31, For the year ended December 31,
except per share amounts) 2023 2022 % Change 2023 2022 % Change
Revenue 506,871 510,504 (0.7 ) 1,937,854 1,617,194 19.8
Adjusted EBITDA(1) 151,231 91,090 66.0 611,118 311,605 96.1
Net earnings (loss) 146,722 3,483 4,112.5 289,244 (34,293 ) (943.4 )
Cash provided by operations 170,255 159,082 7.0 500,571 237,104 111.1
Funds provided by operations(1) 145,189 111,339 30.4 533,409 282,994 88.5
Cash used in investing activities 57,627 45,579 26.4 214,784 144,415 48.7
Capital spending by spend category(1)
Expansion and upgrade 24,459 12,699 92.6 63,898 63,305 0.9
Maintenance and infrastructure 54,388 44,610 21.9 162,851 120,945 34.6
Proceeds on sale (3,117 ) (5,165 ) (39.7 ) (23,841 ) (37,198 ) (35.9 )
Net capital spending(1) 75,730 52,144 45.2 202,908 147,052 38.0
Net earnings (loss) per share:
Basic 10.42 0.27 3,759.3 21.03 (2.53 ) (931.2 )
Diluted 9.81 0.27 3,533.3 19.53 (2.53 ) (871.9 )

(1) See “FINANCIAL MEASURES AND RATIOS”.

Operating Highlights

For the three months ended December 31, For the year ended December 31,
2023 2022 % Change 2023 2022 % Change
Contract drilling rig fleet 214 225 (4.9 ) 214 225 (4.9 )
Drilling rig utilization days:
U.S. 4,138 5,482 (24.5 ) 17,961 20,396 (11.9 )
Canada 5,909 6,058 (2.5 ) 21,156 20,519 3.1
International 693 552 25.5 2,132 2,190 (2.6 )
Revenue per utilization day:
U.S.(US$) 34,452 31,242 10.3 35,040 27,309 28.3
Canada(Cdn$) 34,616 29,886 15.8 33,151 27,037 22.6
International(US$) 49,872 49,918 (0.1 ) 50,840 51,242 (0.8 )
Operating costs per utilization day:
U.S.(US$) 21,039 19,253 9.3 20,401 18,635 9.5
Canada(Cdn$) 19,191 17,538 9.4 19,925 17,007 17.2
Service rig fleet 183 135 35.6 183 135 35.6
Service rig operating hours 56,683 49,368 14.8 201,627 170,362 18.4


Financial Position (Unaudited)

(Stated in thousands of Canadian dollars, except ratios) December 31, 2023 December 31, 2022
Working capital(1) 145,239 60,641
Cash 54,182 21,587
Long-term debt 914,830 1,085,970
Total long-term financial liabilities 1,004,216 1,206,619
Total assets 3,019,035 2,876,123
Long-term debt to long-term debt plus equity ratio(1) 0.37 0.47

(1) See “FINANCIAL MEASURES AND RATIOS”.

Summary for the three months ended December 31, 2023:

  • Revenue of $507 million was largely consistent with 2022 as the strengthening of North America revenue rates and increased well service and international activity were offset by lower North America drilling activity. Drilling rig utilization days decreased 25% and 3% in the U.S. and Canada, respectively. International activity increased 26% as we reactivated rigs in the Middle East. Our service rig operating hours increased 15% as compared with 2022.
  • Adjusted EBITDA was $151 million as compared with $91 million in 2022. Our higher 2023 Adjusted EBITDA was primarily the result of lower share-based compensation, partially offset by $6 million in transaction costs and severance. Share-based compensation was $13 million as compared with $75 million in 2022. Please refer to “Other Items” later in this news release for additional information on share-based compensation.
  • Adjusted EBITDA as a percentage of revenue was 30% as compared with 18% in 2022.
  • Our U.S. revenue per utilization day was US$34,452 compared with US$31,242 in 2022. The increase was primarily the result of higher fleet average day rates, idle but contracted rig revenue and cost recoveries, partially offset by lower turnkey revenue. We recognized revenue from idle but contracted rigs and turnkey activity of US$7 million and nil, respectively, as compared with nil and US$4 million in 2022. Revenue per utilization day, excluding the impact of idle but contracted rigs and turnkey activity was US$32,189, compared to US$30,504 in 2022, an increase of US$1,685 or 6%. Revenue per utilization day, excluding idle but contracted rigs and turnkey activity, decreased US$1,354 from the third quarter of 2023.
  • Our U.S. operating costs per utilization day increased to US$21,039 compared with US$19,253 in 2022. The increase was primarily due to higher rig operating costs, repairs and maintenance, recoverable costs and the impact of fixed costs being spread over fewer activity days. U.S. operating costs per utilization day, excluding turnkey, was US$21,015 compared with US$18,655 in 2022. Sequentially, excluding the impact of turnkey activity, operating costs per utilization day decreased US$587. The decrease was primarily due to lower repairs and maintenance, partially offset by the impact of fixed costs being spread over fewer activity days.
  • In Canada, revenue per utilization day was $34,616 compared with $29,886 in 2022. The increase was a result of higher average day rates and cost recoveries. Sequentially, revenue per utilization day increased $2,392 due to higher boiler revenue.
  • Our Canadian operating costs per utilization day increased to $19,191, compared with $17,538 in 2022, due to higher field wages and recoverable costs, partially offset by lower repairs and maintenance. Sequentially, our daily operating costs increased $880 due to higher field wages and recoverable costs, partially offset by fixed costs being spread over a higher activity base.
  • Completion and Production Services revenue and Adjusted EBITDA were $62 million and $12 million, respectively, compared with $59 million and $12 million in 2022.
  • We realized US$35 million of international contract drilling revenue compared with US$28 million in 2022. Our increased revenue was the result of higher activity as we reactivated rigs in the Middle East.
  • General and administrative expenses were $39 million as compared with $79 million in 2022. The decrease was primarily due to lower share-based compensation, partially offset by $4 million in transaction costs and severance.
  • We recognized non-recurring transaction costs and severance of $6 million which were presented as increases to operating and general and administrative costs of $2 million and $4 million, respectively.
  • Net finance charges were $19 million, a decrease of $4 million compared with 2022 and was the result of lower outstanding long-term debt.
  • We decommissioned 20 legacy drilling rigs from our Canadian fleet and seven from our U.S. fleet, recognizing a non-cash loss on asset decommissioning of $10 million.
  • Cash provided by operations was $170 million compared with $159 million in 2022. We generated $145 million of funds provided by operations compared with $111 million in 2022. Our increased day rates, revenue efficiency and operational leverage continued to drive higher cash generation in 2023.
  • Capital expenditures were $79 million compared with $57 million in 2022. Capital spending by spend category(1) included $24 million for expansion and upgrades and $54 million for the maintenance of existing assets, infrastructure, and intangible assets.
  • We reduced debt by $25 million, primarily from the redemption of US$26 million of 2026 unsecured senior notes, offset by the assumption of the $10 million CWC Real Estate Credit Facility, and ended the quarter with $54 million of cash and more than $600 million of available liquidity.

(1) See “FINANCIAL MEASURES AND RATIOS”.

Summary for the twelve months ended December 31, 2023:

  • Revenue for the twelve months of 2023 was $1,938 million, an increase of 20% from 2022.
  • Adjusted EBITDA was $611 million as compared with $312 million in 2022. Our higher Adjusted EBITDA was attributable to increased North America drilling and service revenue rates, higher Canadian drilling and service activity and lower share-based compensation, partially offset by lower U.S. and international drilling activity.
  • General and administrative costs were $122 million, a decrease of $59 million from 2022 primarily due to lower share-based compensation, partially offset by non-recurring transaction costs and severance of $4 million, higher labour-related costs and the impact of the weakening Canadian dollar on our translated U.S. dollar-denominated costs.
  • Net finance charges were $83 million as compared with $88 million in 2022. Our decreased net finance charges in 2023 were the result of our lower debt balance, partially offset by the impact of higher variable interest rates and higher translated U.S. dollar-denominated interest charges due to the weakening of the Canadian dollar.
  • Cash provided by operations was $501 million as compared with $237 million in 2022. Funds provided by operations in 2023 were $533 million, an increase of $250 million from the comparative period. Our higher cash generation in 2023 was attributable to our increased revenue efficiency, higher Canadian drilling and service activity and lower share-based compensation, partially offset by lower U.S. and international drilling activity.
  • Capital expenditures were $227 million in 2023, an increase of $42 million from 2022. Capital spending by spend category included $64 million for expansion and upgrades and $163 million for the maintenance of existing assets, infrastructure, and intangible assets. Capital expenditures were $12 million higher than guidance due to the timing of equipment deliveries.
  • Our investment activities for the year included the deferred payment of $28 million from our 2022 acquisition of High Arctic Energy Services Inc. (High Arctic), $14 million of cash consideration for the CWC acquisition, a $5 million investment in CleanDesign Income Corp. and proceeds of $10 million from the sale of Cathedral Energy Services Ltd. shares.
  • Year to date, we have reduced debt by $152 million from the full repayment of our Senior Credit Facility and US$74 million of repurchases and redemptions of our 2026 unsecured senior notes, partially offset by the assumption of the $10 million CWC Real Estate Credit Facility. In addition, we repurchased and cancelled 412,623 common shares for $30 million under our Normal Course Issuer Bid (NCIB).

STRATEGY

Precision’s vision is to be globally recognized as the High Performance, High Value provider of land drilling services. We work toward this vision by defining and measuring our results against strategic priorities that we establish at the beginning of every year.

Below we summarize the results of our 2023 strategic priorities:

  1. Deliver High Performance, High Value service through operational excellence.
    • Increased our Canadian drilling rig utilization days and well servicing rig operating hours over 2022, maintaining our position as the leading provider of high-quality and reliable services in Canada.
    • Recertified and reactivated a total of four rigs in the Middle East, exiting 2023 with eight active rigs that represent approximately US$475 million in backlog revenue that stretches into 2028.
    • Acquired CWC in November, expanding our Canadian well servicing business and North America drilling rig fleet.
    • Reinvested $227 million into our equipment and infrastructure. This included a significant upgrade to add the industry’s most advanced AC Super Triple rig to our Canadian fleet, equipped with AlphaTM automation, EverGreenTM products, and rig floor robotics.
    • Coached over 900 rig-based employees through our New Employee Orientation focused on industry-leading safety and performance training at our world-class facilities in Nisku, Alberta and Houston, Texas.
  2. Maximize free cash flow by increasing Adjusted EBITDA margins, revenue efficiency, and growing revenue from AlphaTM technologies and EverGreenTM suite of environmental solutions.
    • Generated cash from operations of $501 million, a 111% increase over 2022.
    • Increased our daily operating margins(1) 32% in Canada and 69% in the U.S. year over year.
    • Grew combined AlphaTM and EverGreenTM revenue by over 10% compared with 2022.
    • Ended the year with 75 AC Super Triple AlphaTM rigs compared to 70 at the beginning of the year.
    • Scaled our EverGreenTM suite of environmental solutions, ending the year with approximately 65% of our AC Super Triple rigs equipped with at least one EverGreenTM product, including 13 EverGreenTM BESS versus seven a year ago.
    • Integrated the well servicing assets from our 2022 acquisition of High Arctic, which helped increase our annual Completion and Production Services’ Adjusted EBITDA 34% in 2023.
  3. Reduce debt by at least $150 million and allocate 10% to 20% of free cash flow before debt repayments for share repurchases. Long-term debt reduction target of $500 million between 2022 and 2025 and sustained Net Debt to Adjusted EBITDA ratio(2) of below 1.0 times by the end of 2025.
    • Reduced debt by $152 million and ended the year with more than $600 million of available liquidity.
    • Returned $30 million of capital to shareholders through share repurchases and renewed our NCIB, allowing us to purchase up to approximately 10% of our public float.
    • Ended the year with a Net Debt to Adjusted EBITDA ratio(1) of approximately 1.4 times and remain committed to reaching a sustained Net Debt to Adjusted EBITDA ratio of below 1.0 times by the end of 2025.

(1) Revenue per utilization day less operating costs per utilization day.
(2) See “FINANCIAL MEASURES AND RATIOS”.

2024 Strategic Priorities

Precision’s strategic priorities for 2024 are focused on increasing our capital returns to shareholders by delivering best-in-class service and generating free cash flow. Precision’s strategic priorities for 2024 are as follows:

  1. Concentrate organizational efforts on leveraging our scale and generating free cash flow.
  2. Reduce debt by $150 million to $200 million and allocate 25% to 35% of free cash flow before debt repayments to share repurchases, while remaining committed to achieving a sustained Net Debt to Adjusted EBITDA ratio of below 1.0 times by the end of 2025. Increase long-term debt reduction target to $600 million between 2022 and 2026 and continue to move direct shareholder capital returns towards 50% of free cash flow.
  3. Continue to deliver operational excellence in drilling and service rig operations to strengthen our competitive position and extend market penetration of our Alpha™ and EverGreen™ products.

OUTLOOK

Energy industry fundamentals continue to support drilling activity for oil and natural gas despite economic uncertainty and the continued presence of global conflict. Today, oil prices are supported by increasing global demand and limited supply growth as OPEC continues to honor its lower production quotas and producers remain committed to returning capital to shareholders versus increasing production. Current depressed global inventories, potential refilling of the U.S. Strategic Petroleum Reserve, and fewer high quality drilling locations all provide cautious optimism for price improvements.

