Precision Drilling Corporation (“Precision” or “the Company”)
(TSX:PD; NYSE:PDS) provides a series of announcements including: 1)
debt repayment update; 2) increase in long-term debt reduction
target; 3) liquidity update; and 4) drilling activity update.
Debt Repayment Update
Following additional open market repurchases of
its unsecured senior notes in the fourth quarter, Precision’s 2020
debt repayments totaled $170 million, exceeding the high end of its
2020 annual targeted range of $100 million to $150 million. As of
December 31, 2020, the amounts outstanding under Precision’s
unsecured senior notes are as follows:
- US$286 million – 7.75% senior notes due December 15, 2023
- US$263 million – 5.25% senior notes due November 15, 2024
- US$348 million – 7.125% senior notes due January 15, 2026
The Company has paid down $550 million of debt
just three years into its long-term debt reduction plan, exceeding
the high end of each year’s annual targeted debt reduction range.
As a result of Precision’s further reduction of absolute debt
levels, the Company anticipates its forward run-rate of cash
interest costs from debt to be approximately $85 million.
Increase in Long-Term Debt Reduction
Target
Precision has increased its long-term debt
reduction target from $700 million to $800 million for the years
2018 through 2022, requiring $250 million of debt reduction over
the next two years to achieve our revised target. The target
increase is due to accelerated debt reduction achieved and the
Company’s forward free cash flow outlook, further strengthened by
its reduced fixed cost structure and lower interest expense
run-rate.
Liquidity Update
Precision anticipates a reported 2020 year-end
cash balance of approximately $105 million to $110 million, $30
million to $35 million higher than year-end 2019, which combined
with availability under the Company’s credit facilities, provides
Precision access to over $700 million in total liquidity entering
2021.
Drilling Activity Update
In the fourth quarter of 2020, Precision’s
average active rig count was 26 for the U.S. plus an average
of 6 rigs earning idle but contracted revenues, 28 for Canada and
six internationally. As of January 5, 2021, Precision has 45 active
rigs in Canada, 31 active rigs in the U.S. and six rigs active
internationally. Active rig counts in Canada are expected to peak
at approximately 60 in the first quarter of 2021, while U.S.
activity levels are expected to continue trending upwards modestly
in the quarter.
Precision’s CFO, Carey Ford stated: “Precision
continues to demonstrate its ability to generate robust free cash
flow and deliver on both short and long-term debt reduction targets
while maintaining a strong liquidity position. The Company
successfully enacted several cash preservation initiatives during
2020, including aggressive reductions in fixed costs and capital
spending. In addition, we further leveraged our SAP enterprise
platform to automate numerous business processes and enhance
business analytics to establish a reduced fixed cost structure that
is sustainable in an increasing activity environment. Precision
will continue to leverage its global scale and high-quality,
digitally-enabled Super Series fleet to maximize free cash flow and
prioritize reducing debt levels to reach targeted leverage of below
two-times net debt to Adjusted EBITDA.”
About PrecisionPrecision is a leading provider
of safe and environmentally responsible High Performance, High
Value services to the energy industry, offering customers access to
an extensive fleet of Super Series drilling rigs. Precision has
commercialized an industry-leading digital technology portfolio
known as “Alpha” that utilizes advanced automation software and
analytics to generate efficient, predictable, and repeatable
results for energy customers. Additionally, Precision offers well
service rigs, camps and rental equipment and directional drilling
services all backed by a comprehensive mix of technical support
services and skilled, experienced personnel. Precision is
headquartered in Calgary, Alberta, Canada and is listed on the
Toronto Stock Exchange under the trading symbol “PD” and on the New
York Stock Exchange under the trading symbol “PDS.”
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 strategic priorities;
- anticipated future activity levels in 2021;
- anticipated demand for Tier 1 rigs;
- anticipated fixed cost savings, capital spending and liquidity;
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
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:
Carey Ford, CFASenior Vice President and Chief
Financial Officer713.435.6100Dustin Honing, CPAManager, Investor
Relations & Corporate Development403.716.4500Precision Drilling
Corporation800, 525 - 8th Avenue S.W.Calgary, Alberta, Canada T2P
1G1Website: www.precisiondrilling.com
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