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Name | Symbol | Market | Type |
---|---|---|---|
Precision Drilling Corporation New | NYSE:PDS | NYSE | Trust |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
1.26 | 1.77% | 72.38 | 74.16 | 71.78 | 72.03 | 59,133 | 22:30:00 |
Precision Drilling announces 2021 first quarter financial results:
Precision’s President and CEO Kevin Neveu stated:
“I am pleased with Precision’s response to the rebounding North American drilling market during the first quarter of 2021. Our current active U.S. rig count sits at 40 rigs, a milestone achieved several weeks earlier than previously anticipated and represents a 40% increase since the beginning of the year. In Canada, which is now experiencing the seasonal break-up slowdown, we are operating 20 rigs, an increase of 100% from this time last year. During the first quarter, Precision added eight new Alpha customers and increased paid days from AlphaAutomation by 27% from the fourth quarter, demonstrating increased market penetration for our Alpha digital technologies. Additionally, we fully commercialized 10 AlphaApps and achieved a similar increase in market penetration with that offering.”
“Precision’s international business continues to generate stable cash flow and we are encouraged with early pre-tendering exercises now underway in the region. It is beginning to appear that rig reactivations may track the relaxation of oil export limits. We remain confident in our ability to reactivate our three idled ultra-high spec rigs in Kuwait. We will also continue to explore opportunities to activate our other idle rigs in the region.”
“Our Well Servicing business has experienced a sharp uptick in customer demand and we anticipate the Canadian Federal government’s well abandonment program will continue to provide additional opportunities for the well service industry through the remainder of the year and in 2022. Approximately 15% of our first quarter activity related to well abandonments.”
“During the quarter, Precision generated $55 million in Adjusted EBITDA and $15 million in cash from operations, largely driven by improving industry activity levels, our strong market share and customer adoption of Precision’s Alpha technologies. We have reduced debt levels by $51 million year to date, despite the temporary seasonal working capital build in the first quarter and expect the benefit of a working capital release in the second quarter. I am confident that the steps we have taken to reduce our fixed costs will continue to maximize the free cash flow generating capabilities of Precision. We remain tightly focused on meeting or exceeding our debt reduction goals for the year along with our other stated priorities.”
“Precision’s ESG-related initiatives produced encouraging results during the quarter, most notably our efforts to progress emission-reduction alternatives for our customers. This includes formalizing partnerships with green energy providers to expand our offering of hybrid battery energy storage systems, bi-fuel systems and natural gas rig power systems. We are also piloting a GHG monitoring system, which will provide our customers with real-time insights to establish performance baselines and drive continued improvement through the entire operation. These initiatives are well complimented by our modern, digitally controlled and highly efficient Super Series rig fleet combined with our industry-leading Alpha digital portfolio. We remain committed to minimizing the environmental impact from our operations while continuing to demonstrate the leading Social and Governance practices for which Precision is well known.”
“Above all, Precision remains focused on the safety of our employees on our rigs, operating centers and corporate offices as we continue to execute our High Performance, High Value strategy during this pandemic. Precision employees have successfully confronted many associated challenges over the past 12 months and I am excited about the opportunities for our people as the recovery continues to take shape,” concluded Mr. Neveu.
SELECT FINANCIAL AND OPERATING INFORMATION
Financial Highlights
(Stated in thousands of Canadian dollars, except per share amounts) | For the three months ended March 31, | ||||||||||
2021 | 2020 | % Change | |||||||||
Revenue | 236,473 | 379,484 | (37.7 | ) | |||||||
Adjusted EBITDA(1) | 54,539 | 101,904 | (46.5 | ) | |||||||
Operating earnings (loss)(1) | (15,415 | ) | 22,599 | (168.2 | ) | ||||||
Net loss | (36,106 | ) | (5,277 | ) | 584.2 | ||||||
Cash provided by operations | 15,422 | 74,953 | (79.4 | ) | |||||||
Funds provided by operations(1) | 43,430 | 81,317 | (46.6 | ) | |||||||
Capital spending: | |||||||||||
Expansion and upgrade | 3,437 | 1,653 | 107.9 | ||||||||
Maintenance and infrastructure | 4,999 | 9,832 | (49.2 | ) | |||||||
Intangibles | - | 57 | (100.0 | ) | |||||||
Proceeds on sale | (3,324 | ) | (5,690 | ) | (41.6 | ) | |||||
Net capital spending | 5,112 | 5,852 | (12.6 | ) | |||||||
Net loss per share: | |||||||||||
Basic | (2.70 | ) | (0.38 | ) | 611.8 | ||||||
Diluted | (2.70 | ) | (0.38 | ) | 611.8 |
(1) See “NON-GAAP MEASURES.”