Natural gas has demonstrated price weaknesses since early 2023; however, this lower-carbon energy source is becoming increasingly favored as countries around the world stress the importance of sustainability, decarbonization and energy security. Even with the recent U.S. moratorium on new U.S. Liquefied Natural Gas (LNG) export terminals, we still expect North American LNG export capacity (including LNG Canada) to increase by more than 14 bcf/d over the next three years due to projects that are currently under construction. We therefore anticipate a sustained period of elevated natural gas drilling activity in both the U.S. and Canada.

In Canada, Precision’s drilling activity remained strong throughout 2023 and we expect high activity levels to continue into 2024 due to strong oil prices, tight supply of Super-Spec drilling rigs and increases in hydrocarbon export capacity. The Trans Mountain oil pipeline expansion is expected to be commissioned late in the first half of 2024, increasing Canada’s tidewater takeaway capacity for crude oil by approximately 590,000 barrels per day. The Coastal GasLink pipeline achieved mechanical completion in late 2023 and will deliver gas to LNG Canada, which is expected to begin start-up activities in 2024.

Northwestern Alberta and Northeastern British Columbia natural gas developments are prime beneficiaries of LNG Canada. The January 2023 agreement between the Government of British Columbia and the Blueberry River First Nation facilitated a significant increase in drilling license approvals and should lead to more drilling activity in the region. Large pad drilling programs are ideally suited for our Super Triple rigs, resulting in strong customer interest for these rigs over the next several years. We expect our Super Triple fleet to be in high demand in 2024 and beyond, supporting higher day rates and daily operating margins, and longer-term take-or-pay contracts. In January 2024, we added the industry’s most advanced Super Triple to our Canadian fleet on a three-year term contract, bringing our Canadian Super Triple fleet size to 30.

In the Canadian heavy oil market, we expect activity levels to remain strong as Canadian producers are benefiting from favorable oil pricing due to a weaker Canadian dollar exchange rate and improving heavy oil differentials. Precision’s Super Single rigs are well suited for long-term conventional heavy oil development in the oil sands and Clearwater formation. We expect our Super Single pad-capable rigs to remain fully utilized throughout the year, supporting higher day rates.

In the U.S., drilling activity began to weaken in early 2023 due to lower natural gas prices and oil price volatility and was exacerbated by drilling and completion efficiencies, consolidation among producers, and continued capital discipline. As a result in 2023, the fourth quarter U.S. active land rig count declined by approximately 20% as compared with 2022. If oil prices remain stable and around today’s level, we expect demand to begin to improve in the second quarter and gain momentum through the remainder of 2024 as customers embark on a new budget cycle, seek to maintain or possibly increase production levels, and replenish inventories.

Our AlphaTM technologies and EverGreenTM suite of environmental solutions continue to gain momentum and have become key competitive differentiators for our rigs as these offerings deliver exceptional value to our customers by reducing risks, well construction costs, and carbon footprint. Currently, approximately 65% of our Super Triple rigs have at least one EverGreenTM product, including 13 EverGreenTM BESS. These battery systems have proven to be an economically viable emissions reduction solution for our customers, and we anticipate continued demand for additional deployments in 2024.

Internationally, we activated our eighth rig in November and now have five active rigs in Kuwait and three active rigs in the Kingdom of Saudi Arabia and expect to increase activity approximately 40% year over year. The majority of these rigs are on five-year term contracts that stretch into 2027 and 2028, providing Precision with predictable cash flow for the next several years. We continue to bid our remaining idle rigs within the region and remain optimistic about our ability to secure rig reactivations.

Precision is the leading provider of high-quality and reliable well services in Canada and the outlook for this business is positive. High customer demand for well maintenance and completion services is expected to add tightness to the availability of staffed service rigs, supporting healthy activity and pricing into the foreseeable future. In November, Precision closed the acquisition of CWC, which enhances our Canadian well servicing offering with high-quality rigs in complementary geographic regions. The acquisition is expected to increase activity approximately 40% in 2024 and provide accretive cash flow on a per share basis.

Commodity Prices

Fourth quarter average West Texas Intermediate and Western Canadian Select oil prices decreased 5% and 14%, respectively, from 2022. Average Henry Hub and AECO natural gas prices declined 52% and 56%, respectively from 2022.

For the three months ended December 31, For the year ended December 31,
2023 2022 2023 2022
Average oil and natural gas prices
Oil
West Texas Intermediate (per barrel) (US$) 78.33 82.77 77.62 94.23
Western Canadian Select (per barrel) (US$) 56.40 65.87 58.96 78.15
Natural gas
United States
Henry Hub (per MMBtu) (US$) 2.91 6.10 2.67 6.51
Canada
AECO (per MMBtu) (CDN$) 2.30 5.24 2.64 5.43


Contracts

The following chart outlines the average number of drilling rigs under term contract by quarter as at February 5, 2024. For those quarters ending after December 31, 2023, this chart represents the minimum number of term contracts from which we will earn revenue. We expect the actual number of contracted rigs to vary in future periods as we sign additional term contracts.

Average for the quarter ended 2023 Average for the quarter ended 2024
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
Average rigs under term contract as of February 5, 2024:
U.S. 40 37 32 28 20 16 11 8
Canada 19 23 23 23 24 22 19 18
International 4 5 7 7 8 8 7 7
Total 63 65 62 58 52 46 37 33

The following chart outlines the average number of drilling rigs that we had under term contract for 2023 and the average number of rigs we have under term contract as at February 5, 2024.

Average for the year ended
2023 2024
Average rigs under term contract as of February 5, 2024:
U.S. 34 14
Canada 22 21
International 6 8
Total 62 43

In Canada, term contracted rigs normally generate 250 utilization days per year because of the seasonal nature of well site access. Accordingly, our anticipated Canadian rigs under term contract may fluctuate as customers complete their commitments earlier than projected. In most regions in the U.S. and internationally, term contracts normally generate 365 utilization days per year.

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 2022 Average for the quarter ended 2023
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
Average Precision active rig count:
U.S. 51 55 57 60 60 51 41 45
Canada 63 37 59 66 69 42 57 64
International 6 6 6 6 5 5 6 8
Total 120 98 122 132 134 98 104 117

According to industry sources, as at February 5, 2024, the U.S. active land drilling rig count has decreased 19% from the same point last year while the Canadian active land drilling rig count has decreased 7%. To date in 2024, approximately 80% of the U.S. industry’s active rigs and 60% of the Canadian industry’s active rigs were drilling for oil targets, compared with 79% for the U.S. and 63% for Canada at the same time last year.

Capital Spending and Free Cash Flow Allocation

We remain committed to disciplined cash flow management, capital spending and returning capital to shareholders. In 2024, capital spending is expected to be $195 million. By spend category, we expect to incur $155 million for sustaining, infrastructure and intangibles, including approximately $45 million of long-lead items, and $40 million for expansion and upgrades. We expect that the $195 million will be split as follows: $177 million in the Contract Drilling Services segment, $13 million in the Completion and Production Services segment, and $5 million in the Corporate segment.

As at December 31, 2023, we had capital commitments of approximately $175 million with payments expected through 2026.

SEGMENTED FINANCIAL RESULTS (UNAUDITED)

Precision’s operations are reported in two segments: Contract Drilling Services, which includes our drilling rig, oilfield supply and manufacturing divisions; and Completion and Production Services, which includes our service rig, rental and camp and catering divisions.

For the three months ended December 31, For the year ended December 31,
(Stated in thousands of Canadian dollars) 2023 2022 % Change 2023 2022 % Change
Revenue:
Contract Drilling Services 446,503 453,225 (1.5 ) 1,704,265 1,436,134 18.7
Completion and Production Services 62,459 59,250 5.4 240,716 187,171 28.6
Inter-segment eliminations (2,091 ) (1,971 ) 6.1 (7,127 ) (6,111 ) 16.6
506,871 510,504 (0.7 ) 1,937,854 1,617,194 19.8
Adjusted EBITDA:(1)
Contract Drilling Services 162,459 137,551 18.1 630,761 397,753 58.6
Completion and Production Services 12,193 11,981 1.8 51,224 38,147 34.3
Corporate and Other (23,421 ) (58,442 ) (59.9 ) (70,867 ) (124,295 ) (43.0 )
151,231 91,090 66.0 611,118 311,605 96.1

(1) See “FINANCIAL MEASURES AND RATIOS”.

SEGMENT REVIEW OF CONTRACT DRILLING SERVICES (UNAUDITED)

For the three months ended December 31, For the year ended December 31,
(Stated in thousands of Canadian dollars, except where noted) 2023 2022 % Change 2023 2022 % Change
Revenue 446,503 453,225 (1.5 ) 1,704,265 1,436,134 18.7
Expenses:
Operating 270,303 296,716 (8.9 ) 1,030,053 988,885 4.2
General and administrative 13,741 18,958 (27.5 ) 43,451 49,496 (12.2 )
Adjusted EBITDA(1) 162,459 137,551 18.1 630,761 397,753 58.6
Adjusted EBITDA as a percentage of revenue(1) 36.4 % 30.3 % 37.0 % 27.7 %

(1) See “FINANCIAL MEASURES AND RATIOS”.

United States onshore drilling statistics:(1) 2023 2022
Precision Industry(2) Precision Industry(2)
Average number of active land rigs for quarters ended:
March 31 60 744 51 603
June 30 51 700 55 687
September 30 41 631 57 746
December 31 45 603 60 761
Year to date average 49 670 56 699

(1) United States lower 48 operations only.
(2) Baker Hughes rig counts.

Canadian onshore drilling statistics:(1) 2023 2022
Precision Industry(2) Precision Industry(2)
Average number of active land rigs for quarters ended:
March 31 69 221 63 205
June 30 42 117 37 113
September 30 57 188 59 199
December 31 64 181 66 187
Year to date average 58 177 56 176

(1) Canadian operations only.
(2) Baker Hughes rig counts.

Revenue from Contract Drilling Services was $447 million, largely consistent with 2022, while Adjusted EBITDA increased 18% to $162 million. The increase in Adjusted EBITDA was primarily due to higher day rates and international activity, partially offset by lower North American drilling activity.

Drilling rig utilization days (drilling days plus move days) in the U.S. were 4,138, 25% lower than 2022. Drilling rig utilization days in Canada were 5,909, approximately 3% lower than 2022. The movement in utilization days in both the U.S. and Canada was consistent with changes in industry activity. Our international drilling rig utilization days increased to 693, a 26% improvement from 2022, as we reactivated rigs in the Middle East under long-term contracts.

Revenue per utilization day in the U.S. increased 10% from 2022 and was primarily the result of higher fleet average day rates, idle but contracted rig revenue and cost recoveries, partially offset by lower turnkey revenue. We recognized revenue from idle but contracted rigs and turnkey activity of US$7 million and nil, respectively, as compared with nil and US$4 million in 2022. Drilling rig revenue per utilization day in Canada increased 16% due to higher average day rates and cost recoveries. Our international revenue per utilization day for the quarter remained consistent with 2022.

In the U.S., 53% of utilization days were generated from rigs under term contract as compared with 59% in 2022. In Canada, 40% of our utilization days were generated from rigs under term contract, compared with 20% in 2022.

U.S. operating costs per utilization day increased 9% from 2022 and was primarily due to higher rig operating costs, repairs and maintenance, recoverable costs and the impact of fixed costs being spread over fewer activity days. Our Canadian operating costs per utilization day increased 9% as compared with 2022 and was due to higher field wages and recoverable costs, partially offset by lower repairs and maintenance.

Our general and administrative expenses decreased $5 million as compared with 2022 and was primarily the result of lower share-based compensation.

During the fourth quarter, we added seven Canadian drilling rigs and 11 U.S. drilling rigs to our fleet and decommissioned 20 Canadian and seven U.S. legacy drilling rigs. As at December 31, 2023, we had a global drilling rig fleet of 214, comprised of 104 rigs in the U.S., 97 rigs in Canada and 13 rigs in the Middle East.

SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES (UNAUDITED)

(Stated in thousands of Canadian dollars, For the three months ended December 31, For the year ended December 31,
except where noted) 2023 2022 % Change 2023 2022 % Change
Revenue 62,459 59,250 5.4 240,716 187,171 28.6
Expenses:
Operating 48,297 45,462 6.2 181,622 141,827 28.1
General and administrative 1,969 1,807 9.0 7,870 7,197 9.4
Adjusted EBITDA(1) 12,193 11,981 1.8 51,224 38,147 34.3
Adjusted EBITDA as a percentage of revenue(1) 19.5 % 20.2 % 21.3 % 20.4 %
Well servicing statistics:
Number of service rigs (end of period) 183 135 35.6 183 135 35.6
Service rig operating hours 56,683 49,368 14.8 201,627 170,362 18.4
Service rig operating hour utilization 38 % 40 % 42 % 42 %

(1) See “FINANCIAL MEASURES AND RATIOS”.

Completion and Production Services revenue increased to $62 million, an increase of $3 million from 2022. Our increased revenue was due to higher well service rates and activity. Our 2023 service rig operating hours increased 15% compared with 2022. Completion and Production Services generated 3% of its revenue from U.S. operations compared with 9% in 2022.

Operating costs as a percentage of revenue were 77%, consistent with 2022. As compared to 2022, our general and administrative expenses increased 9%, primarily due to overhead charges associated with the CWC acquisition.

Adjusted EBITDA was $12 million, consistent with 2022.

SEGMENT REVIEW OF CORPORATE AND OTHER (UNAUDITED)

Our Corporate and Other segment provides support functions to our operating segments. The Corporate and Other segment had negative Adjusted EBITDA of $23 million as compared with negative $58 million in 2022. Our improved Adjusted EBITDA was due to lower share-based compensation, partially offset by $4 million in transaction costs and severance.

OTHER ITEMS (UNAUDITED)

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 2022 Annual Report.

