(Canadian dollars, except as noted)
Precision Drilling Trust (the "Trust" or "Precision") (TSX:
PD.UN) (NYSE: PDS) reported revenue of $286 million for the fourth
quarter of 2009, an increase of 13% over the third quarter of 2009.
The increase was attributed to higher rig activity due to continued
demand for rigs drilling oil wells and an increase in demand for
rigs drilling gas wells and services on oil wells. Earnings before
interest, taxes, loss on asset decommissioning, depreciation and
amortization and foreign exchange ("EBITDA") were $93 million an
increase of $7 million or 8% in the fourth quarter compared to the
third quarter of 2009. EBITDA margin as a percentage of revenue
decreased one percentage point from the third quarter primarily due
to a decrease in the number of idle but contracted rigs in the
fourth quarter. Precision's term contracts provide the Trust with a
base of activity and during the fourth quarter 48% of overall
drilling rig utilization days were generated from term contracts
with term contract utilization day concentration in Canada at 36%,
the United States at 59% and Mexico at 100%.
For the quarter ended December 31, 2009, revenue decreased by
15% and EBITDA declined 31% from the fourth quarter of 2008. The
decrease in revenue and EBITDA is due to significantly lower
customer demand on an industry-wide basis, partially mitigated by
Precision's acquisition in December 2008 of Grey Wolf, Inc ("Grey
Wolf"), an onshore drilling contractor in the United States and
Mexico. Precision reported a net loss of $25 million or negative
$0.09 per diluted unit for the quarter ended December 31, 2009,
compared to net earnings of $92 million or $0.66 per diluted unit
in the fourth quarter of 2008. During the fourth quarter Precision
decommissioned 38 drilling rigs, 30 well servicing rigs and nine
snubbing units resulting in a non-cash loss on decommissioning of
$82 million and a net loss per diluted unit after tax of $0.20.
Other items included in the loss for the fourth quarter of 2009
were a $27 million increase in finance charges and a foreign
exchange gain of $18 million. The net loss per unit was also
impacted by the increase in units outstanding from the equity
issuances during 2009.
For the year ended December 31, 2009, net earnings were $162
million or $0.63 per diluted unit, a decrease of $141 million or
47% compared to $303 million or $2.23 per diluted unit for the year
ended December 31, 2008. Net earnings decreased due to the loss
from decommissioning rigs, increased financing charges and lower
utilization rates throughout North America partially offset by
growth in Precision's rig fleet in the United States. Earnings were
supported by high-margin term contracts and a $123 million foreign
exchange gain, but these favourable factors did not offset lower
earnings from the sharp reduction in equipment utilization and
customer pricing compared to 2008 results. Rig utilization days for
2009 were 5% higher than the prior year due to growth in
Precision's United States operations. EBITDA for 2009 totaled $407
million, a 7% decrease from $437 million in 2008.
"December 31, 2009 marks the end of the first full year of the
new Precision," stated Kevin Neveu, President and Chief Executive
Officer. "The sequential improvement in drilling and servicing
activity Precision experienced in the fourth quarter started in
October and continuing through the end of the year is a strong
indicator of our customer's need to replace hydrocarbon production
and reserves as soon as the economics prove viable. The combination
of improving commodity prices and the developments in
unconventional drilling process is playing into Precision's North
American high performance high value growth strategy as Precision
continues to expand our operations into the emerging markets such
as Marcellus, Eagle Ford and the Cardium oil play in Alberta.
Currently Precision has 213 rigs operating with 133 in Canada, 78
in the United States and two in Mexico.
"On a full year basis, 2009 was a difficult period for all North
American service providers and Precision has weathered through many
difficult challenges. I am proud of the many accomplishments of
Precision and its truly remarkable people. Namely, achieving the
best safety record in company history; reducing long-term debt;
integrating Grey Wolf; delivering 16 new rig builds on time, on
budget, and under term contract; high-grading fleet quality through
tier upgrades; rationalizing less productive assets; and delivering
the safe, high performance, high value service that our customers
demand.
"The recommendation to convert the Trust to a corporation is an
exciting and necessary step in the continued growth of Precision.
Our strategy is to provide high performance, high value services to
continue to grow Precision, both in North America and
internationally. It is important that Precision align its capital
structure to embrace these growth initiatives and adjust to the new
trust tax regime in Canada that takes effect in 2011. We look
forward to the annual general meeting and support from our
unitholders to convert," concluded Mr. Neveu.
