Precision Drilling Corporation announces Kuwait contract award and activity update
CALGARY, Alberta, July 09, 2018 — 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”) (TSX:PD) (NYSE:PDS) is pleased to announce the award of one new build ST-3000 drilling rig in Kuwait under a five year take-or-pay contract with an optional one year extension. Precision has five active rigs in Kuwait on long term contract and expects the sixth rig to commence operations in the third quarter of 2019. All six rigs have standardized rig design features and specifications delivered within the last five years. In line with prior new builds, the rig has attractive internal return metrics and a payback period within the initial contract term. The rig addition allows us to leverage our existing scale in country with no additional overhead required to support the expanded fleet. Capital cost for the new build is approximately US$60 million with approximately US$10 million expected to be spent in 2018 and the remainder in 2019.
One of Precision’s three strategic priorities for 2018 is to reduce debt by generating free cash flow while continuing to fund only the most attractive investment opportunities. We communicated a firm goal to reduce debt by $75 to $125 million in 2018, and have successfully achieved the low end of that range in the first half of this year. Capital expenditures for the year are expected to be funded with free cash flow, with debt repayment remaining a key priority. Our expected cash balance for the end of the second quarter is approximately $95 million.
Precision currently has 54 active rigs in Canada as we emerge from the lows of spring breakup. Despite a fairly flat industry rig count, our activity levels are tracking ahead of last year with visibility to exceed 60 active rigs by mid-August, surpassing our peak rig count in the third quarter of last year. In the U.S., demand for Precision’s rigs continues to strengthen with 78 rigs currently active and visibility to reach 80 rigs by the end of July.
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 future debt reduction;
- anticipated cash balance at the end of the second quarter;
- anticipated capital spending for 2018 and 2019;
- anticipated activity levels in 2018; and
- anticipated customer demand in 2018.
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;
- our ability to deliver rigs to customers on a timely basis; and
- the general stability of the economic and political environments in the jurisdictions where we operate.
Undue reliance should not be placed on forward-looking information and statements. Whether actual results, performance or achievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from our expectations. Such risks and uncertainties include, but are not limited to:
- volatility in the price and demand for oil and natural gas;
- fluctuations in the 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 disadvantage;
- shortages, delays and interruptions in the delivery of equipment supplies and other key inputs;
- the effects of seasonal and weather conditions on operations and facilities;
- the availability of qualified personnel and management;
- a decline in our safety performance which could result in lower demand for our services;
- changes in environmental laws and regulations such as increased regulation of hydraulic fracturing or restrictions on the burning of fossil fuels and greenhouse gas emissions, which could have an adverse impact on the demand for oil and gas;
- terrorism, social, civil and political unrest in the foreign jurisdictions where we operate;
- fluctuations in foreign exchange, interest rates and tax rates; and
- other unforeseen conditions which could impact the use of services supplied by Precision and Precision’s ability to respond to such conditions.
Readers are cautioned that the forgoing list of risk factors is not exhaustive. Additional information on these and other factors that could affect our business, operations or financial results are included in reports on file with applicable securities regulatory authorities, including but not limited to Precision’s Annual Information Form for the year ended December 31, 2017, 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.
Precision is a leading provider of safe and High Performance, High Value services to the oil and gas industry. Precision provides customers with access to an extensive fleet of contract drilling rigs, directional drilling services, well service and snubbing rigs, camps, rental equipment, and wastewater treatment units backed by a comprehensive mix of technical support services and skilled, experienced personnel.
Precision is headquartered in Calgary, Alberta, Canada. Precision is listed on the Toronto Stock Exchange under the trading symbol “PD” and on the New York Stock Exchange under the trading symbol “PDS”.
For further information, please contact:
Carey Ford, CFA
Senior Vice President and Chief Financial Officer
Ashley Connolly, CFA
Manager, Investor Relations
Precision Drilling Corporation
800, 525 – 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1