A summary of expense amounts 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) 2023 2022 2023 2022
Cash settled share-based incentive plans 11,972 75,438 32,063 133,240
Equity settled share-based incentive plans 697 2,531 427
Total share-based incentive compensation plan expense 12,669 75,438 34,594 133,667
Allocated:
Operating 2,765 18,913 9,497 33,607
General and Administrative 9,904 56,525 25,097 100,060
12,669 75,438 34,594 133,667

Cash settled share-based compensation for the quarter was $12 million as compared with $75 million in 2022. The lower expense in 2023 was primarily due to lower share price performance as compared with 2022.

During the first quarter of 2023, we issued Executive Restricted Share Units (Executive RSUs) to certain senior executives. Accordingly, our equity-settled share-based compensation for the quarter was $1 million as compared with nil in 2022.

As at December 31, 2023, the majority of our share-based compensation plans were classified as cash-settled and will be impacted by changes in our share price. Although accounted for as cash-settled, Precision retains the ability to settle certain vested units in common shares at its discretion.

Finance Charges

Net finance charges were $19 million, a decrease of $4 million compared with 2022 and was the result of lower outstanding long-term debt. Interest charges on our U.S. dollar-denominated long-term debt were US$12 million ($17 million) as compared with US$15 million ($21 million) in 2022.

Income Tax

Income tax recovery for the quarter was $69 million as compared with an expense of $9 million in 2022. During the fourth quarter of 2023, we recorded a deferred income tax asset of $73 million for the expected future use of certain Canadian operating losses. We continue to not recognize deferred income tax assets for certain international locations.

CWC Acquisition

We completed our acquisition of CWC Energy Services Corp. on November 8, 2023 for cash of $14 million and the issuance of 947,807 common shares for total consideration of $89 million plus the assumption of $61 million of long-term debt. We recorded a gain on this acquisition of $26 million. We accounted for the acquisition as a business combination and used the acquisition method to record the net assets and liabilities assumed at fair value. Our preliminary purchase price allocation was based on management’s best estimate of fair values of CWC’s assets and liabilities as at the transaction date of November 8, 2023. If within one year of the transaction date new information is obtained regarding facts and circumstances as of the transaction date that adjust these fair values, the purchase price allocation will be revised.

With this acquisition, we substantially increased the size and scale of our Canadian well servicing operations and expanded our geographic footprint into complementary regions. We added 62 marketable service rigs to our fleet along with experienced crews and field personnel and operating facilities. We also added 18 high-quality drilling rigs to our fleet, including seven drilling rigs in Canada and 11 drilling rigs in the U.S. The addition of the U.S. drilling rigs expanded our operations into Wyoming, further diversifying our serviceable U.S. basins.

The integration of CWC’s service and drilling rig business is largely complete and we continue to realize operating synergies from the acquisition with approximately $12 million of the expected $20 million annualized synergies realized to date. The acquired operations, equipment, crews and field personnel further support our High Performance, High Value service offering. As we integrated operations, we successfully minimized customer disruptions, while maintaining our industry-leading safety standards and High Performance, High Value operations.

LIQUIDITY AND CAPITAL RESOURCES (UNAUDITED)

The oilfield services business is inherently cyclical in nature. To manage this, we focus on maintaining a strong financial position in order to have the financial flexibility to manage our growth and cash flow regardless of where we are in the business cycle. We maintain a variable operating cost structure so we can be responsive to changes in demand.

Our maintenance capital expenditures are tightly governed and highly responsive to activity levels with additional cost savings leverage provided through our internal manufacturing and supply divisions. Term contracts on expansion capital provide more certainty of future revenues and return on our capital investments.

Liquidity

Amount Availability Used for Maturity
Senior Credit Facility (secured)
US$447 million (extendible, revolving term credit facility with US$353 million accordion feature) Nil drawn and US$56 million in outstanding letters of credit General corporate purposes June 18, 2025
Real estate credit facilities (secured)
US$8 million Fully drawn General corporate purposes November 19, 2025
$16 million Fully drawn General corporate purposes March 16, 2026
$10 million Fully drawn General corporate purposes June 30, 2028
Operating facilities (secured)
$40 million Undrawn, except $20 million in outstanding letters of credit Letters of credit and general corporate purposes
US$15 million Undrawn Short-term working capital requirements
Demand letter of credit facility (secured)
US$40 million Undrawn, except US$28 million in
outstanding letters of credit
Letters of credit
Unsecured senior notes (unsecured)
US$273 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

During the quarter, we reduced debt by $25 million primarily from the redemption of US$26 million principal amount of our 2026 unsecured senior notes for an aggregate purchase price of $35 million, offset by the assumption of CWC’s $10 million Canadian Real Estate Facility.

As at December 31, 2023, we had $929 million outstanding under our Senior Credit Facility, Real Estate Credit Facilities and unsecured senior notes as compared with $1,103 million at December 31, 2022. The current blended cash interest cost of our debt is approximately 7.0%.

CWC Acquisition

We acquired $61 million of long-term debt obligations comprised of a $51 million syndicated loan and a $10 million Canadian Real Estate Facility. Upon closing, the syndicated loan was fully repaid and cancelled.

The Canadian Real Estate Facility matures in June 2028 and is secured by real properties in Alberta, Canada. Principal plus interest payments are due monthly, based on a 22-year amortization period with any unpaid principal and accrued interest due at maturity. Interest is calculated using a CORRA rate plus margin.

In addition, we acquired an interest rate swap agreement to exchange floating rate interest payments for fixed rate interest payments. Accordingly, we pay a fixed rate of approximately 4.7%.

Consistent with our existing Canadian Real Estate Credit Facility, the facility contains certain affirmative and negative covenants and events of default, customary for these types of transactions. Additionally, we must maintain financial covenants in accordance with the Senior Credit Facility, described below, as of the last day of each period of four consecutive fiscal quarters. In the event the Senior Credit Facility expires, is cancelled or is terminated, financial covenants in effect at that time shall remain in place for the remaining duration of the facility.

Senior Credit Facility

Our Senior Credit Facility requires that we comply with certain covenants including a leverage ratio of consolidated senior debt to consolidated Covenant EBITDA of less than 2.5:1, and consolidated interest coverage ratio of at least 2.5:1. For purposes of calculating the leverage ratio, consolidated senior debt only includes secured indebtedness. The Senior Credit Facility limits the redemption and repurchase of junior debt subject to a pro forma senior net leverage covenant test of less than or equal to 1.75:1.

The Senior Credit Facility matures on June 18, 2025.

Unsecured Senior Notes

The unsecured senior notes require that we comply with certain restrictive and financial covenants, including an incurrence based consolidated interest coverage ratio test of consolidated cash flow, as defined in the senior note agreements, to consolidated interest expense of greater than 2.0:1 for the most recent four consecutive fiscal quarters. In the event our consolidated interest coverage ratio is less than 2.0:1 for the most recent four consecutive fiscal quarters, the unsecured senior notes restrict our ability to incur additional indebtedness.

For further information, please see the unsecured senior note indentures which are available on SEDAR and EDGAR.

Covenants (Unaudited)

As at December 31, 2023, we were in compliance with the covenants of our Senior Credit Facility and Real Estate Credit Facilities.

Covenant At December 31, 2023
Senior Credit Facility
Consolidated senior debt to consolidated covenant EBITDA(1) < 2.50 0.07
Consolidated covenant EBITDA to consolidated interest expense > 2.50 6.92
Real Estate Credit Facilities
Consolidated covenant EBITDA to consolidated interest expense > 2.50 6.92

(1) For purposes of calculating the leverage ratio consolidated senior debt only includes secured indebtedness.

Impact of foreign exchange rates

The following table summarizes the average and closing Canada-U.S. foreign exchanges rates.

For the three months ended December 31, For the year ended December 31,
2023 2022 2023 2022
Canada-U.S. foreign exchange rates
Average 1.36 1.36 1.35 1.30
Closing 1.32 1.36 1.32 1.36


Hedge of investments in foreign operations

We utilize foreign currency long-term debt to hedge our exposure to changes in the carrying value of our net investment in certain foreign operations as a result of changes in foreign exchange rates.

We have designated our U.S. dollar-denominated long-term debt as a net investment hedge in our U.S. operations and other foreign operations that have a U.S. dollar functional currency. To be accounted for as a hedge, the foreign currency denominated long-term debt must be designated and documented as such and must be effective at inception and on an ongoing basis. We recognize the effective amount of this hedge (net of tax) in other comprehensive income. We recognize ineffective amounts (if any) in net earnings (loss).

Average shares outstanding (Unaudited)

The following tables reconcile net earnings (loss) and 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,
2023 2022 2023 2022
Net earnings (loss) – basic 146,722 3,483 289,244 (34,293 )
Effect of share options and other equity compensation plans 5,373 9,235
Net earnings (loss) – diluted 152,095 3,483 298,479 (34,293 )

For the three months ended December 31, For the year ended December 31,
(Stated in thousands) 2023 2022 2023 2022
Weighted average shares outstanding – basic 14,084 13,538 13,754 13,546
Effect of share options and other equity compensation plans 1,425 4 1,533
Weighted average shares outstanding – diluted 15,509 13,542 15,287 13,546


QUARTERLY FINANCIAL SUMMARY (UNAUDITED)

(Stated in thousands of Canadian dollars, except per share amounts) 2023
Quarters ended March 31 June 30 September 30 December 31
Revenue 558,607 425,622 446,754 506,871
Adjusted EBITDA(1) 203,219 142,093 114,575 151,231
Net earnings 95,830 26,900 19,792 146,722
Net earnings per basic share 7.02 1.97 1.45 10.42
Net earnings per diluted share 5.57 1.63 1.45 9.81
Funds provided by operations(1) 159,653 136,959 91,608 145,189
Cash provided by operations 28,356 213,460 88,500 170,255

(Stated in thousands of Canadian dollars, except per share amounts) 2022
Quarters ended March 31 June 30 September 30 December 31
Revenue 351,339 326,016 429,335 510,504
Adjusted EBITDA(1) 36,855 64,099 119,561 91,090
Net earnings (loss) (43,844 ) (24,611 ) 30,679 3,483
Net earnings (loss) per basic share (3.25 ) (1.81 ) 2.26 0.27
Net earnings (loss) per diluted share (3.25 ) (1.81 ) 2.03 0.27
Funds provided by operations(1) 29,955 60,373 81,327 111,339
Cash provided by (used in) operations (65,294 ) 135,174 8,142 159,082

(1) See “FINANCIAL MEASURES AND RATIOS”.

FINANCIAL MEASURES AND RATIOS (UNAUDITED)

Non-GAAP Financial Measures
We reference certain additional Non-Generally Accepted Accounting Principles (Non-GAAP) measures that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors.
Adjusted EBITDA We believe Adjusted EBITDA (earnings before income taxes, loss (gain) on investments and other assets, gain on acquisition, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, loss on asset decommissioning, gain on asset disposals, and depreciation and amortization), as reported in our Condensed Interim Consolidated Statements of Net Earnings (Loss) and our reportable operating segment disclosures, is a useful measure because it gives an indication of the results from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and depreciation and amortization charges.

The most directly comparable financial measure is net earnings (loss).

For the three months ended December 31, For the year ended December 31,
(Stated in thousands of Canadian dollars) 2023 2022 2023 2022
Adjusted EBITDA by segment:
Contract Drilling Services 162,459 137,551 630,761 397,753
Completion and Production Services 12,193 11,981 51,224 38,147
Corporate and Other (23,421 ) (58,442 ) (70,867 ) (124,295 )
Adjusted EBITDA 151,231 91,090 611,118 311,605
Depreciation and amortization 78,734 71,373 297,557 279,035
Gain on asset disposals (8,883 ) (7,774 ) (24,469 ) (29,926 )
Loss on asset decommissioning 9,592 9,592
Foreign exchange (773 ) (84 ) (1,667 ) 1,278
Finance charges 19,468 23,519 83,414 87,813
Gain on repurchase of unsecured notes (137 )
Gain on acquisition (25,761 ) (25,761 )
Loss (gain) on investments and other assets 735 (8,714 ) 6,810 (12,452 )
Incomes taxes (68,603 ) 9,287 (23,465 ) 20,150
Net earnings (loss) 146,722 3,483 289,244 (34,293 )

Funds Provided by (Used in) Operations We believe funds provided by (used in) operations, as reported in our Condensed Interim Consolidated Statements of Cash Flows, is a useful measure because it provides an indication of the funds our principal business activities generate prior to consideration of working capital changes, which is primarily made up of highly liquid balances.

The most directly comparable financial measure is cash provided by (used in) operations.

Net Capital Spending We believe net capital spending is a useful measure as it provides an indication of our primary investment activities.

The most directly comparable financial measure is cash provided by (used in) investing activities.

Net capital spending is calculated as follows:

For the three months ended December 31, For the year ended December 31,
(Stated in thousands of Canadian dollars) 2023 2022 2023 2022
Capital spending by spend category
Expansion and upgrade 24,459 12,699 63,898 63,305
Maintenance, infrastructure and intangibles 54,388 44,610 162,851 120,945
78,847 57,309 226,749 184,250
Proceeds on sale of property, plant and equipment (3,117 ) (5,165 ) (23,841 ) (37,198 )
Net capital spending 75,730 52,144 202,908 147,052
Business acquisitions 646 28,646 10,200
Proceeds from sale of investments and other assets (10,013 )
Purchase of investments and other assets 61 8 5,343 617
Receipt of finance lease payments (191 ) (255 )
Changes in non-cash working capital balances (18,619 ) (6,573 ) (11,845 ) (13,454 )
Cash used in investing activities 57,627 45,579 214,784 144,415

Working Capital We define working capital as current assets less current liabilities, as reported in our Condensed Interim Consolidated Statements of Financial Position.