SELECT FINANCIAL AND OPERATING INFORMATION
(stated in
thousands of Three months ended Year ended
Canadian December 31, December 31,
dollars, except % %
per unit amounts) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue $286,067 $335,049 (14.6) $1,197,446 $1,101,891 8.7
EBITDA(1) 92,615 134,795 (31.3) 407,001 436,536 (6.8)
Net earnings
(loss) (24,885) 92,376 (126.9) 161,703 302,730 (46.6)
Cash provided by
operations 70,631 82,904 (14.8) 504,729 343,910 46.8
Capital spending 13,992 99,310 (85.9) 193,435 229,579 (15.7)
Distributions
declared
- in cash - 53,522 (100.0) 6,408 200,659 (96.8)
Distributions
declared
- in kind - 24,029 (100.0) - 24,029 (100.0)
Net earnings
(loss) per
unit:(2)
Basic (0.09) 0.67 (113.4) 0.65 2.23 (70.9)
Diluted (0.09) 0.66 (113.6) 0.63 2.23 (71.7)
Distributions
declared per unit:
In cash - 0.39 (100.0) 0.04 1.56 (97.4)
In kind $ - $ 0.15 (100.0) $ - $ 0.15 (100.0)
Contract drilling
rig fleet 352 375 (6.1) 352 375 (6.1)
Drilling rig
utilization days:
Canada 6,595 9,066 (27.3) 21,229 34,488 (38.4)
United States 5,899 3,248 81.6 22,672 8,006 183.2
International 172 16 975.0 710 159 346.5
Service rig fleet 200 229 (12.7) 200 229 (12.7)
Service rig
operating hours 60,108 79,507 (24.4) 207,361 335,127 (38.1)
----------------------------------------------------------------------------
(1) EBITDA is a non-GAAP measure and is defined as earnings before
interest, taxes, loss on asset decommissioning, depreciation and
amortization and foreign exchange. See "NON-GAAP MEASURES".
(2) Net earnings per basic and diluted unit have been adjusted to reflect
the rights offering completed in the second quarter of 2009. See "Per
Unit Amounts".
FINANCIAL POSITION AND RATIOS
(Stated in thousands of Canadian dollars, December 31, December 31,
except ratios) 2009 2008
----------------------------------------------------------------------------
Working capital $ 320,860 $ 345,329
Working capital ratio 3.5 2.0
Long-term debt (1) $ 748,725 $ 1,368,349
Total long-term financial liabilities $ 775,418 $ 1,399,300
Total assets $ 4,191,713 $ 4,833,702
Long-term debt to long-term debt plus
equity ratio 0.22 0.37
----------------------------------------------------------------------------
(1) Excludes current portion of long-term debt and is net of unamortized
debt issue costs.
During the fourth quarter Precision reduced its outstanding debt
by $87 million through voluntary debt prepayments of US$75 million
and a quarter-end prepayment of US$6 million. As a result of the
voluntary prepayments Precision realized additional non-cash pretax
expense in the quarter of $8 million related to the amortization of
deferred financing costs.
Precision's top priority for 2009 was strengthening its capital
structure and as a result Precision took decisive steps throughout
the year to conserve cash, reduce its debt levels and improve its
financial position. In total, Precision reduced long-term debt by
$565 million during 2009 while maintaining a strong working capital
balance of $321 million at December 31, 2009. Cash conservation
continues through the indefinite suspension of cash distributions
to unitholders and cost reduction measures that included personnel
reductions and operating facility consolidation. In addition,
planned upgrade capital expenditures on existing equipment were
significantly reduced. During 2009, 16 new Super Series rigs from
the 2008 build program were completed and are working for customers
under term contracts. Capital expenditures for 2009 totaled $193
million, with $163 million expended on the new build program.
Revenue of $286 million in the fourth quarter of 2009 was 15%
lower than the prior year period. The decrease was due to low
commodity prices that led to a sharp reduction in the demand for
drilling and servicing of natural gas wells. The decrease was
partially mitigated by Precision's 2008 expansion initiatives
through organic and acquisition growth in the United States onshore
contract drilling rig market. Precision marketed an average United
States fleet of 159 drilling rigs during the fourth quarter of 2009
as compared to a fleet of 40 drilling rigs in 2008. Revenue in
Precision's Canadian Contract Drilling Services division decreased
37% while revenue declined 38% in the Canadian-based Completion and
Production Services segment compared to the fourth quarter of 2008.
The mix of drilling rigs under term contracts and on technically
advanced well-to-well programs supported relatively strong average
rig dayrate results in the fourth quarter.
The Trust reported EBITDA for the fourth quarter of $93 million
compared with $135 million for the fourth quarter of 2008. EBITDA
is not a recognized financial measure under Generally Accepted
Accounting Principles ("GAAP") as discussed in the "Non-GAAP
Measures" section in this release. EBITDA margin, calculated as a
percentage of revenue, was 32% for the fourth quarter of 2009
compared to 40% for the same period in 2008. The EBITDA margin
decrease was attributable to decreased customer pricing and lower
overall utilization in both operating segments offset by margin
payments from idle but contracted rigs and cost cutting initiatives
in the United States and Canada. Consistent with the previous
quarter, Precision's term contract position, a highly variable
operating cost structure and economies achieved through vertical
integration of the supply chain and maintenance facilities served
to limit the declines.
