This news release contains “forward-looking information and
statements” within the meaning of applicable securities laws. For a
full disclosure of the forward-looking information and statements
and the risks to which they are subject, see the “Cautionary
Statement Regarding Forward-Looking Information and Statements”
later in this news release. This news release contains references
to Adjusted EBITDA, Covenant EBITDA, Operating Earnings (Loss),
Funds Provided by (Used in) Operations and Working Capital. These
terms do not have standardized meanings prescribed under
International Financial Reporting Standards (IFRS) and may not be
comparable to similar measures used by other companies, see
“Non-GAAP Measures” later in this news release.
Precision Drilling announces 2020 second quarter financial
results:
- Revenue of $190 million was a decrease of 47% compared with the
second quarter of 2019.
- Net loss of $49 million or negative $0.18 per diluted share
compared with a net loss of $14 million or negative $0.05 per
diluted share in 2019.
- Earnings before income taxes, gain on repurchase of unsecured
senior notes, finance charges, foreign exchange, impairment
reversal, gain on asset disposals and depreciation and amortization
(Adjusted EBITDA, see “NON-GAAP MEASURES”) of $58 million as
compared with $81 million in the second quarter of 2019.
- Generated cash and funds provided by operations (see “NON-GAAP
MEASURES”) of $104 million and $27 million, respectively.
- Second quarter ending cash balance was $175 million, an
increase of $78 million from March 31, 2020.
- Second quarter capital expenditures were $24 million.
- Reduced our unsecured senior notes balance by $5 million and
drew $5 million under our Senior Credit Facility.
- In U.S., recognized US$8 million of idle but contracted rig
revenue and US$8 million of contract cancellation fees of which
US$2 million pertained to second quarter contracted days.
- Recognized restructuring charges of $6 million and Government
of Canada wage subsidies of $9 million.
- To secure our liquidity position, on April 9, 2020, we amended
our Senior Credit Facility to provide temporary covenant relief
through March 31, 2022.
Precision’s President and CEO Kevin Neveu
stated:
“The immediate and decisive steps the Precision
team has executed during this pandemic and economic crisis have
delivered very strong financial and operational results. Our
actions have further strengthened and positioned the company both
financially and competitively for an eventual industry recovery.
During the second quarter we generated $58 million in Adjusted
EBITDA and cash from operations of $104 million with our results
further supported by field performance and operational excellence
in all parts of our business. Also during the quarter, we improved
our liquidity position by increasing our cash balance to $175
million bringing our total liquidity available to nearly $900
million, which supports our ability to persevere through a
prolonged market downturn and capture value in a market
recovery.”
“During the quarter, we executed structural cost
reductions beyond those previously announced, which we expect will
lead to an additional $14 million in annualized savings. We now
expect our total annualized fixed cost reductions to be 35%, an
increase from our previous target of 30% and our normalized general
and administrative expense savings to exceed $30 million. We expect
these cash preservation measures, combined with capital expenditure
reductions and Canadian wage subsidy program, will reduce total
2020 cash outflows by up to $150 million, an increase from our
previously communicated target of over $100 million. We will
continue to explore every avenue to reduce our costs and spending
and conserve cash to keep Precision on track to meet long-term debt
reduction goals and support our High Performance, High Value
competitive strategy.”
“Second quarter U.S. operating results reflected
improved field margins delivered with tightly managed expenses and
strong contract book performance, both critical in this challenged
environment. While industry activity appears to be flattening,
visibility remains limited for the second half of the year. In
Canada, Precision achieved 36% market share during the second
quarter driven by our Super Triple rig fleet, which is
well-positioned for pad style development drilling activity in the
Montney and Duvernay. We expect the third quarter seasonal rebound
in Canada to remain muted with limited visibility into long-term
customer demand. While global international rig activity is
contracting sharply, we expect Precision’s six rigs under long-term
contract in Kuwait and the Kingdom of Saudi Arabia to remain stable
sources of revenue. Additional rig deployment and re-contracting
opportunities will be delayed until the customers in these regions
fully return to work.”
“Precision’s Alpha technologies continue to
demonstrate exceptional field results, driving strong customer
interest and field adoption of our broad portfolio of digital
solutions. During the second quarter, we commercialized two
additional drilling apps for a total of six commercial apps this
year and we have 12 more under development. This year we have
utilized AlphaApps on over 110 wells throughout North America,
generating 890 AlphaApp days. Additionally, we are utilizing
AlphaAnalytics for an integrated oil company in the Delaware basin
and reduced drilling time on a 28-day horizontal well by 4.1 days,
setting a new efficiency benchmark. In the Haynesville basin, we
applied AlphaAnalytics to a separate customer’s full fleet of rigs
and delivered an 8% improvement in drilling times compared to
results achieved in the first quarter. AlphaAnalytics, AlphaApps
and the AlphaAutomation platform are functioning on over half of
our active North American fleet today and the drilling performance
enhancements are inarguable. We believe the Alpha digital
enablement of the drilling rig process to be the single most
important technology transformation our customers can leverage to
reduce their well construction costs and we believe this may be the
ideal market to capitalize on these initiatives.”
“We will remain focused on the continued
execution of our strategic priorities, including our 2020
deleveraging targets while preserving our strong liquidity
position. We will concentrate on maximizing cash flow, stringently
managing costs, leveraging our high-quality fleet and collaborating
with our customers to utilize our Alpha portfolio to maximize
efficiencies and deliver predictable, repeatable results” concluded
Mr. Neveu.
IMPACT OF COVID-19
In March 2020, the novel coronavirus
(“COVID-19”) outbreak was declared a pandemic by the World Health
Organization. Governments worldwide, including those countries in
which Precision operates, have enacted emergency measures to combat
the spread of the virus. These measures, which include the
implementation of travel bans, self-imposed quarantine periods and
social distancing, have caused a material disruption to businesses
globally resulting in an economic slowdown and decreased demand for
oil. Governments and central banks have reacted with significant
monetary and fiscal interventions designed to stabilize economic
conditions; however, the long-term success of these interventions
is not yet determinable.
As a result of the decrease in demand, worldwide
inventories of oil have increased significantly. However, in the
second quarter voluntary production restraint from national oil
companies and governments of oil-producing nations along with
curtailments in the U.S. and Canada have shifted global oil markets
from a position of over supply to inventory draws. The situation
remains dynamic and the ultimate duration and magnitude of the
impact on the economy and the financial effect on the Corporation
remains unknown at this time.