Working capital is calculated as follows:

December 31, December 31,
(Stated in thousands of Canadian dollars) 2023 2022
Current assets 510,881 470,670
Current liabilities 365,642 410,029
Working capital 145,239 60,641

Non-GAAP Ratios
We reference certain additional Non-GAAP ratios that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors.
Adjusted EBITDA % of Revenue We believe Adjusted EBITDA as a percentage of consolidated revenue, as reported in our Condensed Interim Consolidated Statements of Net Earnings (Loss), provides an indication of our profitability from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and depreciation and amortization charges.
Long-term debt to long-term debt plus equity We believe that long-term debt (as reported in our Condensed Interim Consolidated Statements of Financial Position) to long-term debt plus equity (total shareholders’ equity as reported in our Condensed Interim Consolidated Statements of Financial Position) provides an indication of our debt leverage.
Net Debt to Adjusted EBITDA We believe that the Net Debt (long-term debt less cash, as reported in our Condensed Interim Consolidated Statements of Financial Position) to Adjusted EBITDA ratio provides an indication of the number of years it would take for us to repay our debt obligations.
Supplementary Financial Measures
We reference certain supplementary financial measures that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors.
Capital Spending by Spend Category We provide additional disclosure to better depict the nature of our capital spending. Our capital spending is categorized as expansion and upgrade, maintenance and infrastructure, or intangibles.


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 2024;
  • our capital expenditures, free cash flow allocation and debt reduction plan for 2024;
  • anticipated activity levels, demand for our drilling rigs, day rates and daily operating margins in 2024;
  • the average number of term contracts in place for 2024;
  • customer adoption of AlphaTM technologies and EverGreenTM suite of environmental solutions;
  • timing and amount of accretive cash flow from acquired drilling and well servicing assets;
  • anticipated North American LNG export capacity;
  • potential commercial opportunities and rig contract renewals; and
  • our future debt reduction plans.

These forward-looking information and statements are based on certain assumptions and analysis made by Precision in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. These include, among other things:

  • our ability to react to customer spending plans as a result of changes in oil and natural gas prices;
  • the status of current negotiations with our customers and vendors;
  • customer focus on safety performance;
  • existing term contracts are neither renewed nor terminated prematurely;
  • our ability to deliver rigs to customers on a timely basis;
  • the impact of an increase/decrease in capital spending; and
  • the general stability of the economic and political environments in the jurisdictions where we operate.

Undue reliance should not be placed on forward-looking information and statements. Whether actual results, performance or achievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from our expectations. Such risks and uncertainties include, but are not limited to:

  • volatility in the price and demand for oil and natural gas;
  • fluctuations in the level of oil and natural gas exploration and development activities;
  • fluctuations in the demand for contract drilling, well servicing and ancillary oilfield services;
  • our customers’ inability to obtain adequate credit or financing to support their drilling and production activity;
  • changes in drilling and well servicing technology, which could reduce demand for certain rigs or put us at a competitive advantage;
  • shortages, delays and interruptions in the delivery of equipment supplies and other key inputs;
  • liquidity of the capital markets to fund customer drilling programs;
  • availability of cash flow, debt and equity sources to fund our capital and operating requirements, as needed;
  • the impact of weather and seasonal conditions on operations and facilities;
  • competitive operating risks inherent in contract drilling, well servicing and ancillary oilfield services;
  • ability to improve our rig technology to improve drilling efficiency;
  • general economic, market or business conditions;
  • the availability of qualified personnel and management;
  • a decline in our safety performance which could result in lower demand for our services;
  • changes in laws or regulations, including changes in environmental laws and regulations such as increased regulation of hydraulic fracturing or restrictions on the burning of fossil fuels and greenhouse gas emissions, which could have an adverse impact on the demand for oil and natural gas;
  • terrorism, social, civil and political unrest in the foreign jurisdictions where we operate;
  • fluctuations in foreign exchange, interest rates and tax rates; and
  • other unforeseen conditions which could impact the use of services supplied by Precision and Precision’s ability to respond to such conditions.

Readers are cautioned that the foregoing 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, 2022, 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, 2023 December 31, 2022
ASSETS
Current assets:
Cash $ 54,182 $ 21,587
Accounts receivable 421,427 413,925
Inventory 35,272 35,158
Total current assets 510,881 470,670
Non-current assets:
Income tax recoverable 682 1,602
Deferred tax assets 73,662 455
Property, plant and equipment 2,338,088 2,303,338
Intangibles 17,310 19,575
Right-of-use assets 63,438 60,032
Finance lease receivables 5,003
Investments and other assets 9,971 20,451
Total non-current assets 2,508,154 2,405,453
Total assets $ 3,019,035 $ 2,876,123
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 342,382 $ 392,053
Income taxes payable 3,026 2,991
Current portion of lease obligations 17,386 12,698
Current portion of long-term debt 2,848 2,287
Total current liabilities 365,642 410,029
Non-current liabilities:
Share-based compensation 25,122 60,133
Provisions and other 7,140 7,538
Lease obligations 57,124 52,978
Long-term debt 914,830 1,085,970
Deferred tax liabilities 73,515 28,946
Total non-current liabilities 1,077,731 1,235,565
Shareholders’ equity:
Shareholders’ capital 2,365,129 2,299,533
Contributed surplus 75,086 72,555
Deficit (1,012,029 ) (1,301,273 )
Accumulated other comprehensive income 147,476 159,714
Total shareholders’ equity 1,575,662 1,230,529
Total liabilities and shareholders’ equity $ 3,019,035 $ 2,876,123


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) 2023 2022 2023 2022
Revenue $ 506,871 $ 510,504 $ 1,937,854 $ 1,617,194
Expenses:
Operating 316,509 340,207 1,204,548 1,124,601
General and administrative 39,131 79,207 122,188 180,988
Earnings before income taxes, loss (gain) on investments and other assets, gain on acquisition, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, loss on asset decommissioning, gain on asset disposals, and depreciation and amortization 151,231 91,090 611,118 311,605
Depreciation and amortization 78,734 71,373 297,557 279,035
Gain on asset disposals (8,883 ) (7,774 ) (24,469 ) (29,926 )
Loss on asset decommissioning 9,592 9,592
Foreign exchange (773 ) (84 ) (1,667 ) 1,278
Finance charges 19,468 23,519 83,414 87,813
Gain on repurchase of unsecured senior notes (137 )
Gain on acquisition (25,761 ) (25,761 )
Loss (gain) on investments and other assets 735 (8,714 ) 6,810 (12,452 )
Earnings (loss) before income taxes 78,119 12,770 265,779 (14,143 )
Income taxes:
Current 486 1,799 4,494 4,362
Deferred (69,089 ) 7,488 (27,959 ) 15,788
(68,603 ) 9,287 (23,465 ) 20,150
Net earnings (loss) $ 146,722 $ 3,483 $ 289,244 $ (34,293 )
Net earnings (loss) per share:
Basic $ 10.42 $ 0.27 $ 21.03 $ (2.53 )
Diluted $ 9.81 $ 0.27 $ 19.53 $ (2.53 )


CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

Three Months Ended December 31, Year Ended December 31,
(Stated in thousands of Canadian dollars) 2023 2022 2023 2022
Net earnings (loss) $ 146,722 $ 3,483 $ 289,244 $ (34,293 )
Unrealized gain (loss) on translation of assets and liabilities of operations denominated in foreign currency (36,755 ) (32,809 ) (33,433 ) 106,669
Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt 22,679 23,388 21,195 (81,735 )
Comprehensive income (loss) $ 132,646 $ (5,938 ) $ 277,006 $ (9,359 )


CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended December 31, Year Ended December 31,
(Stated in thousands of Canadian dollars) 2023 2022 2023 2022
Cash provided by (used in):
Operations:
Net earnings (loss) $ 146,722 $ 3,483 $ 289,244 $ (34,293 )
Adjustments for:
Long-term compensation plans (2,541 ) 25,247 6,659 60,094
Depreciation and amortization 78,734 71,373 297,557 279,035
Gain on asset disposals (8,883 ) (7,774 ) (24,469 ) (29,926 )
Loss on asset decommissioning 9,592 9,592
Foreign exchange (853 ) (286 ) (866 ) 638
Finance charges 19,468 23,519 83,414 87,813
Income taxes (68,603 ) 9,287 (23,465 ) 20,150
Other (9 ) 269 (229 ) 542
Loss (gain) on investments and other assets 735 (8,714 ) 6,810 (12,452 )
Gain on acquisition (25,761 ) (25,761 )
Gain on repurchase of unsecured senior notes (137 )
Income taxes paid (708 ) (240 ) (3,103 ) (3,263 )
Income taxes recovered 17 14 24 24
Interest paid (3,335 ) (4,972 ) (83,037 ) (85,678 )
Interest received 614 133 1,176 310
Funds provided by operations 145,189 111,339 533,409 282,994
Changes in non-cash working capital balances 25,066 47,743 (32,838 ) (45,890 )
170,255 159,082 500,571 237,104
Investments:
Purchase of property, plant and equipment (78,582 ) (57,309 ) (224,960 ) (184,250 )
Purchase of intangibles (265 ) (1,789 )
Proceeds on sale of property, plant and equipment 3,117 5,165 23,841 37,198
Proceeds from sale of investments and other assets 10,013
Business acquisitions (646 ) (28,646 ) (10,200 )
Purchase of investments and other assets (61 ) (8 ) (5,343 ) (617 )
Receipt of finance lease payments 191 255
Changes in non-cash working capital balances 18,619 6,573 11,845 13,454
(57,627 ) (45,579 ) (214,784 ) (144,415 )
Financing:
Issuance of long-term debt 162,649 144,889
Repayments of long-term debt (86,699 ) (132,163 ) (375,237 ) (250,749 )
Repurchase of share capital (17,004 ) (29,955 ) (10,010 )
Issuance of common shares from the exercise of options 3,671 9,833
Lease payments (3,010 ) (1,948 ) (9,423 ) (7,134 )
(106,713 ) (130,440 ) (251,966 ) (113,171 )
Effect of exchange rate changes on cash (798 ) (1,524 ) (1,226 ) 1,481
Increase (decrease) in cash 5,117 (18,461 ) 32,595 (19,001 )
Cash, beginning of period 49,065 40,048 21,587 40,588
Cash, end of period $ 54,182 $ 21,587 $ 54,182 $ 21,587


CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(Stated in thousands of Canadian dollars) Shareholders’
Capital
Contributed
Surplus
Accumulated
Other
Comprehensive
Income
Deficit Total
Equity
Balance at January 1, 2023 $ 2,299,533 $ 72,555 $ 159,714 $ (1,301,273 ) $ 1,230,529
Net earnings for the period 289,244 289,244
Other comprehensive loss for the period (12,238 ) (12,238 )
Acquisition share consideration 75,588 75,588
Settlement of Executive Performance and Restricted Share Units 19,206 19,206
Share repurchases (29,955 ) (29,955 )
Redemption of non-management directors share units 757 757
Share-based compensation expense 2,531 2,531
Balance at December 31, 2023 $ 2,365,129 $ 75,086 $ 147,476 $ (1,012,029 ) $ 1,575,662

(Stated in thousands of Canadian dollars) Shareholders’
Capital
Contributed
Surplus
Accumulated
Other
Comprehensive
Income
Deficit Total
Equity
Balance at January 1, 2022 $ 2,281,444 $ 76,311 $ 134,780 $ (1,266,980 ) $ 1,225,555
Net loss for the period (34,293 ) (34,293 )
Other comprehensive income for the period 24,934 24,934
Share options exercised 14,016 (4,183 ) 9,833
Share repurchases (10,010 ) (10,010 )
Share-based compensation reclassification 14,083 (219 ) 13,864
Share-based compensation expense 646 646
Balance at December 31, 2022 $ 2,299,533 $ 72,555 $ 159,714 $ (1,301,273 ) $ 1,230,529


2023 FOURTH QUARTER AND YEAR-END RESULTS 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 Tuesday, February 6, 2024.

To participate in the conference call please register at the URL link below. Once registered, you will receive a dial-in number and a unique PIN, which will allow you to ask questions.

https://register.vevent.com/register/BIbb9becf4f3494c3fa2f6293fa7e871e7

The call will also be webcast and can be accessed through the link below. A replay of the webcast call will be available on Precision’s website for 12 months.

https://edge.media-server.com/mmc/p/x5wzqtp3

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 AlphaTM that utilizes advanced automation software and analytics to generate efficient, predictable, and repeatable results for energy customers. Our drilling services are enhanced by our EverGreenTM suite of environmental solutions, which bolsters our commitment to reducing the environmental impact of our operations. Additionally, Precision offers well service rigs, camps and rental equipment all backed by a comprehensive mix of technical support services and skilled, experienced personnel.

Precision is headquartered in Calgary, Alberta, Canada and is listed on the Toronto Stock Exchange under the trading symbol “PD” and on the New York Stock Exchange under the trading symbol “PDS”.

For further information, please contact:

Lavonne Zdunich, CPA, CA
Vice President, Investor Relations
403.716.4500

800, 525 – 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1
Website: www.precisiondrilling.com


Primary Logo

GET THE LATEST UPDATES DELIVERED TO YOUR INBOX

Untitled
Policy
Precision Drilling

Precision Drilling Meets 2023 Debt Repayment and Share Repurchase Targets and Provides Capital Allocation, Financial and Operational Updates

CALGARY, Alberta, Jan. 05, 2024 — 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.