In the Contract Drilling Services segment Precision currently
markets 352 contract drilling rigs, including 203 in Canada, 146 in
the United States, three rigs in international locations and 96
drilling rig camps. Precision's Completion and Production Services
segment markets 200 service rigs, 20 snubbing units, 78 wastewater
treatment units and a broad mix of rental equipment.
During the fourth quarter of 2009, an average of 72 drilling
rigs worked in Canada, 64 in the United States and 2 in Mexico
totaling 138 rigs. This compares with an average of 106 drilling
rigs working in the third quarter of 2009. Although activity
steadily improved during the quarter, the overall demand for
drilling services remained weak due to low average natural gas
prices.
During the last quarter of 2009, three rigs were moved from the
United States to work under contract in Canada while
internationally, there was no change in rig counts as Precision
continued to operate two drilling rigs in Mexico and has one idle
rig in Chile. Precision will be purposeful in deploying rigs to
international markets with contracts that reward high value high
performance services.
During most of 2009, the industry and Precision experienced
declining utilization as customer spending was dramatically reduced
because of lower oil and natural gas commodity prices. For the
fourth quarter of 2009 AECO natural gas spot prices averaged $4.53
per MMBtu, a decrease of 32% over the fourth quarter 2008 average
of $6.71 per MMBtu. In the United States, Henry Hub natural gas
spot prices averaged US$4.29 per MMBtu in the fourth quarter of
2009 a decrease of 33% over the fourth quarter 2008 average of
US$6.36 per MMBtu. West Texas Intermediate crude oil averaged
US$75.83 per barrel during the quarter compared to US$58.18 per
barrel in the same period in 2008. The one-year forward price for
North American natural gas was also lower, trading in a range of
about $4.75 to $6.25 on Canadian and U.S. exchanges in the fourth
quarter of 2009, compared to a range of about $5.75 to $8.25 in the
same quarter of 2008.
Uncertain capital markets, a weak United States currency and
uncertainty about future natural gas commodity prices continue to
have a negative impact on the North American oilfield service
industry. These factors have improved in 2010 and according to
industry sources, as at February 5, 2010, the United States active
land drilling rig count was down about 4% from the same period in
the prior year while the Canadian drilling rig count was up about
28%.
Summary for the three months ended December 31, 2009:
- Voluntary prepayments of US$81 million were made to reduce
long-term secured debt.
- Revenue was $286 million a decrease of $49 million or 15% from
the prior year quarter due to lower industry-wide customer demand
and lower pricing for most of Precision's services.
- The operating loss was $25 million, a decrease of $137 million
from the fourth quarter in 2008. In the fourth quarter of 2009,
Precision recorded an impairment charge of $82 million related to
the decommissioning of 38 drilling rigs and 30 well servicing rigs
and nine subbing units. Excluding the decommissioning loss,
operating earnings were 20% of revenue, compared to 33% in 2008.
Margins were supported by term contracts but declined overall due
to lower equipment utilization and customer pricing for new work.
Operating earnings is not a recognized financial measure under GAAP
as discussed in the section "Non-GAAP Measures" in this
release.
- Capital expenditures for the purchase of property, plant and
equipment were $14 million in the fourth quarter, a decrease of $85
million over the same period in 2008, and included $6 million on
expansionary capital initiatives and $8 million on the upgrade of
existing assets. Precision's 2008 new rig build program has been
completed and upgrade capital spending continues to be restricted
at low levels to match equipment utilization.
- Financial charges were $34 million, an increase of $27 million
from the prior year. This increase is due to credit facilities
entered into during the fourth quarter 2008 in connection with the
acquisition of Grey Wolf. The increase over the third quarter of
2009 is due to the $8 million amortization of debt financing
charges from the voluntary debt prepayments in the fourth
quarter.
- A significant portion of Precision's secured credit facilities
are denominated in United States dollars. During the quarter
Precision recorded a foreign exchange gain of $18 million primarily
due to a weakening of the United States dollar compared to the
Canadian dollar and the effect on the financial statement
translation of long-term monetary items.
- General and administrative costs were $24 million, an increase
of $5 million from the prior year due primarily to growth in
Precision's United States operations, professional fees for
advisory services and accruals for unit based compensation plans
partially offset by personnel reductions and cost cutting
initiatives. Sequentially, costs were $0.9 million or 4% lower than
the third quarter due primarily to reduced fixed costs.
- Average revenue per utilization day for contract drilling rigs
in the fourth quarter of 2009 compared to the same period in 2008
decreased to US$19,056 from US$21,711 in the United States and in
Canada decreased to $16,551 from $17,927. The decrease in the
revenue rates for Canada is primarily the result of competitive
pricing pressure and reduced field wages which took effect in the
second quarter of 2009 that were passed along to the customer.