Operating Highlights
For the three months ended March 31, | |||||||||||
2021 | 2020 | % Change | |||||||||
Contract drilling rig fleet | 227 | 227 | - | ||||||||
Drilling rig utilization days: | |||||||||||
U.S. | 2,951 | 4,984 | (40.8 | ) | |||||||
Canada | 3,818 | 5,769 | (33.8 | ) | |||||||
International | 540 | 728 | (25.8 | ) | |||||||
Revenue per utilization day: | |||||||||||
U.S.(1) (US$) | 22,133 | 23,878 | (7.3 | ) | |||||||
Canada (Cdn$) | 21,131 | 21,444 | (1.5 | ) | |||||||
International (US$) | 52,744 | 54,294 | (2.9 | ) | |||||||
Operating cost per utilization day: | |||||||||||
U.S. (US$) | 15,106 | 14,534 | 3.9 | ||||||||
Canada (Cdn$) | 13,025 | 14,239 | (8.5 | ) | |||||||
Service rig fleet | 123 | 123 | - | ||||||||
Service rig operating hours | 34,903 | 34,365 | 1.6 |
(1) Includes revenue from idle but contracted rig days.
Financial Position
(Stated in thousands of Canadian dollars, except ratios) | March 31, 2021 | December 31, 2020 | ||||||
Working capital(1) | 161,632 | 175,423 | ||||||
Cash | 77,831 | 108,772 | ||||||
Long-term debt | 1,189,880 | 1,236,210 | ||||||
Total long-term financial liabilities | 1,252,203 | 1,304,162 | ||||||
Total assets | 2,795,596 | 2,898,878 | ||||||
Long-term debt to long-term debt plus equity ratio | 0.47 | 0.47 |
(1) See “NON-GAAP MEASURES.”
Summary for the three months ended March 31, 2021:
STRATEGY
Precision’s strategic priorities for 2021 are as follows:
OUTLOOK
The oilfield services industry outlook and customer sentiment has improved in recent months, largely due to vaccine announcements, reopening of economies and steadily increasing commodity prices. Although longer-term visibility remains limited, improved fundamentals from recovering global oil demand should further stabilize commodity prices and result in customers continuing to increase activity levels throughout the year. In this environment, our customers are expected to remain focused on capital discipline and maximizing operational efficiencies. We anticipate these industry dynamics will accelerate the industry’s transition toward 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 remain 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 will run through the end of 2022 with government funds provided in stages. As the use of service rigs is an integral part of the well abandonment process, our well servicing business is positioned to capture these opportunities as a result of our scale, operational performance and strong safety record. During the fourth quarter, we saw a continued rise in the number of approved abandonment applications and further distribution of program funding to oilfield service providers. Our abandonment service activity continued to increase in the first quarter of 2021 compared with the fourth quarter of 2020 and we expect further increases through the end of the well site abandonment and rehabilitation program in 2022.
During the second quarter of 2020, the Government of Canada introduced the CEWS program to subsidize a portion of employee wages for Canadian employers whose businesses have been adversely 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. For the three months ended March 31, 2021, we recognized $9 million in CEWS program assistance, presented as offsets to operating and general and administrative expenses of $8 million and $1 million, respectively. The CEWS program has benefitted both Precision and our employees as it has allowed us to retain a higher employment level for Canadian positions within our organization. We remain highly supportive of this effective government program.