Precision Drilling Corporation (“Precision” or the “Company”) (TSX:PD; NYSE:PDS) is pleased to provide a series of positive announcements including: 1) 2023 debt repayment and year-end liquidity update; 2) capital allocation framework update; and 3) financial and operational update.

2023 Debt Repayment and Year-End Liquidity Update

Precision reduced total debt by $152 million in 2023, meeting its debt reduction goal. As at December 31, 2023, Precision’s outstanding debt obligations included:

  • US$273 million – 7.125% unsecured senior notes due January 15, 2026
  • US$400 million – 6.875% unsecured senior notes due January 15, 2029
  • US$28 million of real estate credit facilities

Precision ended 2023 with a cash balance of approximately $55 million and total liquidity of approximately $615 million.

Capital Allocation Framework Update

Over the past two years, we have reduced our debt by $258 million and lowered our Net Debt to Adjusted EBITDA leverage ratio1, which we expect to be below 1.5 times as at December 31, 2023. Precision is well on track to exceed its long-term debt reduction target of repaying $500 million between 2022 and 2025 and reaching a sustained Net Debt to Adjusted EBITDA leverage ratio of below 1.0 times by the end of 2025.

During 2023, Precision returned $30 million to shareholders through share repurchases under our Normal Course Issuer Bid and as at December 31, 2023, had 14,336,539 shares outstanding.

With a robust free cash flow outlook, we plan to improve our capital returns to shareholders in 2024 by increasing our debt reduction and share buyback allocations. In early February, we will provide specific capital allocation plans and targets for 2024.

1 Net Debt to Adjusted EBITDA leverage ratio is a Non-GAAP measure. Please refer to page 41 of Precision’s Annual Report for the year ended December 31, 2022 for more information.


Financial and Operational Update

Financial Results

Precision intends to release its 2023 fourth quarter results before markets open on Tuesday, February 6, 2024. These results will include contributions from the acquisition of CWC Energy Services Corp. (“CWC”), which closed on November 8, 2023. Fourth quarter drilling field margins in Canada and the U.S. are expected to align with previous guidance. With a closing share price of $71.96 on December 31, 2023, share based compensation expense for the fourth quarter and year-end 2023 is expected to be approximately $12 million and $34 million, respectively, which also aligns with previous guidance. Following the closing of the CWC acquisition in the fourth quarter, we added 18 high-quality drilling rigs to our fleet and decommissioned 27 legacy rigs. Accordingly, we expect to recognize a non-cash asset decommissioning charge of approximately $11 million in 2023.

Drilling Activity

In Canada, Precision continues to experience strong customer demand for drilling services, particularly when AlphaTM technologies and EverGreenTM environmental solutions are included. In the fourth quarter, our average active rig count was 63 in Canada. We currently have 74 rigs active and expect our rig count to peak between the low to mid-80s during this winter drilling season. By mid-January, we expect to activate an additional Super Triple rig, bringing our Canadian Super Triple rig count to 30.

In the U.S., our average active rig count was 42 in the fourth quarter and we have 43 rigs operating today. Based on recent conversations with customers, we expect drilling activity to begin to rebound in the second quarter of 2024.

Internationally, Precision activated an additional rig in mid-November and currently has a total of eight active rigs, with three in the Kingdom of Saudi Arabia and five in Kuwait. Year over year, our international activity is expected to increase by approximately 40% in 2024.

CFO Quote

Carey Ford, Precision’s CFO, commented, “Precision generated strong free cash flow in 2023, which we expect to continue in 2024, driven by margin progression in Canada, integration of our CWC Energy Services acquisition, and international growth. With a robust free cash flow outlook, we plan to improve our capital returns to shareholders in 2024 by increasing our debt reduction and share buy back allocations. Since the beginning of 2018, our debt reduction and share repurchases have totaled nearly $1 billion and I am confident Precision’s High Performance, High Value strategy, exceptional field results, capital discipline, and capital allocation will continue to support increased shareholder value.”

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 AlphaTM that utilizes advanced automation software and analytics to generate efficient, predictable, and repeatable results for energy customers. Our drilling services are enhanced by our EverGreenTM suite of environmental solutions, which bolsters our commitment to reducing the environmental impact of our operations. Additionally, Precision offers well service rigs, camps and rental equipment all backed by a comprehensive mix of technical support services and skilled, experienced personnel.

Precision is headquartered in Calgary, Alberta, Canada and is listed on the Toronto Stock Exchange under the trading symbol “PD” and on the New York Stock Exchange under the trading symbol “PDS”.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements contained in this report, including statements that contain words such as “could”, “should”, “can”, “anticipate”, “estimate”, “intend”, “plan”, “expect”, “believe”, “will”, “may”, “continue”, “project”, “potential” and similar expressions and statements relating to matters that are not historical facts constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking information and statements”).

In particular, forward-looking information and statements include, but are not limited to, the following:

  • anticipated annual operating synergies;
  • monetization of excess real estate;
  • anticipated future activity levels;
  • anticipated free cash flow; and
  • our future debt reduction and shareholder capital return 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 status of current negotiations with our customers and vendors;
  • customer focus on safety performance;
  • existing term contracts are neither renewed nor terminated prematurely;
  • continued market demand for Super Spec rigs;
  • our ability to deliver rigs to customers on a timely basis;
  • the general stability of the economic and political environments in the jurisdictions where we operate; and
  • the impact of an increase/decrease in capital spending.

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:

  • the business, operational and/or financial performance or achievements of Precision or CWC may be materially different from that currently anticipated. In particular, the synergies and benefits anticipated in respect of the transaction are based on the current business, operational and financial position of each of Precision and CWC, which are subject to a number of risks and uncertainties;
  • volatility in the price and demand for oil and natural gas;
  • fluctuations in the level of oil and natural gas exploration and development activities;
  • fluctuations in the demand for contract drilling, well servicing and ancillary oilfield services;
  • our customers’ inability to obtain adequate credit or financing to support their drilling and production activity;
  • changes in drilling and well servicing technology, which could reduce demand for certain rigs or put us at a competitive advantage;
  • shortages, delays and interruptions in the delivery of equipment supplies and other key inputs;
  • liquidity of the capital markets to fund customer drilling programs;
  • availability of cash flow, debt and equity sources to fund our capital and operating requirements, as needed;
  • the impact of weather and seasonal conditions on operations and facilities;
  • competitive operating risks inherent in contract drilling, well servicing and ancillary oilfield services;
  • ability to improve our rig technology to improve drilling efficiency;
  • general economic, market or business conditions;
  • the availability of qualified personnel and management;
  • a decline in our safety performance which could result in lower demand for our services;
  • changes in laws or regulations, including changes in environmental laws and regulations such as increased regulation of hydraulic fracturing or restrictions on the burning of fossil fuels and GHG 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, 2022, which may be accessed on Precision’s SEDAR+ profile at www.sedarplus.ca or under Precision’s EDGAR profile at www.sec.gov. The forward-looking information and statements contained in this news 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.

For further information, please contact:

Lavonne Zdunich, CPA, CA
Vice President, Investor Relations
403.716.4500
Precision Drilling Corporation
800, 525 – 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1
Website: www.precisiondrilling.com


Primary Logo

GET THE LATEST UPDATES DELIVERED TO YOUR INBOX

Untitled
Policy
Precision Drilling

Precision Drilling Corporation 2023 Fourth Quarter and Year-End Results Conference Call and Webcast

CALGARY, Alberta, Jan. 04, 2024 — Precision Drilling Corporation (“Precision”) intends to release its 2023 fourth quarter and year-end results before the market opens on Tuesday, February 6, 2024, and has scheduled a conference call to begin at 12:00 noon MT (2:00 p.m. ET) on the same day.

To participate in the conference call please register at the URL link below. Once registered, you will receive a dial-in number and a unique PIN, which will allow you to ask questions.

https://register.vevent.com/register/BIbb9becf4f3494c3fa2f6293fa7e871e7

The call will also be webcast and can be accessed through the link below. A replay of the webcast call will be available on Precision’s website for 12 months.

https://edge.media-server.com/mmc/p/x5wzqtp3

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. Our drilling services are enhanced by our EverGreen™ suite of environmental solutions, which bolsters our commitment to reducing the environmental impact of our operations. Additionally, Precision offers well service rigs, camps and rental equipment all backed by a comprehensive mix of technical support services and skilled, experienced personnel.

Precision is headquartered in Calgary, Alberta, Canada and is listed on the Toronto Stock Exchange under the trading symbol “PD” and on the New York Stock Exchange under the trading symbol “PDS”.

For further information, please contact:

Lavonne Zdunich, CPA, CA
Vice President, Investor Relations
403.716.4500
800, 525 – 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1
Website: www.precisiondrilling.com


Primary Logo

GET THE LATEST UPDATES DELIVERED TO YOUR INBOX

Untitled
Policy
Precision Drilling

Precision Drilling Completes Acquisition of CWC Energy Services Corp.

CALGARY, Alberta, Nov. 08, 2023 — 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.

Precision Drilling Corporation (“Precision” or the “Company”) (TSX:PD; NYSE:PDS) is pleased to announce that it has completed its acquisition of CWC Energy Services Corp. (“CWC”). The total consideration for CWC included 947,807 Precision common shares, approximately $14 million in cash, plus the assumption of CWC’s net debt of approximately $38 million, excluding transaction costs. The total transaction value for CWC was approximately $127 million on November 7, 2023.

With the acquisition completed, Precision will begin integrating the two companies, which includes delivering approximately $20 million in expected annual operating synergies and monetizing approximately $20 million from planned excess real estate sales. Including CWC’s rigs, Precision now has 72 active service rigs in Canada, 73 active drilling rigs in Canada and 51 active drilling rigs in the U.S.

Precision’s President and CEO, Kevin Neveu, stated, “We are pleased to have completed this strategic acquisition, which positions Precision as the premier well service provider in Canada and enhances our drilling operations in both Canada and the U.S. With the projected synergies, we expect the transaction to be accretive on a 2024 cash flow per share basis and to support our ongoing deleveraging plan. I am excited to welcome the CWC employees to the Precision team.”

Transaction Details

Precision has acquired all of the issued and outstanding shares of CWC, with each CWC shareholder receiving, at their election (a) 0.002124306 of a Precision share for each CWC share; (b) $0.196668 in cash for each CWC share; or (c) a combination of cash and Precision shares, subject to proration. For more information please refer to CWC’s Management Information Circular filed on SEDAR+ at www.sedarplus.ca.

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. Our drilling services are enhanced by our EverGreen™ suite of environmental solutions, which bolsters our commitment to reducing the environmental impact of our operations. Additionally, Precision offers well service rigs, camps and rental equipment all backed by a comprehensive mix of technical support services and skilled, experienced personnel.

Precision is headquartered in Calgary, Alberta, Canada and is listed on the Toronto Stock Exchange under the trading symbol “PD” and on the New York Stock Exchange under the trading symbol “PDS”.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements contained in this report, including statements that contain words such as “could”, “should”, “can”, “anticipate”, “estimate”, “intend”, “plan”, “expect”, “believe”, “will”, “may”, “continue”, “project”, “potential” and similar expressions and statements relating to matters that are not historical facts constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking information and statements”).

In particular, forward-looking information and statements include, but are not limited to, the following:

  • anticipated annual operating synergies;
  • monetization of excess real estate;
  • anticipated future activity levels;
  • anticipated free cash flow; and
  • our future debt reduction and shareholder capital return 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 status of current negotiations with our customers and vendors;
  • customer focus on safety performance;
  • existing term contracts are neither renewed nor terminated prematurely;
  • continued market demand for Super Spec rigs;
  • our ability to deliver rigs to customers on a timely basis;
  • the general stability of the economic and political environments in the jurisdictions where we operate; and
  • the impact of an increase/decrease in capital spending.

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:

  • the business, operational and/or financial performance or achievements of Precision or CWC may be materially different from that currently anticipated. In particular, the synergies and benefits anticipated in respect of the transaction are based on the current business, operational and financial position of each of Precision and CWC, which are subject to a number of risks and uncertainties;
  • volatility in the price and demand for oil and natural gas;
  • fluctuations in the level of oil and natural gas exploration and development activities;
  • fluctuations in the demand for contract drilling, well servicing and ancillary oilfield services;
  • our customers’ inability to obtain adequate credit or financing to support their drilling and production activity;
  • changes in drilling and well servicing technology, which could reduce demand for certain rigs or put us at a competitive advantage;
  • shortages, delays and interruptions in the delivery of equipment supplies and other key inputs;
  • liquidity of the capital markets to fund customer drilling programs;
  • availability of cash flow, debt and equity sources to fund our capital and operating requirements, as needed;
  • the impact of weather and seasonal conditions on operations and facilities;
  • competitive operating risks inherent in contract drilling, well servicing and ancillary oilfield services;
  • ability to improve our rig technology to improve drilling efficiency;
  • general economic, market or business conditions;
  • the availability of qualified personnel and management;
  • a decline in our safety performance which could result in lower demand for our services;
  • changes in laws or regulations, including changes in environmental laws and regulations such as increased regulation of hydraulic fracturing or restrictions on the burning of fossil fuels and GHG 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, 2022, 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 news 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.

For further information, please contact:

Lavonne Zdunich, CPA, CA
Director, Investor Relations
403.716.4500
Precision Drilling Corporation
800, 525 – 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1
Website: www.precisiondrilling.com


Primary Logo

GET THE LATEST UPDATES DELIVERED TO YOUR INBOX

Untitled
Policy
Precision Drilling

Precision Drilling Announces 2023 Third Quarter Unaudited Financial Results

CALGARY, Alberta, Oct. 26, 2023 — 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 certain Financial Measures and Ratios, including Adjusted EBITDA (earnings before income taxes, loss (gain) on investments and other assets, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization), Funds Provided by (Used in) Operations, Net Capital Spending 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 “Financial Measures and Ratios” later in this news release.