SELECT FINANCIAL AND OPERATING
INFORMATION
Financial
Highlights |
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
(Stated in thousands of Canadian dollars, except per share
amounts) |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
|
Revenue |
189,759 |
|
359,424 |
|
(47.2 |
) |
569,243 |
|
793,467 |
|
(28.3 |
) |
Adjusted EBITDA(1) |
58,465 |
|
81,037 |
|
(27.9 |
) |
160,369 |
|
189,004 |
|
(15.2 |
) |
Operating earnings
(loss)(1) |
(19,189 |
) |
5,569 |
|
(444.6 |
) |
3,410 |
|
67,643 |
|
(95.0 |
) |
Net earnings (loss) |
(48,867 |
) |
(13,801 |
) |
254.1 |
|
(54,144 |
) |
11,213 |
|
(582.9 |
) |
Cash provided by
operations |
104,478 |
|
106,035 |
|
(1.5 |
) |
179,431 |
|
146,622 |
|
22.4 |
|
Funds provided by
operations(1) |
26,639 |
|
40,950 |
|
(34.9 |
) |
107,956 |
|
136,943 |
|
(21.2 |
) |
Capital spending: |
|
|
|
|
|
|
|
|
|
|
|
|
Expansion and upgrade |
12,111 |
|
33,595 |
|
(63.9 |
) |
13,764 |
|
99,712 |
|
(86.2 |
) |
Maintenance and infrastructure |
11,816 |
|
9,874 |
|
19.7 |
|
21,648 |
|
14,719 |
|
47.1 |
|
Intangibles |
- |
|
26 |
|
(100.0 |
) |
57 |
|
464 |
|
(87.7 |
) |
Proceeds on sale |
(5,021 |
) |
(24,575 |
) |
(79.6 |
) |
(10,711 |
) |
(82,452 |
) |
(87.0 |
) |
Net capital spending |
18,906 |
|
18,920 |
|
(0.1 |
) |
24,758 |
|
32,443 |
|
(23.7 |
) |
Net earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
(0.18 |
) |
(0.05 |
) |
256.4 |
|
(0.20 |
) |
0.04 |
|
(600.0 |
) |
Diluted |
(0.18 |
) |
(0.05 |
) |
256.4 |
|
(0.20 |
) |
0.04 |
|
(600.0 |
) |
(1) |
See “NON-GAAP
MEASURES”. |
Operating
Highlights |
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
|
2020 |
2019 |
% Change |
|
2020 |
2019 |
% Change |
|
Contract drilling rig
fleet |
227 |
232 |
(2.2 |
) |
227 |
232 |
(2.2 |
) |
Drilling rig utilization
days: |
|
|
|
|
|
|
|
|
U.S. |
2,743 |
6,994 |
(60.8 |
) |
7,727 |
14,117 |
(45.3 |
) |
Canada |
834 |
2,413 |
(65.4 |
) |
6,603 |
6,757 |
(2.3 |
) |
International |
687 |
728 |
(5.6 |
) |
1,415 |
1,448 |
(2.3 |
) |
Revenue per utilization
day: |
|
|
|
|
|
|
|
|
U.S.(1) (US$) |
29,370 |
23,425 |
25.4 |
|
25,828 |
23,312 |
10.8 |
|
Canada(2) (Cdn$) |
22,940 |
21,613 |
6.1 |
|
21,633 |
22,490 |
(3.8 |
) |
International (US$) |
54,779 |
51,542 |
6.3 |
|
54,529 |
50,746 |
7.5 |
|
Operating cost per utilization
day: |
|
|
|
|
|
|
|
|
U.S. (US$) |
14,172 |
14,803 |
(4.3 |
) |
14,406 |
14,584 |
(1.2 |
) |
Canada (Cdn$) |
13,898 |
17,414 |
(20.2 |
) |
14,196 |
15,840 |
(10.4 |
) |
Service rig fleet |
123 |
123 |
- |
|
123 |
123 |
- |
|
Service
rig operating hours |
4,702 |
29,540 |
(84.1 |
) |
39,067 |
72,438 |
(46.1 |
) |
(1) |
Includes
revenue from idle but contracted rig days and contract cancellation
fees. |
(2) |
Includes lump sum contract shortfall revenue. |
Financial Position |
(Stated in thousands of Canadian dollars, except ratios) |
June 30,2020 |
|
December 31,2019 |
Working capital(1) |
237,867 |
|
201,696 |
Cash |
175,125 |
|
74,701 |
Long-term debt |
1,450,900 |
|
1,427,181 |
Total long-term financial
liabilities |
1,521,067 |
|
1,500,950 |
Total assets |
3,204,233 |
|
3,269,840 |
Long-term debt to long-term debt plus equity ratio |
0.49 |
|
0.48 |
(1) |
See “NON-GAAP
MEASURES”. |
Summary for the three months ended June
30, 2020:
- Revenue this quarter was $190 million which is 47% lower than
the second quarter of 2019. Our decreased revenue was primarily the
result of lower activity across all operating segments. Industry
drilling activity steeply declined in the second quarter of 2020 as
customers reduced drilling programs in response to the global
economic slowdown. Compared with the second quarter of 2019, our
activity, as measured by drilling rig utilization days, decreased
by 61% in the U.S., 65% in Canada and 6% internationally.
- Adjusted EBITDA (see “NON-GAAP MEASURES”) of $58 million for
the quarter was a decrease of $23 million from the previous year
and was primarily due to lower activity. As a percentage of
revenue, Adjusted EBITDA was 31% compared with 23% in the
comparative quarter. The improved percentage was primarily due to
U.S. contract cancellation fees, increased idle but contracted rig
payments and Canadian wage subsidies partially offset by higher
restructuring costs and share-based compensation charges. See
discussion on share-based incentive compensation under “Other
Items” later in this release for additional details.
- Operating loss (see “NON-GAAP MEASURES”) this quarter was $19
million compared with operating earnings of $6 million in the
second quarter of 2019. Our operating earnings in the prior year
quarter were positively impacted by higher activity levels.
- General and administrative expenses this quarter were $18
million, $8 million lower than in 2019. Our lower general and
administrative costs in 2020 were primarily due to lower overhead
costs as we continued to align our cost structure to reflect
reduced global activity and the impact of Canadian wage
subsidies.
- Restructuring charges were $6 million as compared to nil in
2019.
- Net finance charges were $28 million, a decrease of $2 million
compared with the second quarter of 2019 and primarily due to
reduced interest expense related to retired debt, offset by the
impact of the weakening of the Canadian dollar on our U.S. dollar
denominated interest.
- In the second quarter of 2020, revenue per utilization day in
the U.S. increased to US$29,370 from US$23,425 in 2019. The
increase was primarily the result of higher revenues from contract
cancellation fees, idle but contracted rigs and turnkey drilling.
We had second quarter revenue from contract cancellation fees, idle
but contracted rigs and turnkey projects of US$8 million, US$8
million and US$3 million, respectively, as compared with nil, US$1
million and nil, respectively in 2019. Operating costs on a per day
basis decreased to US$14,172 in the second quarter of 2020 compared
with US$14,803 in 2019. The decrease was mainly due to lower
repairs and maintenance partially offset by increased turnkey
activity. On a sequential basis, revenue per utilization day,
excluding revenue from contract cancellations, idle but contracted
rigs and turnkey activity were in line with the first quarter.
Operating costs per day decreased by US$362 due to lower repairs
and maintenance partially offset by turnkey drilling costs.
- In Canada, average revenue per utilization day for contract
drilling rigs was $22,940 compared with $21,613 in the second
quarter of 2019. The higher average revenue per utilization day in
the second quarter of 2020 was primarily due to rig mix partially
offset by lower contract shortfall revenue. During the quarter, we
did not recognize any contract shortfall revenue compared with $1
million in 2019. Average operating costs per utilization day for
drilling rigs in Canada decreased to $13,898 compared with the
prior year quarter of $17,414. The decrease was mainly caused by
the impact of the Canadian wage subsidy programs partially offset
by fixed operating overheads being spread over fewer utilization
days. During the quarter, we recognized Canadian wage subsidies of
$4 million which lowered our operating costs per utilization day by
$5,173.
