STOCK TITAN
  1. Home
  2. News
  3. PDS

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

Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Neutral)
Tags
earnings
Rhea-AI Summary
Precision Drilling announces strong 2023 fourth quarter results, generating revenue of $507 million, Adjusted EBITDA of $151 million, and net earnings of $147 million. The company achieved annual debt reduction and shareholder capital return targets, reducing debt by $152 million and repurchasing $30 million of common shares. Precision plans to reduce debt by another $150 million to $200 million in 2024 and allocate 25% to 35% of free cash flow towards share repurchases. The 2024 capital budget is $195 million, lower than the $227 million invested in 2023.
Positive
  • None.
Negative
  • None.

Insights

The reported financial results from Precision Drilling indicate significant year-over-year improvements in both revenue and Adjusted EBITDA, with a notable increase in net earnings from $3 million to $147 million. The company's strategic focus on debt reduction and shareholder returns is evidenced by the repayment of $152 million in debt and the repurchase of $30 million in common shares. This aggressive debt repayment strategy, coupled with a capital allocation towards share repurchases, reflects a strong free cash flow position and a commitment to enhancing shareholder value.

The reduction in capital expenditure for 2024, from $227 million to $195 million, suggests a disciplined approach to capital management. However, it is crucial to monitor how this reduction impacts the company's growth prospects and ability to capitalize on market opportunities. Additionally, the company's Net Debt to Adjusted EBITDA ratio of approximately 1.4 times is a critical indicator of financial health and the goal to reduce it below 1.0 times by the end of 2025 sets a clear target for financial stability.

Precision Drilling's international expansion, particularly the 40% expected increase in active international rig count, presents a significant growth opportunity. The long-term contracts in the Middle East offer stable and predictable cash flows, which are valuable for the company's financial planning. The successful integration and synergies realized from the acquisition of CWC Energy Services Corp. enhance the company's service offerings and market position in Canada.

Market acceptance of Precision's AlphaTM technologies and EverGreenTM suite of environmental solutions is indicative of a competitive edge in the industry, potentially leading to increased market share. However, the broader industry context, including oil price volatility and natural gas prices, will continue to influence the company's performance. Investors should consider these external factors when evaluating the company's outlook.

The reported increase in revenue per utilization day in both Canada and the U.S. reflects a positive pricing environment for Precision Drilling's services. The company's focus on high-performance rigs and technological advancements, such as the AlphaAutomationTM and AlphaAppsTM, aligns with the industry's trend towards efficiency and environmentally friendly solutions. The adoption of these technologies by 75% of their Super Triple drilling days is a testament to their value proposition in the market.

The completion of the Trans Mountain pipeline expansion and the Coastal GasLink supporting LNG Canada start-up activities could drive further demand for Precision's services. The company's strategic positioning to capitalize on these infrastructure projects may lead to sustained demand and increased utilization of their drilling and service rigs.

CALGARY, Alberta, Feb. 06, 2024 (GLOBE NEWSWIRE) -- 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 EBITDAWe 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) OperationsWe 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 SpendingWe 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 CapitalWe 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 RevenueWe 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 equityWe 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 EBITDAWe 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 CategoryWe 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

 


FAQ

What was Precision Drilling's revenue in the fourth quarter of 2023?

Precision Drilling's revenue in the fourth quarter of 2023 was $507 million.

What was Precision Drilling's Adjusted EBITDA in the fourth quarter of 2023?

Precision Drilling's Adjusted EBITDA in the fourth quarter of 2023 was $151 million.

What were Precision Drilling's net earnings in the fourth quarter of 2023?

Precision Drilling's net earnings in the fourth quarter of 2023 were $147 million.

What were Precision Drilling's annual debt reduction and shareholder capital return targets?

Precision Drilling achieved annual debt reduction and shareholder capital return targets, reducing debt by $152 million and repurchasing $30 million of common shares.

What is Precision Drilling's 2024 capital budget?

Precision Drilling's 2024 capital budget is $195 million, lower than the $227 million invested in 2023.

Stock PDS logo
Precision Drilling Corporation

NYSE:PDS

PDS Rankings

#2715 Ranked by Market Cap
N/A Ranked by Dividends

PDS Latest News

Oct 29, 2024
Precision Drilling Announces 2024 Third Quarter Unaudited Financial Results
Oct 2, 2024
Precision Drilling Corporation 2024 Third Quarter Results Conference Call and Webcast
Sep 13, 2024
Precision Drilling Announces Renewal of Normal Course Issuer Bid
Jul 30, 2024
Precision Drilling Announces 2024 Second Quarter Unaudited Financial Results
Jul 8, 2024
Precision Drilling Extends Senior Credit Facility and Provides Progress Update on 2024 Debt Repayment and Share Repurchase Targets

PDS Stock Data

799.58M
13.76M
2.13%
57.41%
0.89%
Oil & Gas Drilling
Energy
Link
United States of America
Calgary