Precision Drilling announces strong 2023 third quarter financial results:

  • Revenue increased to $447 million compared with $429 million in the third quarter of 2022 driven by higher drilling day rates, offset in part by lower drilling and service activity.
  • Revenue per utilization day continues to be strong and grew 20% in Canada to $32,224 and 26% in the U.S. to US$35,135 compared to the same quarter last year.
  • We continued to scale our AlphaTM digital technologies and EverGreenTM suite of environmental solutions across our Super Triple rig fleet, increasing revenue from these offerings by 30% year over year. Approximately 75% of our Super Triple rig fleet is equipped with AlphaTM and at least one EverGreenTM product.
  • Adjusted EBITDA(1) was $115 million and included $31 million of share-based compensation as our share price increased 41% during the quarter, bringing our year to date share-based compensation to $22 million. In the third quarter of 2022, Adjusted EBITDA was $120 million and included a $6 million charge for share-based compensation.
  • Net earnings were $20 million or $1.45 per share compared to $31 million or $2.26 per share in 2022. For the first nine months of the year, we have generated net earnings of $10.45 per share.
  • During the quarter, we generated cash from operations of $89 million and repurchased and cancelled US$18 million of 2026 unsecured senior notes.
  • As at September 30, 2023, we have reduced total debt by $126 million since the beginning of the year and remain on track to meet our 2023 debt reduction target of $150 million.
  • We ended the quarter with $49 million of cash and more than $600 million of available liquidity.
  • In Canada, we averaged 57 active rigs in the third quarter, similar to our activity for the same quarter last year. Demand for our Super Triple and Super Single pad-capable fleets continues to exceed supply and we expect these rigs to remain fully utilized well into 2024.
  • In the U.S., we averaged 41 active rigs compared to 57 in the third quarter of 2022 due to lower industry activity year over year.
  • Internationally, we activated our seventh rig in late September and expect to activate our eighth rig in the next few weeks. In 2024, we expect to have eight rigs working under long-term contracts, increasing our international earnings approximately 50% over 2023.
  • Completion and Production Services generated revenue of $58 million and Adjusted EBITDA of $14 million, largely consistent with the third quarter of 2022.
  • We expect the acquisition of CWC Energy Service Corp. (CWC) to be completed in the fourth quarter and provide accretive cash flow on a per share basis in 2024.
  • In response to increased customer-funded rig upgrades and to facilitate the strategic purchase of certain long-lead items, we have increased our 2023 capital spending budget from $195 million to $215 million.

(1) See “FINANCIAL MEASURES AND RATIOS.”

Precision’s President and CEO, Kevin Neveu, stated:

“Precision’s third quarter financial results and recent customer contracting demonstrate strong demand for our Super Series rigs, AlphaTM technologies, and EverGreenTM products. The North American land drilling market has matured with participants demonstrating capital discipline and operators rewarding the highest performance drilling contractors.

“Our Canadian business continues to showcase this trend. While Canada’s industry activity during the third quarter was 6% lower than the same period last year, utilization of Precision’s Super Triple and Super Single rigs was up year over year, with 29 Super Triples and 32 Super Singles active during the quarter. Despite customer capital discipline and lower industry activity, customer demand for Super-Spec rigs has never been higher and we continue to strengthen our contract book. Since the end of the second quarter, we have added thirteen term contracts with take-or-pay provisions for our Super Triples and customer-funded upgrades for our Super Singles. The outlook for Canada remains encouraging with 67 rigs active today, significant oil and natural gas pipeline takeaway capacity coming online in early 2024, and current customer conversations indicating incremental demand for Super Triple and Super Single drilling programs in 2024.

“In the U.S., our rig count was stable throughout the third quarter, and we currently have 44 rigs active. Customer interest in AlphaTM digital technologies and our EverGreenTM suite of environmental solutions remains strong, with virtually all our U.S. Super Triple rigs utilizing AlphaAutomationTM and 60% generating incremental revenue from EverGreenTM products. With firm oil prices and a new budget cycle, we expect customer outlook to improve and drive more drilling activity later this year and into 2024.

“Internationally, we currently have seven rigs running and expect to activate our eighth rig within the next few weeks. With our additional rig activations this year, we expect our 2024 international earnings to increase by approximately 50% over 2023, and should remain at this higher level for the next several years as our recent contract awards are under five-year terms.

“During the third quarter, our Adjusted EBITDA was $115 million and excluding our share-based compensation of $31 million increased year over year. This increase was driven by our Canadian drilling operations where strong fundamentals continue to support improving returns. Net earnings were $20 million for the quarter and year to date we have delivered earnings of $10.45 on a per share basis.

“Cash generated from operations during the third quarter was $89 million compared to $8 million last year, reflecting the efforts of our team to focus on cash generation. Year to date, we have reduced our total debt by $126 million and returned $13 million to shareholders through share repurchases and are well on track to achieve the targets we set at the beginning of the year. With strong demand for our Super Series rigs, we are increasing our 2023 capital budget by $20 million to support customer-funded rig upgrades and the purchase of certain long-lead items.

“In September, we announced the acquisition of CWC, which will position Precision as the premier well service provider in Canada and bolster our drilling operations in both the U.S. and Canada. We expect to realize $20 million in operational synergies and generate accretive cash flow on a per share basis in 2024.

“I am proud of the discipline Precision continues to show throughout the organization despite short-term industry cyclicality. We remain focused on our strategic priorities, which include delivering operational excellence, maximizing free cash flow, and improving our balance sheet. With a focused strategy and discipline, I am confident Precision will continue to deliver increased shareholder value,” concluded Mr. Neveu.

SELECT FINANCIAL AND OPERATING INFORMATION

Financial Highlights
For the three months ended September 30, For the nine months ended September 30,
(Stated in thousands of Canadian dollars, except per share amounts) 2023 2022 % Change 2023 2022 % Change
Revenue 446,754 429,335 4.1 1,430,983 1,106,690 29.3
Adjusted EBITDA(1) 114,575 119,561 (4.2 ) 459,887 220,515 108.6
Net earnings (loss) 19,792 30,679 (35.5 ) 142,522 (37,776 ) (477.3 )
Cash provided by operations 88,500 8,142 987.0 330,316 78,022 323.4
Funds provided by operations(1) 91,608 81,327 12.6 388,220 171,655 126.2
Cash used in investing activities 34,278 31,711 8.1 157,157 98,836 59.0
Capital spending by spend category(1)
Expansion and upgrade 13,479 25,461 (47.1 ) 39,439 50,606 (22.1 )
Maintenance and infrastructure 38,914 25,642 51.8 108,463 76,335 42.1
Proceeds on sale (6,698 ) (22,337 ) (70.0 ) (20,724 ) (32,033 ) (35.3 )
Net capital spending(1) 45,695 28,766 58.9 127,178 94,908 34.0
Net earnings (loss) per share:
Basic 1.45 2.26 (35.8 ) 10.45 (2.79 ) (474.6 )
Diluted 1.45 2.03 (28.6 ) 9.84 (2.79 ) (452.7 )

(1) See “FINANCIAL MEASURES AND RATIOS.”

Operating Highlights
For the three months ended September 30, For the nine months ended September 30,
2023 2022 % Change 2023 2022 % Change
Contract drilling rig fleet 224 225 (0.4 ) 224 225 (0.4 )
Drilling rig utilization days:
U.S. 3,815 5,287 (27.8 ) 13,823 14,914 (7.3 )
Canada 5,284 5,432 (2.7 ) 15,247 14,461 5.4
International 554 552 0.4 1,439 1,638 (12.1 )
Revenue per utilization day:
U.S. (US$) 35,135 27,847 26.2 35,216 25,864 36.2
Canada (Cdn$) 32,224 26,927 19.7 32,583 25,843 26.1
International (US$) 51,570 50,216 2.7 51,306 51,687 (0.7 )
Operating costs per utilization day:
U.S. (US$) 21,655 18,220 18.9 20,217 18,484 9.4
Canada (Cdn$) 18,311 16,893 8.4 19,239 16,803 14.5
Service rig fleet 121 135 (10.4 ) 121 135 (10.4 )
Service rig operating hours 46,894 52,340 (10.4 ) 144,944 120,994 19.8

Financial Position
(Stated in thousands of Canadian dollars, except ratios) September 30, 2023 December 31, 2022
Working capital(1) 177,740 60,641
Cash 49,065 21,587
Long-term debt 963,827 1,085,970
Total long-term financial liabilities 1,054,661 1,206,619
Total assets 2,808,201 2,876,123
Long-term debt to long-term debt plus equity ratio (1) 0.41 0.47

(1) See “FINANCIAL MEASURES AND RATIOS.”

Summary for the three months ended September 30, 2023:

  • Revenue of $447 million was 4% higher than 2022 due to the further strengthening of drilling and service revenue rates, partially offset by lower activity. Drilling rig utilization days decreased 28% and 3% in the U.S. and Canada, respectively, while international activity remained consistent. Our service rig operating hours decreased 10% as compared with 2022.
  • Adjusted EBITDA was $115 million as compared with $120 million in 2022. Our lower 2023 Adjusted EBITDA was primarily the result of increased share-based compensation charges and lower activity, partially offset by higher revenue rates. Share-based compensation was $31 million as compared with $6 million in 2022. Please refer to “Other Items” later in this news release for additional information on share-based compensation charges.
  • Adjusted EBITDA as a percentage of revenue was 26% as compared with 28% in 2022.
  • Our U.S. revenue per utilization day was US$35,135 compared with US$27,847 in 2022. The increase was primarily the result of higher fleet average day rates and higher idle but contracted rig revenue. We recognized revenue from idle but contracted rigs of US$6 million as compared with US$1 million in 2022. Consistent with 2022, we did not recognize revenue from turnkey projects during the quarter. Revenue per utilization day, excluding the impact of idle but contracted rigs was US$33,543, compared to US$27,682 in 2022, an increase of US$5,861 or 21%. Revenue per utilization day, excluding idle but contracted rigs, decreased US$1,014 from the second quarter of 2023.
  • Our U.S. operating costs per utilization day increased to US$21,655 compared with US$18,220 in 2022. The increase was primarily due to higher rig operating costs, repairs and maintenance and the impact of fixed costs being spread over fewer activity days. Our higher rig operating costs in the current period pertained to field rate increases completed in the fourth quarter of 2022. U.S. operating costs per utilization day, excluding turnkey, was US$21,623 compared with US$18,236 in 2022. Sequentially, excluding the impact of turnkey activity, operating costs per utilization day increased US$2,677. The increase was primarily due to higher repairs and maintenance and the impact of fixed costs being spread over fewer activity days.
  • In Canada, revenue per utilization day was $32,224 compared with $26,927 in 2022. The increase was a result of higher average day rates and customer cost recoveries. Sequentially, revenue per utilization day decreased $1,311 due to lower customer cost recoveries.
  • Our Canadian operating costs per utilization day increased to $18,311, compared with $16,893 in 2022, due to higher field wages, repairs and maintenance and costs that were recovered from our customers. Sequentially, our daily operating costs decreased $3,021 due to lower repairs and maintenance, customer cost recoveries and operating overheads being spread over a higher activity base.
  • Completion and Production Services revenue and Adjusted EBITDA were $58 million and $14 million, respectively, compared with $57 million and $15 million in 2022.
  • We realized US$29 million of international contract drilling revenue compared with US$28 million in 2022.
  • General and administrative expenses were $44 million as compared with $25 million in 2022. The increase was primarily due to higher share-based compensation charges.
  • Net finance charges were $20 million, a decrease of $3 million compared with 2022 and was the result of lower outstanding long-term debt.
  • Cash provided by operations was $89 million compared with $8 million in 2022. We generated $92 million of funds provided by operations compared with $81 million in 2022. Our increased day rates, revenue efficiency and operational leverage continued to drive higher cash generation in the current quarter.
  • Capital expenditures were $52 million compared with $51 million in 2022. Capital spending by spend category (see “FINANCIAL MEASURES AND RATIOS”) included $13 million for expansion and upgrades and $39 million for the maintenance of existing assets, infrastructure, and intangible assets.
  • We repaid $26 million of debt, repurchasing and cancelling US$18 million of 2026 unsecured senior notes, and ended the quarter with $49 million of cash and more than $600 million of available liquidity.

Summary for the nine months ended September 30, 2023:

  • Revenue for the first nine months of 2023 was $1,431 million, an increase of 29% from 2022.
  • Adjusted EBITDA was $460 million as compared with $221 million in 2022. Our higher Adjusted EBITDA was attributable to increased revenue rates, higher Canadian drilling and service activity and lower share-based compensation, partially offset by lower U.S. and international drilling activity.
  • General and administrative costs were $83 million, a decrease of $19 million from 2022 primarily due to lower share-based compensation, partially offset by higher labour-related costs and the impact of the weakening Canadian dollar on our translated U.S. dollar-denominated costs.
  • Net finance charges were $64 million, consistent with 2022, as the impact of our lower debt balance was offset by higher variable debt interest rates and higher translated U.S. dollar-denominated interest expense due to the weakening of the Canadian dollar.
  • Cash provided by operations was $330 million as compared with $78 million in 2022. Funds provided by operations in 2023 were $388 million, an increase of $217 million from the comparative period.
  • Capital expenditures were $148 million in 2023, an increase of $21 million from 2022. Capital spending by spend category included $39 million for expansion and upgrades and $108 million for the maintenance of existing assets, infrastructure, and intangible assets.
  • Year to date, we have reduced our total debt by $126 million through the full repayment of our Senior Credit Facility and the repurchase and cancellation of US$48 million of our 2026 unsecured senior notes. In addition, we repurchased and cancelled 193,616 common shares for $13 million under our Normal Course Issuer Bid (NCIB).