These figures include US$6 million in revenue generated from idle
but contracted rigs associated with term contracts. Turnkey revenue
was US$3 million generated from 106 utilization days. Within
Precision's Completion and Production Services segment, average
hourly rates for service rigs were $625 in the fourth quarter of
2009 compared to $614 in the third quarter of 2009 and $736 for the
fourth quarter of 2008.
- Average operating costs per utilization day for drilling rigs
increased in the fourth quarter of 2009 to US$11,942 from the prior
year fourth quarter of US$11,226 in the United States and decreased
in Canada from $9,459 to $8,770. In the United States the increase
was impacted by turnkey operations where there is a larger scope of
drilling costs that the drilling contractor is responsible for
providing, with a commensurate increase in revenue. Costs were down
on Canadian drilling rigs due to lower crew wages and cost saving
initiatives partially offset by fixed costs and an average deeper
fleet working. Within Precision's Completion and Production
Services segment, average hourly operating costs for service rigs
were $448 in the fourth quarter of 2009 compared to $492 in the
fourth quarter of 2008.
Summary for the year ended December 31, 2009:
- Precision lowered its debt to capitalization ratio from 0.37
at December 31, 2008 to 0.22 at December 31, 2009 with net debt
repayments of $565 million from proceeds through three equity
issuances and cash flow from operations. As at December 31, 2009
Precision had a cash balance of $131 million and in combination
with access to its US$260 million revolving credit facility and $25
million operating line, Precision continues to carry ample
liquidity.
- The integration of Grey Wolf in the United States has
proceeded on schedule with a new organizational structure and
financial systems in place throughout the second half of 2009. The
roll-out of vertical business support through supply chain and
equipment management was in place throughout the fourth quarter and
the development of new processes will continue through 2010.
- Revenue was $1.2 billion, an increase of $96 million or 9%
from the prior year due to growth in Precision's United States
operations offset by lower activity levels and lower customer
pricing.
- Operating earnings were $187 million, a decrease of $166
million or 47% from 2008. Operating earnings were 16% of revenue,
compared to 32% in 2008. Operating earnings were lower in the
current year in part due to an $82 million loss from the
decommissioning of rigs.
- Capital expenditures for the purchase of property, plant and
equipment were $193 million in 2009, a decrease of $36 million over
2008, and included $163 million on expansionary capital initiatives
and $30 million on the upgrade of existing assets. During 2009, 16
newly-built Super Series drilling rigs were added to the fleet
under term contracts, seven in Canada and nine in the United
States.
- Financial charges were $147 million, an increase of $133
million from the prior year due to debt service and refinancing
costs associated with acquisition growth late in the fourth quarter
of 2008. With the refinancing accomplished in the first half of
this year and debt prepayment in the fourth quarter finance charges
are expected to be lower in future quarters.
- A significant portion of Precision's secured credit facilities
are denominated in United States dollars. During 2009, Precision
recorded a foreign exchange gain of $123 million primarily due to a
weakening of the United States dollar compared to the Canadian
dollar and the effect on the translation of long-term monetary
items.
- General and administrative costs were $98 million, an increase
of $31 million from the prior year due primarily to acquisition
growth in Precision's United States operations partially offset by
personnel reductions and cost cutting initiatives.
OUTLOOK
The effects of a weak global economy and resulting low energy
commodity prices continued throughout most of 2009. While the
economy has begun to show signs of stabilization and oil pricing
has recovered somewhat, there remains considerable demand
uncertainty for both oil and natural gas and this has led to low
underlying customer demand for oilfield services. There are signs
in the market that these trends may be reversing as Precision is
seeing higher customer demand in all of its service areas,
including demand for more oil related and gas related activity.
While demand for oilfield services is improving, the rate and
duration of these improvements cannot be determined at this
time.
Moving into the first quarter of 2010, industry fundamentals for
natural gas are beginning to show improvements. Storage levels for
natural gas in the United States have moved down to near the top of
the range of the last five year's storage levels and natural gas
prices have strengthened over the last two months. Supplies of
natural gas, especially unconventional resource plays in Texas and
Louisiana, came on line in late 2008 and early 2009 from drilling
activity which peaked in 2008. A significant portion of these
wells, and the associated gas production gains, are subject to high
depletion rates and the prior decline in drilling is beginning to
show decreases in recently reported production levels.
Despite this recent improvement, uncertainty remains for the
United States natural gas markets, as concerns over consumption and
the global economy continue to overshadow lower Canadian imports
and the drop in active North American rigs drilling for natural
gas. Based upon the latest available data, United States natural
gas supply has dropped 2% from peak levels achieved in mid 2009 and
Precision expects the supply of natural gas to show additional
declines over the next several months as active gas rig counts
remain relatively low. Subject to demand volatility, this should
lead to higher commodity prices and support a recovery in drilling
activity which Precision is beginning to see in first quarter 2010
activity levels.