Contracts
Year to date in 2021 we have entered into 14 term contracts. The following chart outlines the average number of drilling rigs under contract by quarter as of April 21, 2021. For those quarters ending after March 31, 2021, 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 2020 | Average for the quarter ended 2021 | |||||||||||||||||||||||||||||
Mar. 31 | June 30 | Sept. 30 | Dec. 31 | Mar. 31 | June 30 | Sept. 30 | Dec. 31 | |||||||||||||||||||||||
Average rigs under term contract as of April 21, 2021: | ||||||||||||||||||||||||||||||
U.S. | 41 | 32 | 26 | 24 | 21 | 24 | 17 | 13 | ||||||||||||||||||||||
Canada | 5 | 4 | 3 | 4 | 6 | 6 | 6 | 6 | ||||||||||||||||||||||
International | 8 | 8 | 6 | 6 | 6 | 6 | 6 | 6 | ||||||||||||||||||||||
Total | 54 | 44 | 35 | 34 | 33 | 36 | 29 | 25 |
The following chart outlines the average number of drilling rigs that we had under contract for 2020 and the average number of rigs we have under contract as of April 21, 2021.
Average for theyear ended | ||||||||||
2020 | 2021 | |||||||||
Average rigs under term contract as of April 21, 2021: | ||||||||||
U.S. | 31 | 19 | ||||||||
Canada | 4 | 6 | ||||||||
International | 7 | 6 | ||||||||
Total | 42 | 31 |
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 2020 | Average for the quarter ended 2021 | ||||||||||||||||||
Mar. 31 | June 30 | Sept. 30 | Dec. 31 | Mar. 31 | |||||||||||||||
Average Precision active rig count: | |||||||||||||||||||
U.S. | 55 | 30 | 21 | 26 | 33 | ||||||||||||||
Canada | 63 | 9 | 18 | 28 | 42 | ||||||||||||||
International | 8 | 8 | 6 | 6 | 6 | ||||||||||||||
Total | 126 | 47 | 45 | 60 | 81 |
According to industry sources, as of April 21, 2021, the U.S. active land drilling rig count is down 17% from the same point last year while the Canadian active land drilling rig count is up 87%. To date in 2021, approximately 86% of the U.S. industry’s active rigs and 52% of the Canadian industry’s active rigs were drilling for oil targets, compared with 85% for the U.S. and 61% for Canada at the same time last year.
Capital Spending
Capital spending in 2021 is expected to be $54 million and includes $38 million for sustaining, infrastructure and intangibles and $16 million for upgrade and expansion. We expect that the $54 million will be split $50 million in the Contract Drilling Services segment, $3 million in the Completion and Production Services segment and $1 million to the Corporate segment. At March 31, 2021, Precision had capital commitments of $109 million with payments expected through to 2023.
SEGMENTED FINANCIAL RESULTS
For the three months ended March 31, | |||||||||||
(Stated in thousands of Canadian dollars) | 2021 | 2020 | % Change | ||||||||
Revenue: | |||||||||||
Contract Drilling Services | 204,819 | 346,549 | (40.9 | ) | |||||||
Completion and Production Services | 32,544 | 33,663 | (3.3 | ) | |||||||
Inter-segment eliminations | (890 | ) | (728 | ) | 22.3 | ||||||
236,473 | 379,484 | (37.7 | ) | ||||||||
Adjusted EBITDA:(1) | |||||||||||
Contract Drilling Services | 60,031 | 110,733 | (45.8 | ) | |||||||
Completion and Production Services | 7,802 | 3,235 | 141.2 | ||||||||
Corporate and Other | (13,294 | ) | (12,064 | ) | 10.2 | ||||||
54,539 | 101,904 | (46.5 | ) |
(1) See “NON-GAAP MEASURES.”