- We realized revenue from international contract drilling of
US$38 million in the second quarter of 2020, consistent with the
prior year quarter. Average revenue per utilization day in our
international contract drilling business increased 6% to US$54,779
from the comparable prior year quarter, primarily due to rate
increases from the commencement, renewal and extension of drilling
contracts.
- Cash and funds provided by operations (see “NON-GAAP MEASURES”)
in the second quarter of 2020 were $104 million and $27 million,
respectively, compared to $106 million and $41 million in the prior
year comparative.
- Capital expenditures were $24 million in the second quarter, a
decrease of $20 million over the same period in 2019. Capital
spending for the quarter included $12 million for upgrade and
expansion capital and $12 million for the maintenance of existing
assets, infrastructure spending and intangibles.
Summary for the six months ended June 30,
2020:
- Revenue for the first half of 2020 was $569 million, a decrease
of 28% from the comparative 2019 period.
- Operating earnings (see “NON-GAAP MEASURES”) were $3 million, a
decrease of $64 million from the same period in 2019. As a
percentage of revenue, operating earnings were 1% compared with 9%
in 2019. Operating results this year were negatively impacted by
lower activity.
- General and administrative costs were $38 million, a decrease
of $19 million from 2019. The decrease was due to lower overhead
costs as a result of our restructuring activities and lower
share-based compensation.
- Net finance charges were $56 million, a decrease of $6 million
from 2019 primarily due to a reduction in interest expense related
to retired debt partially offset by the weakening of the Canadian
dollar on our U.S. dollar denominated interest expense.
- Cash provided by operations was $179 million in 2020 as
compared with $147 million in 2019. Funds provided by operations
(see “NON-GAAP MEASURES”) in the first half of 2020 were $108
million, a decrease of $29 million from the prior year comparative
period of $137 million.
- Capital expenditures were $35 million for the first half of
2020, a decrease of $79 million over the same period in 2019.
Capital spending for the first half of 2020 included $14 million
for upgrade and expansion capital and $22 million for the
maintenance of existing assets, infrastructure spending and
intangibles.
STRATEGY
Precision’s strategic priorities for 2020 are as follows:
- Generate strong free cash flow and reduce debt by $100
million to $150 million in 2020 – In the second quarter of
2020, Precision generated $104 million of cash provided by
operations (see “NON-GAAP MEASURES”) and $5 million of cash
proceeds from the divestiture of non-core assets. We increased our
cash balance by $78 million during the quarter, exiting with a cash
balance of $175 million, compared to $97 million at March 31, 2020.
We will place a high priority on maintaining a strong liquidity
position and will continue to reduce debt levels once visibility
improves.
- Demonstrate operational excellence in all aspects of
our business – In Canada, we continued at record level
market share of 36% and reported operating margins (revenue less
operating costs) of $9,042 per utilization day. In the U.S., we
lowered field costs and leveraged our contract book to generate
reported operating margins of US$15,198 per utilization day.
Internationally, we maintained stable activity, averaging eight
active drilling rigs, and recorded average day rates of
US$54,779.
- Leverage our Alpha Technology platform as a competitive
differentiator and source of financial returns – As at
June 30, 2020, we have 38 field-deployed rigs equipped with our
AlphaAutomation platform which have drilled 316 wells in 2020.
Since 2017, we have drilled approximately 1,500 wells with
AlphaAutomation and currently have 18 AlphaApps available, of which
six are commercial. In 2020, we have drilled over 110 wells with
AlphaApps, generating 890 AlphaApp days, further allowing us to
differentiate our High Performance, High Value offering. We are
currently utilizing AlphaAnalytics for an integrated oil company in
the Delaware basin and have reduced drilling time on a 28-day
horizontal well by 4.1 days, setting a new drilling efficiency
benchmark. With a separate customer in the Haynesville basin, we
applied AlphaAnalytics to their full fleet of rigs and delivered an
8% improvement in drilling times compared to results achieved in
the first quarter. AlphaAnalytics, AlphaApps and the
AlphaAutomation platform are functioning on over half of our active
North American fleet today.
OUTLOOK
The energy industry continues to have a
challenging outlook as the COVID-19 pandemic has resulted in
significant global oil supply imbalances and near-term crude oil
price volatility. Our customers have responded by materially
reducing capital spending leading to a rapid reduction in global
oilfield service activity levels. In this reduced-activity
environment, our customers remain focused on operational
efficiencies. We anticipate this will accelerate the industry’s
transition towards service providers with the highest performing
assets and competitive digital technology offerings. Pursuit of
predictable and repeatable results will further drive field
application of drilling automation processes to create additional
cost efficiencies and performance value for customers.
Precision continues to closely monitor
announcements of available government financial support and
economic stimulus programs. We are encouraged by the Government of
Canada’s $1.7 billion well site abandonment and rehabilitation
program, which will support industry activity levels and provide
thousands of jobs throughout western Canada. The program is
expected to run through to the end of 2022 with government funds
being provided in stages. As the use of service rigs is an integral
part of the well abandonment process, we believe our well servicing
business is well positioned to capture these opportunities as a
result of our scale, operational performance and strong safety
record.
On April 1, 2020, the Government of Canada
announced the Canada Emergency Wage Subsidy (CEWS) program, which
would subsidize 75% of employee wages for Canadian employers whose
businesses have been affected by COVID-19. The program is intended
to help employers re-hire previously laid off workers, prevent
further job losses and better position Canadian businesses to
resume normal operations. Under this program in the second quarter
of 2020, we recognized $9 million of CEWS subsidies that were
presented as reductions to operating and general and administrative
expense of $6 million and $3 million, respectively. The Government
of Canada recently indicated its continued support of this program
through to the end of the year. We expect to participate in the
third and fourth quarter of 2020 and receive similar levels of wage
subsidies as recognized in the second quarter.
Contracts
Year to date in 2020 we have entered into ten
term contracts. The following chart outlines the average number of
drilling rigs under contract by quarter as of July 22, 2020. For
those quarters ending after June 30, 2020, this chart represents
the minimum number of long-term contracts from which we will earn
revenue. We expect the actual number of contracted rigs to vary in
future periods as we sign additional contracts and certain
customers elect to pay contract cancellation fees.
|
Average for the quarter ended 2019 |
Average for the quarter ended 2020 |
|
Mar. 31 |
June 30 |
Sept. 30 |
Dec. 31 |
Mar. 31 |
June 30 |
Sept. 30 |
Dec. 31 |
Average rigs under term
contract as of July 22, 2020: |
|
|
|
|
|
|
|
|
U.S. |
56 |
52 |
49 |
41 |
41 |
32 |
26 |
22 |
Canada |
8 |
5 |
5 |
5 |
5 |
4 |
3 |
3 |
International |
8 |
8 |
9 |
9 |
8 |
8 |
6 |
6 |
Total |
72 |
65 |
63 |
55 |
54 |
44 |
35 |
31 |
The following chart outlines the average number
of drilling rigs that we had under contract for 2019 and the
average number of rigs we have under contract as of July 22,
2020.
|
Average for the year ended |
|
2019 |
2020 |
2021 |
Average rigs under term
contract as of July 22, 2020: |
|
|
|
U.S. |
49 |
30 |
6 |
Canada |
6 |
4 |
2 |
International |
9 |
7 |
6 |
Total |
64 |
41 |
14 |
In Canada, term contracted rigs normally
generate 250 utilization days per year because of the seasonal
nature of well site access. In most regions in the U.S. and
internationally, term contracts normally generate 365 utilization
days per year.