While equipment utilization levels are beginning to improve,
there still remains competitive pressure on all of Precision's
service offerings. During the last nine months in the United
States, there has been a steady increase in the number of rigs
operating and as such Precision is seeing modest dayrate increases
on recent spot market contracts. In Canada, there has been a recent
seasonal increase in rigs working in Canada that is exceeding early
2009 levels. In both Canada and the United States, all of
Precision's Tier I rigs are working along with about 60% of the
Tier II rigs. Approximately 20% of the Tier III rigs are working
today. Precision expects low Tier III utilization to persist into
2010 and potentially longer depending on natural gas prices.
Customers have provided very little visibility regarding their
oilfield service plans and expenditures for the summer 2010
drilling season in Canada. In the United States, Precision expects
the working rig count to continue to modestly improve as we move
through 2010, subject to changes in commodity prices.
Precision continues to carry a strong portfolio of long-term
customer contracts that help mitigate the effects of the downturn.
Precision expects to have an average of approximately 75 rigs under
day work term contract in North America in the first quarter of
2010 and an average of 71 for the second quarter. These term
contract totals include four rigs in the United States that are
currently not working but receiving margin revenue from customers.
In Canada, term contracted drilling rigs generate about 200 to 250
utilization days a year due to the seasonal nature of well access
whereas in the United States Precision expects about 350
utilization days in most regions.
For 2010, Precision expects to have an average of approximately
34 rigs in Canada under term contract and 31 in the United States
and one in Mexico, for a total of 66 for the full year. For the
calendar year of 2011, Precision expects an average of
approximately 36 rigs to be generating revenue under existing term
contracts, with 19 of these in Canada and 17 in the United States.
Precision's long-term contracts continue to be honoured by its
customers although in some cases, term revisions have been
negotiated within original economic terms or paid out. Precision
currently expects that additional term contracts for existing
equipment will be entered into during 2010 as current negotiations
are ongoing with several customers in Canada and the United
States.
Precision expects to keep non-expansion capital expenditures at
low levels. For 2010, Precision expects to have capital
expenditures of $75 million, which includes $50 million in
sustaining upgrade and infrastructure expenditures and $25 million
is planned for performance improvements to improve the Tier
classification of 13 to 15 rigs during the year. Currently, there
are potential market opportunities to construct several new rigs
and Precision may allot new expansion capital subject to customer
term contract economics.
Despite persistent market uncertainty and near term challenges,
the future of the global oil and gas service industry remains
promising. Precision has positioned its rig fleet in most of the
onshore growth basins in North America and this is expected to
provide an opportunity to demonstrate its value to customers
through delivery of high performance, high value services that
deliver low customer well costs and strong relative margins to
Precision.
SEGMENTED FINANCIAL RESULTS
Precision's operations are reported in two segments. The
Contract Drilling Services segment includes the drilling rig, camp
and catering, oilfield supply, and manufacturing divisions. The
Completion and Production Services segment includes the service
rig, snubbing, rental, and wastewater treatment divisions.
(stated in Three months ended Year ended
thousands of December 31, December 31,
Canadian % %
dollars) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue:
Contract
Drilling
Services $239,356 $261,379 (8.4) $1,030,852 $809,317 27.4
Completion and
Production
Services 49,119 79,644 (38.3) 176,422 308,624 (42.8)
Inter-segment
eliminations (2,408) (5,974) 59.7 (9,828) (16,050) 38.8
----------------------------------------------------------------------------
$286,067 $335,049 (14.6) $1,197,446 $1,101,891 8.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating
earnings (loss): (1)
Contract
Drilling
Services $(10,752) $98,809 (110.9) $210,784 $302,061 (30.2)
Completion and
Production
Services (6,477) 21,811 (129.7) 10,934 86,088 (87.3)
Corporate and
other (7,780) (9,095) 14.5 (34,890) (35,442) 1.6
----------------------------------------------------------------------------
$(25,009) $111,525 (122.4) $186,828 $352,707 (47.0)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
(stated in thousands of Three months ended December 31,
Canadian dollars, %
except where noted) 2009 2008 Change
----------------------------------------------------------------------------
Revenue $ 239,356 $ 261,379 (8.4)
Expenses:
Operating 138,712 136,492 1.6
General and administrative 11,720 7,819 49.9
----------------------------------------------------------------------------
EBITDA (1) 88,924 117,068 (24.0)
Loss on asset decommissioning 67,794 - nm
Depreciation 31,882 18,259 74.6
----------------------------------------------------------------------------
Operating earnings (loss) (1) $ (10,752) $ 98,809 (110.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings (loss) as a
percentage of revenue (4.5%) 37.8%
----------------------------------------------------------------------------
Drilling rig revenue per
utilization day in Canada (2) $ 16,551 $ 17,927 (7.7)
----------------------------------------------------------------------------
Drilling rig revenue per
utilization day in the
United States (2) US$ 19,056 US$ 21,711 (12.2)
----------------------------------------------------------------------------
(stated in thousands of Year ended December 31,
Canadian dollars, %
except where noted) 2009 2008 Change
----------------------------------------------------------------------------
Revenue $ 1,030,852 $ 809,317 27.4
Expenses:
Operating 578,225 425,051 36.0
General and administrative 55,160 25,129 119.5
----------------------------------------------------------------------------
EBITDA (1) 397,467 359,137 10.7
Loss on asset decommissioning 67,794 - nm
Depreciation 118,889 57,076 108.3
----------------------------------------------------------------------------
Operating earnings (1) $ 210,784 $ 302,061 (30.2)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings as a
percentage of revenue 20.4% 37.3%
----------------------------------------------------------------------------
Drilling rig revenue per
utilization day in Canada (2) $ 17,824 $ 16,420 8.6
----------------------------------------------------------------------------
Drilling rig revenue per
utilization day in the
United States (2) US$ 19,882 US$ 21,610 (8.0)
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
(2) Includes revenue from idle but contracted rig days and/or rig contract
lump sum payouts.