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
(Stated in thousands of Canadian dollars, except where noted) | For the three months ended March 31, | ||||||||||
2021 | 2020 | % Change | |||||||||
Revenue | 204,819 | 346,549 | (40.9 | ) | |||||||
Expenses: | |||||||||||
Operating | 138,121 | 222,329 | (37.9 | ) | |||||||
General and administrative | 6,667 | 8,770 | (24.0 | ) | |||||||
Restructuring | - | 4,717 | n/m | ||||||||
Adjusted EBITDA(1) | 60,031 | 110,733 | (45.8 | ) | |||||||
Depreciation | 65,232 | 75,724 | (13.9 | ) | |||||||
Gain on asset disposals | (1,725 | ) | (2,842 | ) | (39.3 | ) | |||||
Operating earnings (loss)(1) | (3,476 | ) | 37,851 | (109.2 | ) | ||||||
Operating earnings (loss)(1) as a percentage of revenue | (1.7 | )% | 10.9 | % |
(1) See “NON-GAAP MEASURES.”
United States onshore drilling statistics:(1) | 2021 | 2020 | |||||||||||||
Precision | Industry(2) | Precision | Industry(2) | ||||||||||||
Average number of active land rigs for quarters ended: | |||||||||||||||
March 31 | 33 | 378 | 55 | 764 |
(1) United States lower 48 operations only.(2) Baker Hughes rig counts.
Canadian onshore drilling statistics:(1) | 2021 | 2020 | |||||||||||||
Precision | Industry(2) | Precision | Industry(2) | ||||||||||||
Average number of active land rigs for quarters ended: | |||||||||||||||
March 31 | 42 | 145 | 63 | 196 |
(1) Canadian operations only.(2) Baker Hughes rig counts.
SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES
(Stated in thousands of Canadian dollars, except where noted) | For the three months ended March 31, | ||||||||||
2021 | 2020 | % Change | |||||||||
Revenue | 32,544 | 33,663 | (3.3 | ) | |||||||
Expenses: | |||||||||||
Operating | 23,390 | 26,626 | (12.2 | ) | |||||||
General and administrative | 1,352 | 1,479 | (8.6 | ) | |||||||
Restructuring | - | 2,323 | n/m | ||||||||
Adjusted EBITDA(1) | 7,802 | 3,235 | 141.2 | ||||||||
Depreciation | 4,001 | 4,283 | (6.6 | ) | |||||||
Gain on asset disposals | (243 | ) | (739 | ) | (67.1 | ) | |||||
Operating earnings (loss)(1) | 4,044 | (309 | ) | (1,408.7 | ) | ||||||
Operating earnings (loss)(1) as a percentage of revenue | 12.4 | % | (0.9 | )% | |||||||
Well servicing statistics: | |||||||||||
Number of service rigs (end of period) | 123 | 123 | - | ||||||||
Service rig operating hours | 34,903 | 34,365 | 1.6 | ||||||||
Service rig operating hour utilization | 32 | % | 31 | % |
(1) See “NON-GAAP MEASURES.”
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 $13 million as compared with $12 million in the first quarter of 2020. Our Adjusted EBITDA was negatively impacted by higher share-based compensation costs as a result of our increased share price and the reclassification of certain share-based compensation plans, partially offset by CEWS program assistance of $1 million. During the first quarter of 2020, we incurred restructuring charges of $3 million to better align our cost structure with reduced activity.
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 2020 Annual Report.
A summary of amounts expensed under these plans during the reporting periods are as follows:
For the three months ended March 31, | |||||||
(Stated in thousands of Canadian dollars) | 2021 | 2020 | |||||
Cash settled share-based incentive plans | 9,868 | (6,393 | ) | ||||
Equity settled share-based incentive plans: | |||||||
Executive PSU | 773 | 2,735 | |||||
Stock option plan | 131 | 386 | |||||
Total share-based incentive compensation plan expense (recovery) | 10,772 | (3,272 | ) | ||||
Allocated: | |||||||
Operating | 2,264 | (973 | ) | ||||
General and Administrative | 8,508 | (2,299 | ) | ||||
10,772 | (3,272 | ) |
Cash settled share-based compensation expense increased by $16 million in the current quarter primarily due to our increasing share price and reclassification of Executive PSUs as a cash settled share-based incentive plan. Conversely, our equity settled share-based compensation expense for the first quarter of 2021 decreased by $2 million from the Executive PSU reclassification.
