Precision Drilling Announces Updates on Debt Repayment, Share Repurchases, Liquidity and 2020 Capital Expenditure Plan
January 07 2020 - 6:00AM
Precision Drilling Corporation (“Precision” or “the Company”)
(TSX:PD; NYSE:PDS) provides a series of announcements
including: 1) year-end and 2020 debt repayment updates and progress
on long-term debt reduction targets; 2) year-end progress on share
repurchases; 3) year-end cash balance and extension of revolving
credit facility; and 4) revised 2020 capital expenditure plan.
Debt Repayment Update
Following additional open market repurchases and
redemptions of its senior notes in the fourth quarter, Precision’s
2019 debt repayments totaled $205 million, exceeding its recently
increased 2019 annual target of $200 million.
To date in 2020, Precision has redeemed $32
million of its 2021 senior notes and reaffirms its 2020 targeted
debt reduction range of $100 million to $150 million, which
includes the remaining balance of the 2021 senior notes.
Precision has paid down $412 million in debt
since the beginning of 2018, exceeding the low end of the 4-year
debt reduction target range of $400 million to $600 million, in
just over two years. The Company plans to continue reducing
debt levels to reach its targeted leverage ratio of below two-times
net debt to Adjusted EBITDA.
As of January 7, 2020, the amounts outstanding
under Precision’s senior notes are as follows:
- US$66 million – 6.5% senior notes
due December 15, 2021
- US$345 million – 7.75% senior notes
due December 15, 2023
- US$308 million – 5.25% senior notes
due November 15, 2024
- US$370 million – 7.125% senior
notes due January 15, 2026
Share Repurchases Update
As of 2019 year-end, Precision has repurchased
and cancelled 16.5 million shares for $26 million. These
repurchases were funded from cash flow and account for 5.7% of the
Company’s available public float. Precision is currently approved
to buy back up to 29.2 million shares, representing 10% of its
public float, by August 26, 2020.
Liquidity Update
Precision anticipates a reported 2019 year-end
cash balance of approximately $75 million and in the fourth quarter
completed a one-year extension of its US$500 million revolving
credit facility, now maturing November 2023. Excluding letters of
credit, the Company’s revolving credit facility remains undrawn,
and with the year-end cash balance, Precision has access to over
$700 million in liquidity.
Capital Expenditure Plan
Update
Due to a change in Precision’s estimate of rig
componentization, certain costs that were previously classified as
operating expenses will now be classified as maintenance
capital. For 2020, this change is expected to decrease
operating expenses and increase maintenance capital by an estimated
$25 million with no impact on cash flow. As a result, Precision’s
previously communicated 2020 capital expenditure plan of $60
million to $80 million is now expected to be $85 million to $105
million.
Regarding the above announcements, Precision’s
CFO, Carey Ford stated: “Precision’s proven ability to generate
free cash flow has allowed the Company to accelerate both its short
and long-term debt reduction targets. Since 2018, we have reduced
our debt by $412 million and used $26 million to repurchase our
shares, totaling $438 million used to strengthen our balance sheet
and return capital to shareholders. Precision remains well
positioned to continue reducing debt, while maintaining financial
flexibility to manage customer spending cycles, address the most
attractive growth opportunities and opportunistically repurchase
our shares. We are firm in our belief that these efforts are the
most productive means to create shareholder value in the current
market environment.”
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:
- our planned capital expenditures
for 2020;
- anticipated positive cash
flows;
- future debt repayments; and
- statements with respect to the NCIB
and advantages to shareholders of the NCIB.
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,
2018, 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.
About PrecisionPrecision 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 Super Series drilling rigs supported by an
industry leading technology platform that offers innovative
drilling solutions to deliver efficient, predictable and repeatable
results through service differentiation. Precision also offers
directional drilling services, 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. 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, CFASenior Vice President and Chief
Financial Officer713.435.6136
Dustin Honing, CPAManager, Investor
Relations403.716.4515
Precision Drilling Corporation800, 525 - 8th
Avenue S.W.Calgary, Alberta, Canada T2P 1G1Website:
www.precisiondrilling.com
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