Drilling Activity
The following chart outlines the average number
of drilling rigs that we had working or moving by quarter for the
periods noted.
|
Average for the quarter ended 2019 |
2020 |
|
Mar. 31 |
June 30 |
Sept. 30 |
Dec. 31 |
Mar. 31 |
June 30 |
Average Precision active rig
count: |
|
|
|
|
|
|
U.S. |
79 |
77 |
72 |
63 |
55 |
30 |
Canada |
48 |
27 |
42 |
43 |
63 |
9 |
International |
8 |
8 |
9 |
9 |
8 |
8 |
Total |
135 |
112 |
123 |
115 |
126 |
47 |
According to industry sources, as of July 22,
2020, the U.S. active land drilling rig count is down 74% from the
same point last year and the Canadian active land drilling rig
count is down 73%. To date in 2020, approximately 82% of the U.S.
industry’s active rigs and 58% of the Canadian industry’s active
rigs were drilling for oil targets, compared with 81% for the U.S.
and 58% for Canada at the same time last year.
Capital Spending
Capital spending in 2020 is expected to be $48
million and includes $34 million for sustaining, infrastructure and
intangibles and $14 million for upgrade and expansion. We expect
that the $48 million will be split $45 million in the Contract
Drilling Services segment, $3 million in the Completion and
Production Services segment and less than $1 million to the
Corporate segment. At June 30, 2020, Precision had capital
commitments of $113 million with payments expected through to
2022.
SEGMENTED FINANCIAL RESULTS
Precision’s operations are reported in two
segments: Contract Drilling Services, which includes our drilling
rig, directional drilling, oilfield supply and manufacturing
divisions; and Completion and Production Services, which includes
our service rig, rental and camp and catering divisions.
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
(Stated in thousands of Canadian dollars) |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
184,738 |
|
334,475 |
|
(44.8 |
) |
531,287 |
|
713,739 |
|
(25.6 |
) |
Completion and Production Services |
5,525 |
|
26,145 |
|
(78.9 |
) |
39,188 |
|
81,964 |
|
(52.2 |
) |
Inter-segment eliminations |
(504 |
) |
(1,196 |
) |
(57.9 |
) |
(1,232 |
) |
(2,236 |
) |
(44.9 |
) |
|
189,759 |
|
359,424 |
|
(47.2 |
) |
569,243 |
|
793,467 |
|
(28.3 |
) |
Adjusted EBITDA:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services |
74,613 |
|
93,295 |
|
(20.0 |
) |
185,346 |
|
211,750 |
|
(12.5 |
) |
Completion and Production Services |
(1,220 |
) |
2,781 |
|
(143.9 |
) |
2,015 |
|
13,299 |
|
(84.8 |
) |
Corporate and Other |
(14,928 |
) |
(15,039 |
) |
(0.7 |
) |
(26,992 |
) |
(36,045 |
) |
(25.1 |
) |
|
58,465 |
|
81,037 |
|
(27.9 |
) |
160,369 |
|
189,004 |
|
(15.2 |
) |
(1) |
See
“NON-GAAP MEASURES”. |
SEGMENT
REVIEW OF CONTRACT DRILLING SERVICES |
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
(Stated in thousands of Canadian dollars, except where noted) |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
|
Revenue |
184,738 |
|
334,475 |
|
(44.8 |
) |
531,287 |
|
713,739 |
|
(25.6 |
) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
101,498 |
|
231,422 |
|
(56.1 |
) |
323,827 |
|
477,937 |
|
(32.2 |
) |
General and administrative |
6,083 |
|
9,758 |
|
(37.7 |
) |
14,853 |
|
21,006 |
|
(29.3 |
) |
Restructuring |
2,544 |
|
- |
|
n/m |
|
7,261 |
|
3,046 |
|
138.4 |
|
Adjusted EBITDA(1) |
74,613 |
|
93,295 |
|
(20.0 |
) |
185,346 |
|
211,750 |
|
(12.5 |
) |
Depreciation |
74,062 |
|
75,155 |
|
(1.5 |
) |
149,786 |
|
153,154 |
|
(2.2 |
) |
Gain on asset disposals |
(3,091 |
) |
(4,271 |
) |
(27.6 |
) |
(5,933 |
) |
(39,272 |
) |
(84.9 |
) |
Impairment reversal |
- |
|
- |
|
n/m |
|
- |
|
(5,810 |
) |
(100.0 |
) |
Operating earnings(1) |
3,642 |
|
22,411 |
|
(83.7 |
) |
41,493 |
|
103,678 |
|
(60.0 |
) |
Operating earnings(1) as a percentage of revenue |
2.0 |
% |
6.7 |
% |
|
|
7.8 |
% |
14.5 |
% |
|
|
(1) |
See “NON-GAAP
MEASURES”. |
n/m |
Not meaningful |
United
States onshore drilling statistics:(1) |
2020 |
2019 |
|
Precision |
Industry(2) |
Precision |
Industry(2) |
Average number of active land
rigs for quarters ended: |
|
|
|
|
March 31 |
55 |
764 |
79 |
1,023 |
June 30 |
30 |
378 |
77 |
967 |
Year to date average |
42 |
571 |
78 |
995 |
(1) |
United States
lower 48 operations only. |
(2) |
Baker Hughes rig counts. |
Canadian onshore drilling statistics:(1) |
2020 |
2019 |
|
Precision |
Industry(2) |
Precision |
Industry(2) |
Average number of active land
rigs for quarters ended: |
|
|
|
|
March 31 |
63 |
196 |
48 |
183 |
June 30 |
9 |
25 |
27 |
82 |
Year to date average |
36 |
110 |
37 |
132 |
(1) |
Canadian
operations only. |
(2) |
Baker Hughes rig counts. |
SEGMENT REVIEW OF COMPLETION AND PRODUCTION
SERVICES
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
(Stated in thousands of Canadian dollars, except where noted) |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
|
Revenue |
5,525 |
|
26,145 |
|
(78.9 |
) |
39,188 |
|
81,964 |
|
(52.2 |
) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
5,558 |
|
21,823 |
|
(74.5 |
) |
32,184 |
|
64,956 |
|
(50.5 |
) |
General and administrative |
915 |
|
1,541 |
|
(40.6 |
) |
2,394 |
|
3,252 |
|
(26.4 |
) |
Restructuring |
272 |
|
- |
|
n/m |
|
2,595 |
|
457 |
|
467.8 |
|
Adjusted EBITDA(1) |
(1,220 |
) |
2,781 |
|
(143.9 |
) |
2,015 |
|
13,299 |
|
(84.8 |
) |
Depreciation |
4,119 |
|
4,341 |
|
(5.1 |
) |
8,402 |
|
9,290 |
|
(9.6 |
) |
Gain on asset disposals |
(262 |
) |
(3,546 |
) |
(92.6 |
) |
(1,001 |
) |
(3,602 |
) |
(72.2 |
) |
Operating earnings (loss)(1) |
(5,077 |
) |
1,986 |
|
(355.6 |
) |
(5,386 |
) |
7,611 |
|
(170.8 |
) |
Operating earnings (loss)(1) as a percentage of revenue |
(91.9 |
)% |
7.6 |
% |
|
|
(13.7 |
)% |
9.3 |
% |
|
|
Well servicing
statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
Number of service rigs (end of period) |
123 |
|
123 |
|
- |
|
123 |
|
123 |
|
- |
|
Service rig operating hours |
4,702 |
|
29,540 |
|
(84.1 |
) |
39,067 |
|
72,438 |
|
(46.1 |
) |
Service rig operating hour utilization |
4 |
% |
26 |
% |
|
|
17 |
% |
31 |
% |
|
|
(1) |
See “NON-GAAP
MEASURES”. |
n/m |
Not meaningful |
SEGMENT REVIEW OF CORPORATE AND
OTHER
Our Corporate and Other segment provides support
functions to our operating segments. The Corporate and Other
segment had negative Adjusted EBITDA (see “NON-GAAP MEASURES”) of
$15 million, slightly lower than the second quarter of 2019
primarily due to Canadian wage subsidies offset by higher
share-based compensation expense and increased restructuring
charges. During the second quarter of 2020, we incurred $3 million
of restructuring charges and recognized $2 million of Canadian wage
subsidies.