nm - calculation not meaningful
Canadian onshore drilling Three months ended December 31,
statistics: (1) 2009 2008
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling rigs (end
of period) 203 829 220 884
Drilling rig operating days
(spud to release) 5,864 24,988 8,138 34,855
Drilling rig operating day
utilization 28% 32% 40% 43%
Number of wells drilled 657 2,643 1,010 4,733
Average days per well 8.9 9.5 8.1 7.4
Number of metres drilled (000s) 1,035 4,193 1,415 6,173
Average metres per well 1,575 1,587 1,401 1,304
Average metres per day 176 168 174 177
----------------------------------------------------------------------------
Canadian onshore drilling Year ended December 31,
statistics: (1) 2009 2008
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling rigs (end
of period) 203 829 220 884
Drilling rig operating days
(spud to release) 18,967 78,005 30,716 133,744
Drilling rig operating day
utilization 23% 25% 37% 42%
Number of wells drilled 2,198 8,254 4,061 16,441
Average days per well 8.6 9.5 7.6 8.1
Number of metres drilled (000s) 3,316 12,470 5,440 21,924
Average metres per well 1,509 1,511 1,340 1,334
Average metres per day 175 160 177 164
----------------------------------------------------------------------------
(1) Canadian operations only.
(2) Canadian Association of Oilwell Drilling Contractors ("CAODC"),
Precision and Daily Oil Bulletin - excludes non-CAODC rigs and
non-reporting CAODC members.
United States onshore
drilling statistics:(3) 2009 2008
----------------------------------------------------------------------------
Precision Industry(4) Precision Industry(4)
Average number of active
land rigs for quarters ended:
March 31 82 1,287 13 1,712
June 30 50 885 15 1,797
September 30 53 936 24 1,910
December 31 64 1,073 35 1,861
Year average 62 1,046 22 1,814
----------------------------------------------------------------------------
(3) United States lower 48 operations only.
(4) Baker Hughes rig counts.
In the Contract Drilling Services segment, revenue for the
fourth quarter of 2009 decreased by 8% to $239 million while EBITDA
decreased by 24% to $89 million compared to the same period in
2008. The decrease in revenue was due to lower activity and
dayrates partially offset by acquisition growth in late December
2008. Accordingly, the decline in EBITDA was due to lower rig
utilization and lower customer pricing, partially mitigated by
strong term contracts.
Activity and dayrates in North America were impacted by lower
customer demand due to continued low natural gas prices although
resurgent oil prices were favourable. Drilling rig revenue per
utilization day in Canada was down 8% over the prior year due to
competitive pricing in the spot market partially offset by having
proportionately more activity from contracted rigs and a higher
percentage of activity from Tier I rigs which typically receive a
dayrate premium. During the quarter, 36% of Precision's utilization
days in Canada and 59% of the utilization days in the United States
were generated from rigs under term contract. In the United States,
the average drilling utilization dayrates for Precision remained
firm due to term contracted rigs and margin contributions from idle
but contracted rigs. As at the end of the quarter in the United
States there were 37 drilling rigs working under term contracts and
another eight idle but contracted rigs where Precision was
receiving the margin payment only.
Drilling rig utilization days (spud to rig release plus move
days) in Canada during the fourth quarter of 2009 were 6,595 a
decrease of 27% compared to 9,066 in 2008. Drilling rig activity
for Precision in the United States was 82% higher than the same
quarter of 2008 due to acquisition growth in December 2008. Prior
to the acquisition of Grey Wolf, Precision did not have any
drilling rigs operating internationally in the fourth quarter of
2008 compared to 172 utilization days in the current quarter from
operations in Mexico.
Operating expenses were 58% of revenue for the quarter compared
to 52% for the prior year quarter. Operating costs for the quarter
were higher than the prior year due to customer pricing declines
that outpaced the decline in variable operating costs and rig mix
with a new composition of rigs and contracts in United States
operations due to acquisition growth.