STRATEGY

Precision’s vision is to be globally recognized as the High Performance, High Value provider of land drilling services. We work toward this vision by defining and measuring our results against strategic priorities that we establish at the beginning of every year.

Precision’s 2023 strategic priorities and the progress made during the third quarter and year to date are as follows:

  1. Deliver High Performance, High Value service through operational excellence.
    • Year to date, we have increased our Canadian drilling rig utilization days and well servicing rig operating hours, maintaining our position as the leading provider of high-quality and reliable services in Canada.
    • Activated our seventh rig in the Middle East and expect to have an eighth rig working in the next few weeks. These eight rigs represent over US$500 million in backlog revenue that stretches into 2028.
    • Announced the acquisition of CWC, expanding our Canadian well servicing business and our drilling fleets in both the U.S. and Canada. The proposed transaction is expected to provide approximately $20 million in annual synergies and be accretive on a 2024 cash flow per share basis.
    • Reinvested $148 million year to date into our equipment and infrastructure as we progress toward our total expected 2023 investment of $215 million.
  2. Maximize free cash flow by increasing Adjusted EBITDA margins, revenue efficiency, and growing revenue from Alpha™ technologies and EverGreen™ suite of environmental solutions.
    • Realized third quarter daily operating margins (revenue per utilization day less operating costs per utilization day) of $13,913 in Canada and US$13,480 in the U.S., representing increases of 39% and 40%, respectively, compared with the third quarter of 2022.
    • Grew combined Alpha™ technologies and EverGreen™ suite of environmental solutions third quarter revenue by 30% compared with the same quarter last year.
    • At September 30, we had 74 of our AC Super Triple rigs equipped with Alpha™ technologies, representing a 19% increase over the third quarter of 2022.
    • Continued to scale our EverGreen™ suite of environmental solutions. Approximately 75% of our Super Triple fleet is equipped with at least one EverGreen™ product, including 11 field deployed EverGreen™ Battery Energy Storage Systems (BESS).
  3. Reduce debt by at least $150 million and allocate 10% to 20% of free cash flow before debt repayments for share repurchases. Long-term debt reduction target of $500 million between 2022 and 2025 and sustained Net Debt to Adjusted EBITDA ratio(1) of below 1.0 times by the end of 2025.
    • Generated significant third quarter cash from operations of $89 million which allowed us to repurchase and cancel US$18 million of 2026 unsecured senior notes.
    • As of September 30, 2023, we have reduced debt by $126 million and remain committed to reducing debt by at least $150 million in 2023.
    • We have allocated $13 million of free cash flow to share repurchases for the first nine months of the year and in September we renewed our NCIB for an additional year as we believe it continues to be another tool to enhance shareholder value.
    • We remain committed to our long-term debt reduction target and reaching a sustained Net Debt to Adjusted EBITDA ratio of below 1.0 times by the end of 2025.

(1) See “FINANCIAL MEASURES AND RATIO.”

OUTLOOK

Energy industry fundamentals continue to support drilling activity for oil and natural gas despite economic uncertainty and geopolitical instability. During the third quarter, persistent challenges and stresses from interest rate hikes and recessionary risks began to weaken, and commodity prices moved higher. While the recent conflict in the Middle East has had little direct impact on global oil and natural gas supply, an escalation of events and involvement from additional regional powers could disrupt supply in the world’s top oil producing region.

Today, oil prices are supported by increasing global demand and limited supply growth as OPEC continues to honour its lower production quotas and producers remain committed to returning capital to shareholders versus increasing production. Natural gas has demonstrated short-term price weaknesses; however, this lower-carbon energy source is becoming increasingly favored as countries around the world stress the importance of sustainability, decarbonization and energy security. With demand for Liquefied Natural Gas (LNG) exports grog and the next wave of North American LNG projects expected to begin coming online in 2025 (including LNG Canada), we anticipate a sustained period of elevated natural gas drilling activity in both the U.S. and Canada.

In Canada, Precision’s year to date drilling activity has surpassed 2022 levels and we expect high activity levels to continue into 2024, due to strong oil prices and increases in hydrocarbon export capacity. The Trans Mountain oil pipeline expansion and the Coastal GasLink pipeline are each expected to begin operations in the first quarter of 2024. Northwestern Alberta and Northeastern British Columbia natural gas developments are prime beneficiaries of the LNG Canada project and the January 2023 agreement between the Government of British Columbia and the Blueberry River First Nation, which has facilitated a significant increase in drilling license approvals and should lead to more drilling activity in the region. Large pad drilling programs are ideally suited for our Super Triple rigs, resulting in strong customer interest for these rigs for the next several years. Our Super Triple fleet is currently fully utilized and we expect customer demand to continue to exceed supply, driving higher day rates, daily operating margins and longer-term take-or-pay contracts. We are currently upgrading one of our Canadian rigs and expect to add it to our Super Triple Canadian fleet in January 2024 on a three-year term contract, bringing our fleet size to 30.

In the Canadian heavy oil market, we expect activity levels to remain strong as Canadian producers are benefiting from favorable oil pricing due to a weaker Canadian dollar exchange rate and improving heavy oil differentials. Precision’s Super Single rigs are well suited for long-term conventional heavy oil development in the oil sands and Clearwater formation. We expect our Super Single pad-capable rigs to be fully utilized well into 2024, driving higher day rates.

In the U.S., drilling activity had been increasing since mid-2020 but began to weaken in early 2023 due to lower natural gas prices and oil price volatility. As at October 25, 2023, the Baker Hughes’ active U.S. land rig count declined 21% from the start of the year. If oil prices remain stable and around today’s level, we expect demand to improve late in the fourth quarter and gain momentum in 2024 as customers embark on a new budget cycle and seek to maintain or possibly increase production levels and replenish inventories.

Our Alpha™ technologies and EverGreen™ suite of environmental solutions continue to gain momentum and have become key competitive differentiators for our rigs as these offerings deliver exceptional value to our customers by reducing risks, well construction costs and carbon footprint. We currently have 11 EverGreen™ BESS deployed in the field and have commitments for two additional deployments by year end. Precision’s EverGreen™ BESS have proven to be an economically viable emissions reduction solution for our customers and we anticipate continued demand for additional deployments in 2024.

Internationally, we currently have seven rigs working on term contracts, four in Kuwait and three in the Kingdom of Saudi Arabia, increasing to eight in the next few weeks. In 2024, our international earnings are expected to increase approximately 50% over 2023 levels and provide stable and predictable cash flow that stretches into 2028. We continue to bid our remaining idle rigs within the region and remain optimistic about our ability to secure rig reactivations.

Precision is the leading provider of high-quality and reliable well services in Canada and the outlook for this business is positive. High customer demand for well maintenance and completion services is expected to add tightness to the availability of staffed service rigs, supporting healthy activity and pricing into the foreseeable future. In September, Precision announced the acquisition of CWC, which will allow us to enhance our Canadian well service offering with high-quality rigs in complementary geographic regions. The acquisition is expected to close in the fourth quarter of 2023 and provide accretive cash flow on a per share basis in 2024.

Contracts

The following chart outlines the average number of drilling rigs under term contract by quarter as at October 25, 2023. For those quarters ending after September 30, 2023, this chart represents the minimum number of term contracts from which we will earn revenue. We expect the actual number of contracted rigs to vary in future periods as we sign additional term contracts.

Average for the quarter ended 2022 Average for the quarter ended 2023
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
Average rigs under term contract
as of October 25, 2023:
U.S. 27 29 31 35 40 37 32 28
Canada 6 8 10 16 19 23 23 21
International 6 6 6 6 4 5 7 8
Total 39 43 47 57 63 65 62 57

The following chart outlines the average number of drilling rigs that we had under term contract for 2022 and the average number of rigs we have under term contract as at October 25, 2023.

Average for the year ended
2022 2023
Average rigs under term contract
as of October 25, 2023:
U.S. 31 34
Canada 10 22
International 6 6
Total 47 62

In Canada, term contracted rigs normally generate 250 utilization days per year because of the seasonal nature of well site access. Accordingly, our anticipated Canadian rigs under term contract may fluctuate as customers complete their commitments earlier than projected. In most regions in the U.S. and internationally, term contracts normally generate 365 utilization days per year. Internationally, we expect to have eight rigs operating under long-term contract by the end of 2023.

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 2022 Average for the quarter ended 2023
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30
Average Precision active rig count:
U.S. 51 55 57 60 60 51 41
Canada 63 37 59 66 69 42 57
International 6 6 6 6 5 5 6
Total 120 98 122 132 134 98 104

According to industry sources, as at October 25, 2023, the U.S. active land drilling rig count has decreased 21% from the same point last year while the Canadian active land drilling rig count has decreased 6%. To date in 2023, approximately 79% of the U.S. industry’s active rigs and 59% of the Canadian industry’s active rigs were drilling for oil targets, compared with 79% for the U.S. and 63% for Canada at the same time last year.

Capital Spending and Free Cash Flow Allocation

We remain committed to disciplined cash flow management, capital spending and returning capital to shareholders. In response to increased customer contracted rig upgrades and to facilitate the strategic purchase of certain long-lead items, capital spending in 2023 is expected to increase by $20 million to $215 million. By spend category, we expect to incur $155 million for sustaining, infrastructure and intangibles and $60 million for expansion and upgrades. We expect that the $215 million will be split as follows: $201 million in the Contract Drilling Services segment, $11 million in the Completion and Production Services segment, and $3 million in the Corporate segment. As at September 30, 2023, Precision had capital commitments of approximately $229 million with payments expected through 2026.

SEGMENTED FINANCIAL RESULTS

Precision’s operations are reported in two segments: Contract Drilling Services, which includes our drilling rig, oilfield supply and manufacturing divisions; and Completion and Production Services, which includes our service rig, rental and camp and catering divisions.

For the three months ended September 30, For the nine months ended September 30,
(Stated in thousands of Canadian dollars) 2023 2022 % Change 2023 2022 % Change
Revenue:
Contract Drilling Services 390,728 374,465 4.3 1,257,762 982,909 28.0
Completion and Production Services 57,573 56,642 1.6 178,257 127,921 39.3
Inter-segment eliminations (1,547 ) (1,772 ) (12.7 ) (5,036 ) (4,140 ) 21.6
446,754 429,335 4.1 1,430,983 1,106,690 29.3
Adjusted EBITDA:(1)
Contract Drilling Services 131,701 118,599 11.0 468,302 260,202 80.0
Completion and Production Services 14,118 14,788 (4.5 ) 39,031 26,166 49.2
Corporate and Other (31,244 ) (13,826 ) 126.0 (47,446 ) (65,853 ) (28.0 )
114,575 119,561 (4.2 ) 459,887 220,515 108.6

(1) See “FINANCIAL MEASURES AND RATIOS.”

SEGMENT REVIEW OF CONTRACT DRILLING SERVICES

For the three months ended September 30, For the nine months ended September 30,
(Stated in thousands of Canadian dollars, except where noted) 2023 2022 % Change 2023 2022 % Change
Revenue 390,728 374,465 4.3 1,257,762 982,909 28.0
Expenses:
Operating 247,937 246,442 0.6 759,750 692,169 9.8
General and administrative 11,090 9,424 17.7 29,710 30,538 (2.7 )
Adjusted EBITDA(1) 131,701 118,599 11.0 468,302 260,202 80.0
Adjusted EBITDA as a percentage of revenue(1) 33.7 % 31.7 % 37.2 % 26.5 %

(1) See “FINANCIAL MEASURES AND RATIOS.”

United States onshore drilling statistics:(1) 2023 2022
Precision Industry(2) Precision Industry(2)
Average number of active land rigs for quarters ended:
March 31 60 744 51 603
June 30 51 700 55 687
September 30 41 631 57 746
Year to date average 51 692 54 679

(1) United States lower 48 operations only.
(2) Baker Hughes rig counts.

Canadian onshore drilling statistics:(1) 2023 2022
Precision Industry(2) Precision Industry(2)
Average number of active land rigs for quarters ended:
March 31 69 221 63 205
June 30 42 117 37 113
September 30 57 188 59 199
Year to date average 56 175 53 172

(1) Canadian operations only.
(2) Baker Hughes rig counts.

SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES

For the three months ended September 30, For the nine months ended September 30,
(Stated in thousands of Canadian dollars, except where noted) 2023 2022 % Change 2023 2022
Revenue 57,573 56,642 1.6 178,257 127,921 39.3
Expenses:
Operating 41,612 40,198 3.5 133,325 96,365 38.4
General and administrative 1,843 1,656 11.3 5,901 5,390 9.5
Adjusted EBITDA(1) 14,118 14,788 (4.5 ) 39,031 26,166 49.2
Adjusted EBITDA as a percentage of revenue(1) 24.5 % 26.1 % 21.9 % 20.5 %
Well servicing statistics:
Number of service rigs (end of period) 121 135 (10.4 ) 121 135 (10.4 )
Service rig operating hours 46,894 52,340 (10.4 ) 144,944 120,994 19.8
Service rig operating hour utilization 42 % 47 % 44 % 43 %

(1) See “FINANCIAL MEASURES AND RATIOS.”

SEGMENT REVIEW OF CORPORATE AND OTHER

Our Corporate and Other segment provides support functions to our operating segments. The Corporate and Other segment had negative Adjusted EBITDA of $31 million as compared with $14 million in 2022. Our higher current quarter Adjusted EBITDA was impacted by higher share-based compensation charges and higher translated U.S. dollar-denominated costs.