OTHER ITEMS
Share-based Incentive Compensation
Plans
We have several cash and equity-settled
share-based incentive plans for non-management directors, officers
and other eligible employees. Our accounting policies for each
share-based incentive plan can be found in our 2019 Annual
Report.
A summary of amounts expensed under these plans
during the reporting periods are as follows:
|
For the three monthsended June 30, |
For the six months ended June 30, |
(Stated in thousands of Canadian dollars) |
2020 |
2019 |
2020 |
|
2019 |
Cash settled share-based
incentive plans |
5,372 |
515 |
(1,021 |
) |
6,319 |
Equity settled share-based
incentive plans: |
|
|
|
|
|
Executive PSU |
2,959 |
3,024 |
5,694 |
|
5,396 |
Stock option plan |
168 |
506 |
554 |
|
1,237 |
Total
share-based incentive compensation plan expense |
8,499 |
4,045 |
5,227 |
|
12,952 |
|
|
|
|
|
|
Allocated: |
|
|
|
|
|
Operating |
1,987 |
798 |
1,014 |
|
3,227 |
General and Administrative |
6,512 |
3,247 |
4,213 |
|
9,725 |
|
8,499 |
4,045 |
5,227 |
|
12,952 |
Cash settled shared-based compensation expense
increased by $5 million in the current quarter primarily due to our
increasing share price. Our total equity settled share-based
compensation expense for the second quarter of 2020 was $3 million,
slightly lower than 2019 due to vesting of stock options granted in
prior years.
Finance Charges
Net finance charges were $28 million, a decrease
of $2 million compared with the second quarter of 2019, primarily
due to reduced interest expense related to retired debt, offset by
the impact of the weakening of the Canadian dollar on our U.S.
dollar denominated interest.
Interest charges on our U.S. denominated
long-term debt in the second quarter of 2020 were US$19 million
($26 million) as compared with US$21 million ($28 million) in
2019.
Income Tax
Income tax expense for the quarter was $4
million compared with a recovery of $6 million in the same quarter
in 2019. The higher income tax expense in the second quarter of
2020 was the result of not recognizing the benefit of $14 million
on Canadian deferred tax assets.
LIQUIDITY AND CAPITAL
RESOURCES
Liquidity
Amount |
Availability |
Used for |
Maturity |
Senior credit facility (secured) |
|
|
|
US$500 million (extendible, revolvingterm credit facility with
US$300 million accordion feature) |
US$4 million drawn and US$32 million in outstanding letters of
credit |
General corporate purposes |
November 21, 2023 |
Operating facilities (secured) |
|
|
|
$40 million |
Undrawn, except $8 million inoutstanding letters of credit |
Letters of credit and generalcorporate purposes |
|
US$15 million |
Undrawn |
Short term working capitalrequirements |
|
Demand letter of credit facility (secured) |
|
|
|
US$30 million |
Undrawn, except US$2 millionin outstanding letters of credit |
Letters of credit |
|
Unsecured senior notes (unsecured) |
|
|
|
US$63 million – 6.5% |
Fully drawn |
Capital expenditures and generalcorporate purposes |
December 15, 2021 |
US$344 million – 7.75% |
Fully drawn |
Debt redemption and repurchases |
December 15, 2023 |
US$303 million – 5.25% |
Fully drawn |
Capital expenditures and generalcorporate purposes |
November 15, 2024 |
US$368 million – 7.125% |
Fully drawn |
Debt redemption and repurchases |
January 15, 2026 |
As at June 30, 2020, we had US$1,080 million
($1,467 million) outstanding under our Senior Credit Facility and
unsecured senior notes as compared with US$1,113 million ($1,445
million) at December 31, 2019. During the first half of 2020, we
redeemed US$25 million principal amount and repurchased and
cancelled US$3 million of our 6.50% unsecured senior notes due
2021, repurchased and cancelled US$5 million of our 5.25% unsecured
senior notes due 2024, US$2 million of our 7.125% unsecured senior
notes due 2026 and US$1 million of our 7.75% unsecured senior notes
due 2023 and we drew US$4 million on our Senior Credit Facility.
The weakening of the Canadian dollar resulted in $64 million of
additional stated debt such that at June 30, 2020, we had $1,462
million of outstanding unsecured senior notes and $16 million in
unamortized debt issue costs.
The current blended cash interest cost of our
debt is approximately 6.7%.
Covenants
Following is a listing of our applicable Senior
Credit Facility financial covenants and the calculations as at June
30, 2020:
|
Covenant |
At June 30, 2020 |
|
Senior Credit
Facility |
|
|
|
Consolidated senior debt to consolidated covenant EBITDA(1) |
< 2.50 |
(0.23 |
) |
Consolidated covenant EBITDA to consolidated interest
expense(1) |
> 2.50 |
3.39 |
|
(1) |
For purposes
of calculating the leverage ratio consolidated senior debt only
includes secured indebtedness. |
At June 30, 2020, we were in compliance with the covenants of
our Senior Credit Facility.
Senior Credit Facility
On April 9, 2020 we agreed with the lenders of
our Senior Credit Facility to reduce the consolidated Covenant
EBITDA to consolidated interest expense coverage ratio for the most
recent four consecutive quarters greater than or equal to 2.5:1 to
2.0:1 for the period ending September 30, 2020, 1.75:1 for the
period ending December 31, 2020, 1.25:1 for the periods ending
March 31, June 30 and September 30, 2021, 1.75:1, for the period
ending December 31, 2021, 2.0:1 for the period ending March 31,
2022 and 2.5:1 for periods ending thereafter.