Finance Charges
Net finance charges were $22 million, a decrease of $5 million compared with the first quarter of 2020, primarily due to reduced interest expense related to retired debt.
Interest charges on our U.S. denominated long-term debt in the first quarter of 2021 were US$16 million ($20 million) as compared with US$19 million ($26 million) in 2020.
Income Tax
Income tax recovery for the quarter was $2 million, consistent with 2020. As compared with the first quarter of 2020, we had a lower income tax recovery as a percentage of loss before income taxes as we did not recognize deferred tax assets on certain Canadian and international operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Amount | Availability | Used for | Maturity | |||
Senior credit facility (secured) | ||||||
US$500 million (extendible, revolving term credit facility with US$300 million accordion feature) | US$36 million drawn and US$32 million in outstanding letters of credit | General corporate purposes | November 21, 2023 | |||
Real estate credit facilities (secured) | ||||||
US$10 million | Fully drawn | General corporate purposes | November 19, 2025 | |||
$20 million | Fully drawn | General corporate purposes | March 16, 2026 | |||
Operating facilities (secured) | ||||||
$40 million | Undrawn, except $7 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$30 million | Undrawn, except US$2 million in outstanding letters of credit | Letters of credit | ||||
Unsecured senior notes (unsecured) | ||||||
US$286 million – 7.75% | Fully drawn | Debt redemption and repurchases | December 15, 2023 | |||
US$263 million – 5.25% | Fully drawn | Capital expenditures and general corporate purposes | November 15, 2024 | |||
US$348 million – 7.125% | Fully drawn | Debt redemption and repurchases | January 15, 2026 |
At March 31, 2021, we had $1,205 million outstanding under our Senior Credit Facility, Real Estate Credit Facilities and unsecured senior notes as compared with $1,250 million at December 31, 2020. To provide additional liquidity during the quarter, we established a $20 million Canadian Real Estate Credit Facility secured by real properties in Alberta, Canada.
The current blended cash interest cost of our debt is approximately 6.6%.
Covenants
Following is a listing of applicable financial covenants and their calculations for our Senior Credit Facility and Real Estate Credit Facilities:
Covenant | At March 31, 2021 | ||||
Senior Credit Facility | |||||
Consolidated senior debt to consolidated covenant EBITDA(1) | < 2.50 | 0.30 | |||
Consolidated covenant EBITDA to consolidated interest expense | > 1.25 | 2.14 | |||
Real Estate Credit Facilities | |||||
Consolidated covenant EBITDA to consolidated interest expense | > 1.25 | 2.14 |
(1) For purposes of calculating the leverage ratio consolidated senior debt only includes secured indebtedness.
At March 31, 2021, we were in compliance with the covenants of our Senior Credit Facility and Real Estate Credit Facilities.
Average shares outstanding
The following table reconciles the weighted average shares outstanding used in computing basic and diluted net loss per share:
For the three months ended March 31, | |||||||
(Stated in thousands) | 2021 | 2020 | |||||
Weighted average shares outstanding – basic | 13,349 | 13,771 | |||||
Effect of stock options and other equity compensation plans | — | — | |||||
Weighted average shares outstanding – diluted | 13,349 | 13,771 |
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share amounts) | 2020 | 2021 | ||||||||||||||
Quarters ended | June 30 | September 30 | December 31 | March 31 | ||||||||||||
Revenue | 189,759 | 164,822 | 201,688 | 236,473 | ||||||||||||
Adjusted EBITDA(1) | 58,465 | 47,771 | 55,263 | 54,539 | ||||||||||||
Net loss | (48,867 | ) | (28,476 | ) | (37,518 | ) | (36,106 | ) | ||||||||
Net loss per basic and diluted share | (3.56 | ) | (2.08 | ) | (2.74 | ) | (2.70 | ) | ||||||||
Funds provided by operations(1) | 26,639 | 27,489 | 35,282 | 43,430 | ||||||||||||
Cash provided by operations | 104,478 | 41,950 | 4,737 | 15,422 |
(Stated in thousands of Canadian dollars, except per share amounts) | 2019 | 2020 | ||||||||||||||
Quarters ended | June 30 | September 30 | December 31 | March 31 | ||||||||||||
Revenue | 359,424 | 375,552 | 372,301 | 379,484 | ||||||||||||
Adjusted EBITDA(1) | 81,037 | 97,895 | 105,006 | 101,904 | ||||||||||||
Net loss | (13,801 | ) | (3,534 | ) | (1,061 | ) | (5,277 | ) | ||||||||
Net loss per basic and diluted share | (0.93 | ) | (0.23 | ) | (0.08 | ) | (0.38 | ) | ||||||||
Funds provided by operations(1) | 40,950 | 79,930 | 75,779 | 81,317 | ||||||||||||
Cash provided by operations | 106,035 | 66,556 | 74,981 | 74,953 |
(1) See “NON-GAAP MEASURES.”