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 2022 Annual Report.

A summary of expense amounts under these plans during the reporting periods are as follows:

For the three months ended
September 30,
For the nine months ended
September 30,
(Stated in thousands of Canadian dollars) 2023 2022 2023 2022
Cash settled share-based incentive plans 30,105 5,543 20,091 57,802
Equity settled share-based incentive plans 701 1,834 427
Total share-based incentive compensation plan expense 30,806 5,543 21,925 58,229
Allocated:
Operating 7,692 1,922 6,732 14,694
General and Administrative 23,114 3,621 15,193 43,535
30,806 5,543 21,925 58,229

Cash settled share-based compensation expense for the quarter was $30 million as compared with $6 million in 2022. The higher expense in 2023 was primarily due to our improved share price performance as compared with 2022.

During the first quarter of 2023, we issued Executive Restricted Share Units (Executive RSUs) to certain senior executives. Accordingly, our equity-settled share-based compensation expense for the quarter was $1 million as compared with nil in 2022.

As at September 30, 2023, the majority of our share-based compensation plans were classified as cash-settled and will be impacted by changes in our share price. Although accounted for as cash-settled, Precision retains the ability to settle certain vested units in common shares at its discretion.

Finance Charges

Net finance charges were $20 million, a decrease of $3 million compared with 2022 and the result of lower outstanding long-term debt. Interest charges on our U.S. dollar-denominated long-term debt were US$13 million ($17 million) as compared with US$16 million ($20 million) in 2022.

Income Tax

Income tax expense for the quarter was $8 million as compared with $6 million in 2022. During the third quarter, we continued to not recognize deferred tax assets on certain Canadian and international operating losses.

Normal Course Issuer Bid

During the quarter, the Toronto Stock Exchange (TSX) approved the renewal of our Normal Course Issuer Bid. Pursuant to the NCIB, we are authorized to repurchase and cancel up to a maximum of 1,326,321 common shares. Purchases under the renewed NCIB may commence on September 19, 2023 and will terminate no later than September 18, 2024, or such earlier time as we complete our maximum purchases pursuant to the NCIB or provide notice of termination.

Cathedral Energy Services Ltd.

During the third quarter of 2023, we exercised 2 million warrants for $1 million in exchange for 2 million common shares of Cathedral Energy Services Ltd. (Cathedral). In addition, we divested 11 million common shares of Cathedral for net proceeds of $10 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Amount Availability Used for Maturity
Senior Credit Facility (secured)
US$447 million (extendible, revolving
term credit facility with US$353 million accordion feature)
Nil drawn and US$55 million in
outstanding letters of credit
General corporate purposes June 18, 2025
Real estate credit facilities (secured)
US$9 million Fully drawn General corporate purposes November 19, 2025
$17 million Fully drawn General corporate purposes March 16, 2026
Operating facilities (secured)
$40 million Undrawn, except $20 million in
outstanding letters of credit
Letters of credit and general
corporate purposes
US$15 million Undrawn Short-term working capital
requirements
Demand letter of credit facility (secured)
US$40 million Undrawn, except US$21 million in
outstanding letters of credit
Letters of credit
Unsecured senior notes (unsecured)
US$299 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

As at September 30, 2023, we had $978 million outstanding under our Senior Credit Facility, Real Estate Credit Facilities and unsecured senior notes as compared with $1,103 million at December 31, 2022. The current blended cash interest cost of our debt is approximately 7.0%.

During the quarter, we repurchased and cancelled US$18 million principal amount of our 2026 unsecured senior notes.

Covenants

As at September 30, 2023, we were in compliance with the covenants of our Senior Credit Facility and Real Estate Credit Facilities.

Covenant At September 30,
2023
Senior Credit Facility
Consolidated senior debt to consolidated covenant EBITDA(1) < 2.50 0.05
Consolidated covenant EBITDA to consolidated interest expense > 2.50 6.74
Real Estate Credit Facilities
Consolidated covenant EBITDA to consolidated interest expense > 2.50 6.74

(1) For purposes of calculating the leverage ratio consolidated senior debt only includes secured indebtedness.

Average shares outstanding

The following tables reconcile net earnings (loss) and the weighted average shares outstanding used in computing basic and diluted net earnings (loss) per share:

For the three months ended
September 30,
For the nine months ended
September 30,
2023 2022 2023 2022
Net earnings (loss) – basic 19,792 30,679 142,522 (37,776 )
Effect of share options and other
equity compensation plans
(94 ) 3,679
Net earnings (loss) – diluted 19,792 30,585 146,201 (37,776 )

For the three months ended
September 30,
For the nine months ended
September 30,
(Stated in thousands) 2023 2022 2023 2022
Weighted average shares outstanding – basic 13,607 13,580 13,643 13,549
Effect of share options and
other equity compensation plans
3 1,464 1,215
Weighted average shares outstanding – diluted 13,610 15,044 14,858 13,549

QUARTERLY FINANCIAL SUMMARY

(Stated in thousands of Canadian dollars, except per share amounts) 2022 2023
Quarters ended December 31 March 31 June 30 September 30
Revenue 510,504 558,607 425,622 446,754
Adjusted EBITDA(1) 91,090 203,219 142,093 114,575
Net earnings 3,483 95,830 26,900 19,792
Net earnings per basic share 0.27 7.02 1.97 1.45
Net earnings per diluted share 0.27 5.57 1.63 1.45
Funds provided by operations(1) 111,339 159,653 136,959 91,608
Cash provided by operations 159,082 28,356 213,460 88,500

(Stated in thousands of Canadian dollars, except per share amounts) 2021 2022
Quarters ended December 31 March 31 June 30 September 30
Revenue 295,202 351,339 326,016 429,335
Adjusted EBITDA(1) 63,881 36,855 64,099 119,561
Net earnings (loss) (27,336 ) (43,844 ) (24,611 ) 30,679
Net earnings (loss) per basic share (2.05 ) (3.25 ) (1.81 ) 2.26
Net earnings (loss) per diluted share (2.05 ) (3.25 ) (1.81 ) 2.03
Funds provided by operations(1) 62,681 29,955 60,373 81,327
Cash provided by (used in) operations 59,713 (65,294 ) 135,174 8,142

(1) See “FINANCIAL MEASURES AND RATIOS.”

FINANCIAL MEASURES AND RATIOS

Non-GAAP Financial Measures
We reference certain additional Non-Generally Accepted Accounting Principles (Non-GAAP) measures that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors.
Adjusted EBITDA We believe Adjusted EBITDA (earnings before income taxes, loss (gain) on investments and other assets, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization), as reported in our Condensed Interim Consolidated Statements of Net Earnings (Loss) and our reportable operating segment disclosures, is a useful measure because it gives an indication of the results from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and depreciation and amortization charges.

The most directly comparable financial measure is net earnings (loss).

For the three months ended
September 30,
For the nine months ended
September 30,
(Stated in thousands of Canadian dollars) 2023 2022 2023 2022
Adjusted EBITDA by segment:
Contract Drilling Services 131,701 118,599 468,302 260,202
Completion and Production Services 14,118 14,788 39,031 26,166
Corporate and Other (31,244 ) (13,826 ) (47,446 ) (65,853 )
Adjusted EBITDA 114,575 119,561 459,887 220,515
Depreciation and amortization 73,192 69,448 218,823 207,662
Gain on asset disposals (2,438 ) (8,238 ) (15,586 ) (22,152 )
Foreign exchange 363 1,344 (894 ) 1,362
Finance charges 19,618 22,521 63,946 64,294
Gain on repurchase of unsecured notes (37 ) (137 )
Loss (gain) on investments and other assets (3,813 ) (2,515 ) 6,075 (3,738 )
Incomes taxes 7,898 6,322 45,138 10,863
Net earnings (loss) 19,792 30,679 142,522 (37,776 )

Funds Provided by
(Used in) Operations
We believe funds provided by (used in) operations, as reported in our Condensed Interim Consolidated Statements of Cash Flows, is a useful measure because it provides an indication of the funds our principal business activities generate prior to consideration of working capital changes, which is primarily made up of highly liquid balances.

The most directly comparable financial measure is cash provided by (used in) operations.

Net Capital Spending We believe net capital spending is a useful measure as it provides an indication of our primary investment activities.

The most directly comparable financial measure is cash provided by (used in) investing activities.

Net capital spending is calculated as follows:

For the three months ended
September 30,
For the nine months ended
September 30,
(Stated in thousands of Canadian dollars) 2023 2022 2023 2022
Capital spending by spend category
Expansion and upgrade 13,479 25,461 39,439 50,606
Maintenance, infrastructure and intangibles 38,914 25,642 108,463 76,335
52,393 51,103 147,902 126,941
Proceeds on sale of property, plant and equipment (6,698 ) (22,337 ) (20,724 ) (32,033 )
Net capital spending 45,695 28,766 127,178 94,908
Business acquisitions 10,200 28,000 10,200
Proceeds from sale of investments and other assets (10,013 ) (10,013 )
Purchase of investments and other assets 3,211 73 5,282 609
Receipt of finance lease payments (64 ) (64 )
Changes in non-cash working capital balances (4,551 ) (7,328 ) 6,774 (6,881 )
Cash used in investing activities 34,278 31,711 157,157 98,836

Working Capital We define working capital as current assets less current liabilities, as reported in our Condensed Interim Consolidated Statements of Financial Position.

Working capital is calculated as follows:

September 30, December 31,
(Stated in thousands of Canadian dollars) 2023 2022
Current assets 477,396 470,670
Current liabilities 299,656 410,029
Working capital 177,740 60,641

Non-GAAP Ratios
We reference certain additional Non-GAAP ratios that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors.
Adjusted EBITDA %
of Revenue
We believe Adjusted EBITDA as a percentage of consolidated revenue, as reported in our Condensed Interim Consolidated Statements of Net Earnings (Loss), provides an indication of our profitability from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and depreciation and amortization charges.
Long-term debt to
long-term debt plus
equity
We believe that long-term debt (as reported in our Condensed Interim Consolidated Statements of Financial Position) to long-term debt plus equity (total shareholders’ equity as reported in our Condensed Interim Consolidated Statements of Financial Position) provides an indication of our debt leverage.
Net Debt to
Adjusted EBITDA
We believe that the Net Debt (long-term debt less cash, as reported in our Condensed Interim Consolidated Statements of Financial Position) to Adjusted EBITDA ratio provides an indication of the number of years it would take for us to repay our debt obligations.
Supplementary Financial Measures
We reference certain supplementary financial measures that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors.
Capital Spending by
Spend Category
We provide additional disclosure to better depict the nature of our capital spending. Our capital spending is categorized as expansion and upgrade, maintenance and infrastructure, or intangibles.

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 2023;
  • our capital expenditures, free cash flow allocation and debt reduction plan for 2023;
  • anticipated activity levels, demand for our drilling rigs, day rates and daily operating margins in 2023;
  • the average number of term contracts in place for 2023;
  • customer adoption of Alpha™ technologies and EverGreen™ suite of environmental solutions;
  • timing and amount of accretive cash flow from acquired drilling and well servicing assets;
  • potential commercial opportunities and rig contract renewals; and
  • our future debt reduction plans.

These forward-looking information and statements are based on certain assumptions and analysis made by Precision in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. These include, among other things:

  • our ability to react to customer spending plans as a result of changes in oil and natural gas prices;
  • the status of current negotiations with our customers and vendors;
  • customer focus on safety performance;
  • existing term contracts are neither renewed nor terminated prematurely;
  • our ability to deliver rigs to customers on a timely basis;
  • the impact of an increase/decrease in capital spending; and
  • the general stability of the economic and political environments in the jurisdictions where we operate.

Undue reliance should not be placed on forward-looking information and statements. Whether actual results, performance or achievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from our expectations. Such risks and uncertainties include, but are not limited to:

  • volatility in the price and demand for oil and natural gas;
  • fluctuations in the level of oil and natural gas exploration and development activities;
  • fluctuations in the demand for contract drilling, well servicing and ancillary oilfield services;
  • our customers’ inability to obtain adequate credit or financing to support their drilling and production activity;
  • changes in drilling and well servicing technology, which could reduce demand for certain rigs or put us at a competitive advantage;
  • shortages, delays and interruptions in the delivery of equipment supplies and other key inputs;
  • liquidity of the capital markets to fund customer drilling programs;
  • availability of cash flow, debt and equity sources to fund our capital and operating requirements, as needed;
  • the impact of weather and seasonal conditions on operations and facilities;
  • competitive operating risks inherent in contract drilling, well servicing and ancillary oilfield services;
  • ability to improve our rig technology to improve drilling efficiency;
  • general economic, market or business conditions;
  • the availability of qualified personnel and management;
  • a decline in our safety performance which could result in lower demand for our services;
  • changes in laws or regulations, including changes in environmental laws and regulations such as increased regulation of hydraulic fracturing or restrictions on the burning of fossil fuels and greenhouse gas emissions, which could have an adverse impact on the demand for oil and natural gas;
  • terrorism, social, civil and political unrest in the foreign jurisdictions where we operate;
  • fluctuations in foreign exchange, interest rates and tax rates; and
  • other unforeseen conditions which could impact the use of services supplied by Precision and Precision’s ability to respond to such conditions.

Readers are cautioned that the forgoing list of risk factors is not exhaustive. Additional information on these and other factors that could affect our business, operations or financial results are included in reports on file with applicable securities regulatory authorities, including but not limited to Precision’s Annual Information Form for the year ended December 31, 2022, 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) Se