During the covenant relief period, Precision’s
distributions in the form of dividends, distributions and share
repurchases are restricted to a maximum of US$15 million in 2020
and US$25 million in each of 2021 and 2022, subject to a pro forma
senior net leverage ratio (as defined in the credit agreement) of
less than or equal to 1.75:1.
In addition, during 2021, the North American and
acceptable secured foreign assets must directly account for at
least 65% of consolidated Covenant EBITDA calculated quarterly on a
rolling twelve-month basis, increasing to 70% thereafter. Precision
also has the option to voluntarily terminate the covenant relief
period prior to its March 31, 2022 end date.
The Senior Credit Facility limits the redemption
and repurchase of junior debt subject to a pro forma senior net
leverage covenant test of less than or equal to 1.75:1.
NON-GAAP MEASURES
In this release we reference non-GAAP (Generally
Accepted Accounting Principles) measures. These terms do not have
standardized meanings prescribed under International Financial
Reporting Standards (IFRS) and may not be
comparable to similar measures used by other companies.
Adjusted EBITDA
We believe that Adjusted EBITDA (earnings before
income taxes, gain on repurchase of unsecured senior notes, finance
charges, foreign exchange, impairment reversal, gain on assets
disposals and depreciation and amortization), as reported in the
Interim Consolidated Statement of Net Earnings (Loss), is a useful
measure, because it gives an indication of the results from our
principal business activities prior to consideration of how our
activities are financed and the impact of foreign exchange,
taxation and depreciation and amortization charges.
Covenant EBITDA
Covenant EBITDA, as defined in our Senior Credit
Facility agreement, is used in determining the Corporation’s
compliance with its covenants. Covenant EBITDA differs from
Adjusted EBITDA by the exclusion of bad debt expense, restructuring
costs, certain foreign exchange amounts and the deduction of cash
lease payments incurred after December 31, 2018.
Operating Earnings (Loss)
We believe that operating earnings (loss) is a
useful measure because it provides an indication of the results of
our principal business activities before consideration of how those
activities are financed and the impact of foreign exchange and
taxation. Operating earnings is calculated as follows:
|
For the three months ended June 30, |
|
For the six months ended June 30, |
|
(Stated in thousands of Canadian dollars) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Revenue |
189,759 |
|
359,424 |
|
569,243 |
|
793,467 |
|
Expenses: |
|
|
|
|
|
|
|
|
Operating |
106,552 |
|
252,049 |
|
354,779 |
|
540,657 |
|
General and administrative |
18,449 |
|
26,338 |
|
37,984 |
|
57,368 |
|
Restructuring |
6,293 |
|
— |
|
16,111 |
|
6,438 |
|
Depreciation and
amortization |
81,124 |
|
83,327 |
|
164,038 |
|
170,080 |
|
Gain on asset disposals |
(3,470 |
) |
(7,859 |
) |
(7,079 |
) |
(42,909 |
) |
Impairment reversal |
— |
|
— |
|
— |
|
(5,810 |
) |
Operating earnings
(loss) |
(19,189 |
) |
5,569 |
|
3,410 |
|
67,643 |
|
Foreign exchange |
(928 |
) |
(3,763 |
) |
1,763 |
|
(5,886 |
) |
Finance charges |
28,083 |
|
30,385 |
|
55,663 |
|
61,688 |
|
Gain on
repurchase of unsecured notes |
(1,121 |
) |
(1,085 |
) |
(1,971 |
) |
(1,398 |
) |
Earnings (loss) before income taxes |
(45,223 |
) |
(19,968 |
) |
(52,045 |
) |
13,239 |
|
Funds Provided By (Used In)
Operations
We believe that funds provided by (used in)
operations, as reported in the Interim Consolidated Statements of
Cash Flow, is a useful measure because it provides an indication of
the funds our principal business activities generate prior to
consideration of working capital, which is primarily made up of
highly liquid balances.
Working Capital
We define working capital as current assets less
current liabilities as reported on the Interim Consolidated
Statement of Financial Position.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements contained in this release,
including statements that contain words such as "could", "should",
"can", "anticipate", "estimate", "intend", "plan", "expect",
"believe", "will", "may", "continue", "project", "potential" and
similar expressions and statements relating to matters that are not
historical facts constitute "forward-looking information" within
the meaning of applicable Canadian securities legislation and
"forward-looking statements" within the meaning of the "safe
harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995 (collectively, "forward-looking
information and statements").
In particular, forward looking information and
statements include, but are not limited to, the following:
- our strategic priorities for 2020;
- our capital expenditure plans for 2020;
- anticipated activity levels in 2020 and our scheduled
infrastructure projects;
- anticipated demand for Tier 1 rigs;
- the average number of term contracts in place for 2020 and
2021;
- anticipated cash outflow savings and liquidity;
- potential commercial opportunities and rig contract renewals;
and
- our future debt reduction plans.
These forward-looking information and statements
are based on certain assumptions and analysis made by Precision in
light of our experience and our perception of historical trends,
current conditions, expected future developments and other factors
we believe are appropriate under the circumstances. These include,
among other things:
- the fluctuation in oil prices may pressure customers into
reducing or limiting their drilling budgets;
- the success of our response to the COVID-19 global
pandemic;
- the status of current negotiations with our customers and
vendors;
- customer focus on safety performance;
- existing term contracts are neither renewed nor terminated
prematurely;
- our ability to deliver rigs to customers on a timely basis;
and
- the general stability of the economic and political
environments in the jurisdictions where we operate.
Undue reliance should not be placed on
forward-looking information and statements. Whether actual results,
performance or achievements will conform to our expectations and
predictions is subject to a number of known and unknown risks and
uncertainties which could cause actual results to differ materially
from our expectations. Such risks and uncertainties include, but
are not limited to:
- volatility in the price and demand for oil and natural
gas;
- fluctuations in the level of oil and natural gas exploration
and development activities;
- fluctuations in the demand for contract drilling, directional
drilling, well servicing and ancillary oilfield services;
- our customers’ inability to obtain adequate credit or financing
to support their drilling and production activity;
- the success of our response to the COVID-19 global
pandemic;
- changes in drilling and well servicing technology, which could
reduce demand for certain rigs or put us at a competitive
advantage;
- shortages, delays and interruptions in the delivery of
equipment supplies and other key inputs;
- liquidity of the capital markets to fund customer drilling
programs;
- availability of cash flow, debt and equity sources to fund our
capital and operating requirements, as needed;
- the impact of weather and seasonal conditions on operations and
facilities;
- competitive operating risks inherent in contract drilling,
directional drilling, well servicing and ancillary oilfield
services;
- ability to improve our rig technology to improve drilling
efficiency;
- general economic, market or business conditions;
- the availability of qualified personnel and management;
- a decline in our safety performance which could result in lower
demand for our services;
- changes in laws or regulations, including changes in
environmental laws and regulations such as increased regulation of
hydraulic fracturing or restrictions on the burning of fossil fuels
and greenhouse gas emissions, which could have an adverse impact on
the demand for oil and natural gas;
- terrorism, social, civil and political unrest in the foreign
jurisdictions where we operate;
- fluctuations in foreign exchange, interest rates and tax rates;
and
- other unforeseen conditions which could impact the use of
services supplied by Precision and Precision’s ability to respond
to such conditions.