For the quarter, EBITDA margins contracted eight percentage
points to 37% over the prior year period due to the significant
drop in activity and increased pressure on dayrates. The reduction
was mitigated through fixed cost reductions and vertical business
support through supply chain management in Canada, aided by the
addition of supply chain management in United States operations
during the second half of 2009. Sequentially, the current quarter
EBITDA margins were three percentage points lower than the third
quarter of 2009 due to less flow through margin from idle but
contracted rigs and the proportion of higher rig activity from new
lower dayrate work.
During the fourth quarter the Contract Drilling Services segment
recognized a loss of $68 million related to the decommissioning of
38 drilling rigs. Depreciation for the quarter was $14 million
higher than 2008 due to the increase in United States activity and
asset mix associated with higher performance Tier I and II rig
utilization and acquisition growth. The segment applies the unit of
production method in calculating rig depreciation expense.
SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES
Three months ended Year ended
(stated in thousands December 31, December 31,
of Canadian dollars, % %
except where noted) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue $49,119 $79,644 (38.3) $176,422 $308,624 (42.8)
Expenses:
Operating 33,528 50,880 (34.1) 123,846 188,705 (34.4)
General and
administrative 2,908 2,930 (0.8) 10,077 10,865 (7.3)
----------------------------------------------------------------------------
EBITDA: (1) 12,683 25,834 (50.9) 42,499 109,054 (61.0)
Loss on asset
decommissioning 14,379 - nm 14,379 - nm
Depreciation 4,781 4,023 18.8 17,186 22,966 (25.2)
----------------------------------------------------------------------------
Operating earnings
(loss) (1) $(6,477) $21,811 (129.7) $10,934 $86,088 (87.3)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings
(loss) as a
percentage of
revenue (13.2%) 27.4% 6.2% 27.9%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Year ended
Canadian well December 31, December 31,
servicing % %
statistics: 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Number of service
rigs (end of period) 200 229 (12.7) 200 229 (12.7)
Service rig
operating hours 60,108 79,507 (24.4) 207,361 335,127 (38.1)
Service rig
operating hour
utilization 29% 38% 38% 54%
Service rig revenue
per operating hour $ 625 $ 736 (15.1) $ 652 $ 708 (7.9)
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
nm - calculation not meaningful
In the Completion and Production Services segment, revenue for
the fourth quarter of 2009 decreased by 38% from the comparable
quarter of 2008 to $49 million while EBITDA declined by 51% to $13
million. The decrease in revenue and EBITDA is attributed to the
decline in industry activity as customers reduced spending in
response to sharply lower oil and natural gas commodity prices.
Service rig activity declined 24% from the prior year period,
with the service rig fleet generating 60,108 operating hours in the
fourth quarter of 2009 compared with 79,507 hours in 2008 for
utilization of 29% and 38%, respectively. The reduction was the
result of lower service rig demand due to decreased drilling
activity and spending on production maintenance of existing wells.
New well completions accounted for 28% of service rig operating
hours in the fourth quarter compared to 36% in the same quarter in
2008. Well completions in Canada in the fourth quarter were down
75% from the same quarter in 2008.
For the fourth quarter of 2009, quarterly EBITDA margins
contracted seven percentage points to 26% over the prior year
period due to a significant drop in activity and increased pressure
on hourly rates. Sequentially, the current quarter EBITDA margin
was five percentage points higher than the third quarter of 2009
due to higher service rig activity in oil producing regions and
stabilization of customer pricing. Average service rig revenue per
operating hour decreased $111 over the prior year. Reduction in
labour costs of approximately $23 per hour contributed to lower
variable operating expenses, however fixed costs spread over a
lower activity base and lower revenue rates led to an increase in
operating expenses as a percentage of revenue from 64% in the
fourth quarter of 2008 to 68% for the same period in 2009.
In the fourth quarter the Completion and Production Services
segment recorded a $14 million loss related to the decommissioning
of 30 well servicing rigs and nine snubbing units. Depreciation in
the fourth quarter of 2009 was higher than the prior year period
due to a gain on disposal of property recorded in 2008 offset by
lower equipment utilization in the current period. The segment
applies the unit of production method in calculating well servicing
rig depreciation expense.
SEGMENT REVIEW OF CORPORATE AND OTHER
Corporate and other expenses decreased by 14% to $8 million in
the fourth quarter of 2009 compared to $9 million in the same
period of 2008. The decrease was primarily associated with a $2
million gain on disposal of property during the current year
quarter offset by costs associated with the integration of the
expanded United States operations.
OTHER ITEMS
Net financing charges of $34 million for the fourth quarter of
2009 were $27 million higher than the prior year. Included in
financing charges is $14 million for the amortization of deferred
financing costs which includes an $8 million charge associated with
the voluntary debt prepayments in the fourth quarter of 2009.