IMPACT OF COVID-19
In March 2020, the 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 lockdowns, travel bans, 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 success of these interventions is not yet determinable. The situation remains dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on us is not known at this time.
Financial Impacts
The current challenging economic climate may have significant adverse impacts on Precision including, but not limited to, substantial reductions in revenue and cash flows, increased risk of non-collection of accounts receivable and future impairments of property, plant and equipment and intangible assets.
Our estimates and judgements made in the preparation of our financial statements are increasingly difficult and subject to a higher degree of measurement uncertainty during this volatile period.
At March 31, 2021, we reviewed each cash-generating unit (CGU) and did not identify any indications of impairment. Accordingly, we did not test our CGUs for impairment.
Operational impacts
During the pandemic, the oil and natural gas extractive services industry has been classified as an “essential service” and Precision’s operations, including all field operations, technical support centres and administration groups, have remained open. The vertical integration of our operations has ensured minimal supply chain constraints and service disruptions.
To manage the additional safety risks presented by COVID-19, we implemented a comprehensive infectious disease plan and added safety, sanitization and physical distancing procedures. Precision’s procedures are in accordance with recommendations from the World Health Organization, Center for Disease Control and various federal, state and provincial government health authorities.
Liquidity
Despite the challenges posed by COVID-19, we have maintained a strong liquidity position. We exited the quarter with a cash balance of $78 million and $595 million of available borrowing capacity under our secured credit facilities, providing us with $673 million of total liquidity as compared with $661 million at December 31, 2020. We expect that cash provided by operations, cash on hand and our sources of financing, including our Senior Credit Facility, will be sufficient to meet our debt obligations and fund committed and future capital expenditures.
NON-GAAP MEASURES
In this release we reference non-GAAP (Generally Accepted Accounting Principles) measures. Adjusted EBITDA, Covenant EBITDA, Operating Earnings (Loss), Funds Provided by (Used in) Operations and Working Capital are terms used by us to assess performance as we believe they provide useful supplemental information to investors. 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, gain on assets disposals and depreciation and amortization), as reported in the Interim Consolidated Statement of Net 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 March 31, | |||||||
(Stated in thousands of Canadian dollars) | 2021 | 2020 | |||||
Revenue | 236,473 | 379,484 | |||||
Expenses: | |||||||
Operating | 160,621 | 248,227 | |||||
General and administrative | 21,313 | 19,535 | |||||
Restructuring | — | 9,818 | |||||
Depreciation and amortization | 72,013 | 82,914 | |||||
Gain on asset disposals | (2,059 | ) | (3,609 | ) | |||
Operating earnings (loss) | (15,415 | ) | 22,599 | ||||
Foreign exchange | (64 | ) | 2,691 | ||||
Finance charges | 22,446 | 27,580 | |||||
Gain on repurchase of unsecured notes | — | (850 | ) | ||||
Loss before income taxes | (37,797 | ) | (6,822 | ) |
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:
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:
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:
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, 2020, 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 report 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) | March 31, 2021 | December 31, 2020 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 77,831 | $ | 108,772 | ||||
Accounts receivable | 220,878 | 207,209 | ||||||
Inventory | 25,605 | 26,282 | ||||||
Total current assets | 324,314 | 342,263 | ||||||
Non-current assets: | ||||||||
Deferred tax assets | 1,265 | 1,098 | ||||||
Right-of-use assets | 53,122 | 55,168 | ||||||
Property, plant and equipment | 2,390,395 | 2,472,683 | ||||||
Intangibles | 26,500 | 27,666 | ||||||
Total non-current assets | 2,471,282 | 2,556,615 | ||||||
Total assets | $ | 2,795,596 | $ | 2,898,878 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 145,128 | $ | 150,957 | ||||
Income taxes payable | 4,181 | 3,702 | ||||||
Current portion of lease obligations | 11,155 | 11,285 | ||||||
Current portion of long-term debt | 2,218 | 896 | ||||||
Total current liabilities | 162,682 | 166,840 | ||||||
Non-current liabilities: | ||||||||
Share-based compensation | 7,747 | 11,507 | ||||||
Provisions and other | 7,465 | 7,563 | ||||||
Lease obligations | 47,111 | 48,882 | ||||||
Long-term debt | 1,189,880 | 1,236,210 | ||||||
Deferred tax liabilities | 18,371 | 21,236 | ||||||
Total non-current liabilities | 1,270,574 | 1,325,398 | ||||||
Shareholders’ equity: | ||||||||
Shareholders’ capital | 2,281,444 | 2,285,738 | ||||||
Contributed surplus | 73,819 | 72,915 | ||||||
Deficit | (1,125,700 | ) | (1,089,594 | ) | ||||
Accumulated other comprehensive income | 132,777 | 137,581 | ||||||
Total shareholders’ equity | 1,362,340 | 1,406,640 | ||||||
Total liabilities and shareholders’ equity | $ | 2,795,596 | $ | 2,898,878 |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF NET LOSS (UNAUDITED)
(Stated in thousands of Canadian dollars, except per share amounts) | Three Months Ended March 31, | |||||||
2021 | 2020 | |||||||
Revenue | $ | 236,473 | $ | 379,484 | ||||
Expenses: | ||||||||
Operating | 160,621 | 248,227 | ||||||
General and administrative | 21,313 | 19,535 | ||||||
Restructuring | — | 9,818 | ||||||
Earnings before income taxes, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization | 54,539 | 101,904 | ||||||
Depreciation and amortization | 72,013 | 82,914 | ||||||
Gain on asset disposals | (2,059 | ) | (3,609 | ) | ||||
Foreign exchange | (64 | ) | 2,691 | |||||
Finance charges | 22,446 | 27,580 | ||||||
Gain on repurchase of unsecured senior notes | — | (850 | ) | |||||
Loss before income taxes | (37,797 | ) | (6,822 | ) | ||||
Income taxes: | ||||||||
Current | 784 | 1,059 | ||||||
Deferred | (2,475 | ) | (2,604 | ) | ||||
(1,691 | ) | (1,545 | ) | |||||
Net loss | $ | (36,106 | ) | $ | (5,277 | ) | ||
Net loss per share: | ||||||||
Basic | $ | (2.70 | ) | $ | (0.38 | ) | ||
Diluted | $ | (2.70 | ) | $ | (0.38 | ) |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended March 31, | ||||||||
(Stated in thousands of Canadian dollars) | 2021 | 2020 | ||||||
Net loss | $ | (36,106 | ) | $ | (5,277 | ) | ||
Unrealized gain (loss) on translation of assets and liabilities of operations denominated in foreign currency | (20,998 | ) | 157,008 | |||||
Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt | 15,909 | (118,156 | ) | |||||
Tax benefit related to net investment hedge of long-term debt | 285 | — | ||||||