Readers are cautioned that the forgoing list of
risk factors is not exhaustive. Additional information on these and
other factors that could affect our business, operations or
financial results are included in reports on file with applicable
securities regulatory authorities, including but not limited to
Precision’s Annual Information Form for the year ended December 31,
2019, which may be accessed on Precision’s SEDAR profile at
www.sedar.com or under Precision’s EDGAR profile at www.sec.gov.
The forward-looking information and statements contained in this
release are made as of the date hereof and Precision undertakes no
obligation to update publicly or revise any forward-looking
statements or information, whether as a result of new information,
future events or otherwise, except as required by law.
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(Stated in thousands of Canadian dollars) |
June 30,
2020 |
|
December 31, 2019 |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
$ |
175,125 |
|
$ |
74,701 |
|
Accounts receivable |
|
192,645 |
|
|
310,204 |
|
Inventory |
|
31,502 |
|
|
31,718 |
|
Income tax recoverable |
|
1,194 |
|
|
1,142 |
|
Total current assets |
|
400,466 |
|
|
417,765 |
|
Non-current assets: |
|
|
|
|
|
|
Deferred tax assets |
|
6,011 |
|
|
4,724 |
|
Right of use assets |
|
63,412 |
|
|
66,142 |
|
Property, plant and equipment |
|
2,704,377 |
|
|
2,749,463 |
|
Intangibles |
|
29,967 |
|
|
31,746 |
|
Total non-current assets |
|
2,803,767 |
|
|
2,852,075 |
|
Total
assets |
$ |
3,204,233 |
|
$ |
3,269,840 |
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
148,139 |
|
$ |
199,478 |
|
Income taxes payable |
|
4,285 |
|
|
4,142 |
|
Current portion of lease obligation |
|
10,175 |
|
|
12,449 |
|
Total current liabilities |
|
162,599 |
|
|
216,069 |
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
Share-based compensation |
|
4,785 |
|
|
8,830 |
|
Provisions and other |
|
9,655 |
|
|
9,959 |
|
Lease obligation |
|
55,727 |
|
|
54,980 |
|
Long-term debt |
|
1,450,900 |
|
|
1,427,181 |
|
Deferred tax liabilities |
|
26,152 |
|
|
25,389 |
|
Total non-current
liabilities |
|
1,547,219 |
|
|
1,526,339 |
|
Shareholders’ equity: |
|
|
|
|
|
|
Shareholders’ capital |
|
2,291,796 |
|
|
2,296,378 |
|
Contributed surplus |
|
70,503 |
|
|
66,255 |
|
Deficit |
|
(1,023,600 |
) |
|
(969,456 |
) |
Accumulated other comprehensive income |
|
155,716 |
|
|
134,255 |
|
Total
shareholders’ equity |
|
1,494,415 |
|
|
1,527,432 |
|
Total
liabilities and shareholders’ equity |
$ |
3,204,233 |
|
$ |
3,269,840 |
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS)
(UNAUDITED)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars, except per share amounts) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
189,759 |
|
$ |
359,424 |
|
$ |
569,243 |
|
$ |
793,467 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
106,552 |
|
|
252,049 |
|
|
354,779 |
|
|
540,657 |
|
General and administrative |
|
18,449 |
|
|
26,338 |
|
|
37,984 |
|
|
57,368 |
|
Restructuring |
|
6,293 |
|
|
— |
|
|
16,111 |
|
|
6,438 |
|
Earnings before income taxes,
gain on repurchase of unsecured senior notes, finance charges,
foreign exchange, impairment reversal, gain on asset
disposals and depreciation and amortization |
|
58,465 |
|
|
81,037 |
|
|
160,369 |
|
|
189,004 |
|
Depreciation and
amortization |
|
81,124 |
|
|
83,327 |
|
|
164,038 |
|
|
170,080 |
|
Gain on asset disposals |
|
(3,470 |
) |
|
(7,859 |
) |
|
(7,079 |
) |
|
(42,909 |
) |
Impairment reversal |
|
— |
|
|
— |
|
|
— |
|
|
(5,810 |
) |
Foreign exchange |
|
(928 |
) |
|
(3,763 |
) |
|
1,763 |
|
|
(5,886 |
) |
Finance charges |
|
28,083 |
|
|
30,385 |
|
|
55,663 |
|
|
61,688 |
|
Gain on
repurchase of unsecured senior notes |
|
(1,121 |
) |
|
(1,085 |
) |
|
(1,971 |
) |
|
(1,398 |
) |
Earnings (loss) before income
taxes |
|
(45,223 |
) |
|
(19,968 |
) |
|
(52,045 |
) |
|
13,239 |
|
Income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
2,116 |
|
|
1,403 |
|
|
3,175 |
|
|
3,013 |
|
Deferred |
|
1,528 |
|
|
(7,570 |
) |
|
(1,076 |
) |
|
(987 |
) |
|
|
3,644 |
|
|
(6,167 |
) |
|
2,099 |
|
|
2,026 |
|
Net
earnings (loss) |
$ |
(48,867 |
) |
$ |
(13,801 |
) |
$ |
(54,144 |
) |
$ |
11,213 |
|
Net earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.18 |
) |
$ |
(0.05 |
) |
$ |
(0.20 |
) |
$ |
0.04 |
|
Diluted |
$ |
(0.18 |
) |
$ |
(0.05 |
) |
$ |
(0.20 |
) |
$ |
0.04 |
|
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2020 |
|
2019 |
|
|
2020 |
|
2019 |
|
Net earnings (loss) |
$ |
(48,867 |
) |
$ |
(13,801 |
) |
|
$ |
(54,144 |
) |
$ |
11,213 |
|
Unrealized gain (loss) on translation of assets and liabilities
of operations denominated in foreign currency |
|
(71,311 |
) |
|
(42,846 |
) |
|
|
85,697 |
|
|
(91,364 |
) |
Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt,
net of tax |
|
53,920 |
|
|
29,859 |
|
|
|
(64,236 |
) |
|
68,873 |
|
Comprehensive loss |
$ |
(66,258 |
) |
$ |
(26,788 |
) |
|
$ |
(32,683 |
) |
$ |
(11,278 |
) |
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Stated
in thousands of Canadian dollars) |
2020 |
|
2019 |
|
|
2020 |
|
2019 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss) |
$ |
(48,867 |
) |
$ |
(13,801 |
) |
|
$ |
(54,144 |
) |
$ |
11,213 |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term compensation plans |
|
6,324 |
|
|
3,612 |
|
|
|
5,621 |
|
|
10,924 |
|
Depreciation and amortization |
|
81,124 |
|
|
83,327 |
|
|
|
164,038 |
|
|
170,080 |
|
Gain on asset disposals |
|
(3,470 |
) |
|
(7,859 |
) |
|
|
(7,079 |
) |
|
(42,909 |
) |
Impairment reversal |
|
— |
|
|
— |
|
|
|
— |
|
|
(5,810 |
) |
Foreign exchange |
|
(1,718 |
) |
|
(3,880 |
) |
|
|
1,154 |
|
|
(6,118 |
) |
Finance charges |
|
28,083 |
|
|
30,385 |
|
|
|
55,663 |
|
|
61,688 |
|
Income taxes |
|
3,644 |
|
|
(6,167 |
) |
|
|
2,099 |
|
|
2,026 |
|
Other |
|
(823 |
) |
|
(281 |
) |
|
|
(763 |
) |
|
(159 |
) |
Gain on repurchase of unsecured senior notes |
|
(1,121 |
) |
|
(1,085 |
) |
|
|
(1,971 |
) |
|
(1,398 |
) |
Income taxes paid |
|
(3,128 |
) |
|
(3,550 |
) |
|
|
(3,948 |
) |
|
(3,887 |
) |
Income taxes recovered |
|
— |
|
|
— |
|
|
|
— |
|
|
1,071 |
|
Interest paid |
|
(33,548 |
) |
|
(40,263 |
) |
|
|
(53,043 |
) |
|
(60,496 |
) |
Interest received |
|
139 |
|
|
512 |
|
|
|
329 |
|
|
718 |
|
Funds provided by
operations |
|
26,639 |
|
|
40,950 |
|
|
|
107,956 |
|
|
136,943 |
|
Changes
in non-cash working capital balances |
|
77,839 |
|
|
65,085 |
|
|
|
71,475 |
|
|
9,679 |
|
|
|
104,478 |
|
|
106,035 |
|
|
|
179,431 |
|
|
146,622 |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
(23,927 |
) |
|
(43,469 |
) |
|
|
(35,412 |
) |
|
(114,431 |
) |
Purchase of intangibles |
|
— |
|
|
(26 |
) |
|
|
(57 |
) |
|
(464 |
) |
Proceeds on sale of property, plant and equipment |
|
5,021 |
|
|
24,575 |
|
|
|
10,711 |
|
|
82,452 |
|
Changes in non-cash working capital balances |
|
(1,880 |
) |
|
2,536 |
|
|
|
(5,406 |
) |
|
(727 |
) |
|
|
(20,786 |
) |
|
(16,384 |
) |
|
|
(30,164 |
) |
|
(33,170 |
) |
Financing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from senior credit facility |
|
5,030 |
|
|
— |
|
|
|
5,030 |
|
|
— |
|
Repurchase of unsecured senior notes |
|
(4,911 |
) |
|
(107,161 |
) |
|
|
(45,465 |
) |
|
(123,833 |
) |
Share repurchase |
|
(15 |
) |
|
— |
|
|
|
(5,259 |
) |
|
— |
|
Lease payments |
|
(1,897 |
) |
|
(1,685 |
) |
|
|
(3,625 |
) |
|
(3,357 |
) |
Debt amendment fees |
|
(647 |
) |
|
— |
|
|
|
(668 |
) |
|
— |
|
|
|
(2,440 |
) |
|
(108,846 |
) |
|
|
(49,987 |
) |
|
(127,190 |
) |
Effect
of exchange rate changes on cash |
|
(3,129 |
) |
|
(1,255 |
) |
|
|
1,144 |
|
|
(2,308 |
) |
Increase in cash |
|
78,123 |
|
|
(20,450 |
) |
|
|
100,424 |
|
|
(16,046 |
) |
Cash,
beginning of period |
|
97,002 |
|
|
101,030 |
|
|
|
74,701 |
|
|
96,626 |
|
Cash,
end of period |
$ |
175,125 |
|
$ |
80,580 |
|
|
$ |
175,125 |
|
$ |
80,580 |
|
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(Stated
in thousands of Canadian dollars) |
Shareholders’Capital |
|
ContributedSurplus |
|
AccumulatedOtherComprehensiveIncome |
Deficit |
|
TotalEquity |
|
Balance at January 1, 2020 |
$ |
2,296,378 |
|
$ |
66,255 |
|
$ |
134,255 |
$ |
(969,456 |
) |
$ |
1,527,432 |
|
Net loss for the period |
|
— |
|
|
— |
|
|
— |
|
(54,144 |
) |
|
(54,144 |
) |
Other comprehensive income for
the period |
|
— |
|
|
— |
|
|
21,461 |
|
— |
|
|
21,461 |
|
Share repurchases |
|
(5,259 |
) |
|
— |
|
|
— |
|
— |
|
|
(5,259 |
) |
Redemption of non-management
director DSUs |
|
677 |
|
|
(502 |
) |
|
— |
|
|
|
|
175 |
|
Share-based compensation
reclassification |
|
— |
|
|
(1,498 |
) |
|
— |
|
— |
|
|
(1,498 |
) |
Share-based compensation expense |
|
— |
|
|
6,248 |
|
|
— |
|
— |
|
|
6,248 |
|
Balance at June 30, 2020 |
$ |
2,291,796 |
|
$ |
70,503 |
|
$ |
155,716 |
$ |
(1,023,600 |
) |
$ |
1,494,415 |
|
(Stated
in thousands of Canadian dollars) |
Shareholders’Capital |
ContributedSurplus |
|
AccumulatedOtherComprehensiveIncome |
|
Deficit |
|
TotalEquity |
|
Balance at January 1, 2019 |
$ |
2,322,280 |
$ |
52,332 |
|
$ |
162,014 |
|
$ |
(978,874 |
) |
$ |
1,557,752 |
|
Lease transition
adjustment |
|
— |
|
— |
|
|
— |
|
|
2,800 |
|
|
2,800 |
|
Net earnings for the
period |
|
— |
|
— |
|
|
— |
|
|
11,213 |
|
|
11,213 |
|
Other comprehensive loss for
the period |
|
— |
|
— |
|
|
(22,491 |
) |
|
— |
|
|
(22,491 |
) |
Share-based compensation expense |
|
— |
|
6,633 |
|
|
— |
|
|
— |
|
|
6,633 |
|
Balance
at June 30, 2019 |
$ |
2,322,280 |
$ |
58,965 |
|
$ |
139,523 |
|
$ |
(964,861 |
) |
$ |
1,555,907 |
|
SECOND QUARTER 2020 EARNINGS CONFERENCE
CALL AND WEBCAST
Precision Drilling Corporation has scheduled a conference call
and webcast to begin promptly at 12:00 noon MT (2:00 p.m. ET) on
Thursday, July 23, 2020.
The conference call dial in numbers are
1-844-515-9176 or 614-999-9312.
A live webcast of the conference call will be
accessible on Precision’s website at www.precisiondrilling.com by
selecting “Investor Relations”, then “Webcasts &
Presentations”. Shortly after the live webcast, an archived version
will be available for approximately 60 days.
An archived version of the webcast will be
available for approximately 60 days. An archived recording of the
conference call will be available approximately one hour after the
completion of the call until July 29, 2020 by dialing 855-859-2056
or 404-537-3406, passcode 5483895.
About Precision
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
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 well service rigs,
camps and rental equipment and directional drilling services, all
backed by a comprehensive mix of technical support services and
skilled, experienced personnel.
Precision is headquartered in Calgary, Alberta,
Canada. 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, Senior Vice President and Chief
Financial Officer713.435.6100
Dustin Honing, Manager, Investor Relations and
Corporate Development403.716.4500
800, 525 - 8th Avenue S.W.Calgary, Alberta,
Canada T2P 1G1Website: www.precisiondrilling.com
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