Comprehensive income (loss) | $ | (40,910 | ) | $ | 33,575 |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, | ||||||||
(Stated in thousands of Canadian dollars) | 2021 | 2020 | ||||||
Cash provided by (used in): | ||||||||
Operations: | ||||||||
Net loss | $ | (36,106 | ) | $ | (5,277 | ) | ||
Adjustments for: | ||||||||
Long-term compensation plans | 7,148 | (703 | ) | |||||
Depreciation and amortization | 72,013 | 82,914 | ||||||
Gain on asset disposals | (2,059 | ) | (3,609 | ) | ||||
Foreign exchange | 558 | 2,872 | ||||||
Finance charges | 22,446 | 27,580 | ||||||
Income taxes | (1,691 | ) | (1,545 | ) | ||||
Other | 3 | 60 | ||||||
Gain on repurchase of unsecured senior notes | — | (850 | ) | |||||
Income taxes paid | (161 | ) | (820 | ) | ||||
Interest paid | (18,766 | ) | (19,495 | ) | ||||
Interest received | 45 | 190 | ||||||
Funds provided by operations | 43,430 | 81,317 | ||||||
Changes in non-cash working capital balances | (28,008 | ) | (6,364 | ) | ||||
15,422 | 74,953 | |||||||
Investments: | ||||||||
Purchase of property, plant and equipment | (8,436 | ) | (11,485 | ) | ||||
Purchase of intangibles | — | (57 | ) | |||||
Proceeds on sale of property, plant and equipment | 3,324 | 5,690 | ||||||
Changes in non-cash working capital balances | (4,802 | ) | (3,526 | ) | ||||
(9,914 | ) | (9,378 | ) | |||||
Financing: | ||||||||
Issuance of long-term debt | 20,000 | — | ||||||
Repayments of long-term debt | (49,425 | ) | (40,554 | ) | ||||
Repurchase of share capital | (4,294 | ) | (5,244 | ) | ||||
Debt issuance costs | (244 | ) | — | |||||
Debt amendment fees | — | (21 | ) | |||||
Lease payments | (1,621 | ) | (1,728 | ) | ||||
(35,584 | ) | (47,547 | ) | |||||
Effect of exchange rate changes on cash | (865 | ) | 4,273 | |||||
Increase (decrease) in cash | (30,941 | ) | 22,301 | |||||
Cash, beginning of period | 108,772 | 74,701 | ||||||
Cash, end of period | $ | 77,831 | $ | 97,002 |
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, 2021 | $ | 2,285,738 | $ | 72,915 | $ | 137,581 | $ | (1,089,594 | ) | $ | 1,406,640 | |||||||||
Net loss for the period | — | — | — | (36,106 | ) | (36,106 | ) | |||||||||||||
Other comprehensive loss for the period | — | — | (4,804 | ) | — | (4,804 | ) | |||||||||||||
Share repurchases | (4,294 | ) | — | — | — | (4,294 | ) | |||||||||||||
Share-based compensation reclassification | — | (1,455 | ) | — | — | (1,455 | ) | |||||||||||||
Share-based compensation expense | — | 2,359 | — | — | 2,359 | |||||||||||||||
Balance at March 31, 2021 | $ | 2,281,444 | $ | 73,819 | $ | 132,777 | $ | (1,125,700 | ) | $ | 1,362,340 |
(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 | — | — | — | (5,277 | ) | (5,277 | ) | |||||||||||||
Other comprehensive income for the period | — | — | 38,852 | — | 38,852 | |||||||||||||||
Share repurchases | (5,244 | ) | — | — | — | (5,244 | ) | |||||||||||||
Share-based compensation reclassification | — | (1,498 | ) | — | — | (1,498 | ) | |||||||||||||
Share-based compensation expense | — | 3,121 | — | — | 3,121 | |||||||||||||||
Balance at March 31, 2020 | $ | 2,291,134 | $ | 67,878 | $ | 173,107 | $ | (974,733 | ) | $ | 1,557,386 |
FIRST QUARTER 2021 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, April 22, 2021.
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 April 26, 2021 by dialing 855-859-2056 or 404-537-3406, passcode 6870957.
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 “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. 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, Director, 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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