Interest in the quarter was $21 million and reflected reduced debt
levels that resulted from refinancing activities throughout the
year. The increase in interest expense over the prior year is
attributable to higher long-term debt associated with the
acquisition of Grey Wolf. During the second quarter, Precision
entered into interest rate agreements that effectively fixed the
overall effective interest rate at current levels on a significant
portion of the term debt in the secured credit facility for its
remaining term.
The Trust's effective tax rate on earnings before income taxes
for 2009 was nil compared to 11% for the same period in 2008. The
decrease in the effective tax rate year-over-year is primarily due
to the impact of foreign exchange gains and income taxed at lower
rates.
At December 31, 2009 Precision reported goodwill of $761 million
of which $476 million relates to the United States contract
drilling business unit. With specific reference to goodwill
impairment, Precision has not recognized any impairment at the end
of 2009 and will continue to monitor the business climate as to any
impairment in 2010.
LIQUIDITY AND CAPITAL RESOURCES
During the fourth quarter Precision used $47 million of cash
reserves and $124 million in operating cash inflow to fund a $53
million increase in non-cash working capital, $14 million in net
capital spending, $7 million tax assessment and $87 million in
long-term debt reduction. Liquidity remains sufficient as Precision
had a cash balance of $131 million and the US$260 million Revolver
in its Secured Facility remains undrawn except for US$28 million in
outstanding letters of credit as at December 31, 2009. In addition
to the Secured Facility, Precision has available a $25 million
operating facility which is to be utilized for working capital
management and the issuance of letters of credit. During the
current quarter, working capital increased by $42 million over the
third quarter to $321 million due in part to a $17 million increase
in income taxes recoverable as improving operating activity was
offset by the completion of new asset construction.
In connection with the 2008 acquisition of Grey Wolf, a
subsidiary of the Trust entered into a new senior secured credit
facility (the "Secured Facility") with a syndicate of lenders that
is guaranteed by the Trust and was comprised of term loans and a
revolving facility (the "Revolver"). Precision also entered into an
unsecured bridge facility with certain of the lenders (the
"Unsecured Facility" and, together with the Secured Facility, the
"Credit Facilities") that was also guaranteed by the Trust. The
Credit Facilities funded the cash portion of the acquisition and
refinanced the pre-closing Precision bank debt and certain
pre-closing debt obligations of Grey Wolf.
On February 18, 2009 the Trust issued 46 million Trust units at
US$3.75 per unit for gross proceeds of $217 million and proceeds
net of fees and expenses of $209 million. The proceeds were used to
repurchase the outstanding convertible notes assumed in conjunction
with the Grey Wolf acquisition. All of the note holders exercised
the repurchase option.
In April, Precision announced a series of financing transactions
that raised approximately $380 million which was used to strengthen
the Trust's balance sheet by refinancing and restructuring the debt
incurred in the acquisition of Grey Wolf. The financing
transactions enabled the repayment and retirement of Precision's
Unsecured Facility loans of $296 million (US$235 million) which
bore interest at 17% and allowed Precision's Secured Facility to be
fully syndicated and thereby provide certainty to the cost of debt.
Precision issued $175 million of unsecured notes with an eight-year
life requiring no principal payments for the first five years, and
reduced the available Revolver capacity to US$260 million in
conjunction with the closing of these financing transactions.
The financing transactions, coupled with the Trust's February
2009 unit offering, reduced Precision's blended interest rate to
approximately 8.3%, reduced Precision's cash interest expense and
reduced overall leverage. During the fourth quarter, Precision made
voluntary prepayments on the Secured Facility of US$81 million and
because of these prepayments, the 2010 mandatory debt payments
under the Secured Facility are less than $1 million.
The terms of the documents governing the Secured Facility
contain provisions that in the event of default or in liquidation
scenario ensure the lenders have priority as to payment over the
unitholders in respect to the assets and income of the Trust and
its subsidiaries. Amounts due and owing to the lenders under the
Secured Facility must be paid before any distributions can be made
to unitholders.
As at December 31, 2009, approximately $711 million was
outstanding under the Secured Facility and $175 million was
outstanding under the unsecured notes.
The Secured Facility contains customary covenants including
three financial covenants: a leverage ratio; interest coverage
ratio; and fixed charge coverage ratio. Recently, Precision
successfully amended certain financial covenant terms to provide
greater flexibility and for 2010 expects to remain in full
compliance with complete access to its Revolver and operating
line.
During 2009, the Trust generated cash from continuing operations
of $505 million and the issuance of Trust units for net proceeds of
$413 million. The cash generated was used to purchase property
plant and equipment net of disposal proceeds and related non-cash
working capital of $204 million, repay long-term debt of $565
million, pay additional finance charges of $22 million, pay an
income tax assessment of $7 million and make cash distributions to
unitholders of $27 million leaving a cash increase at December 31,
2009 of $93 million offset by a $24 million unrealized foreign
exchange loss on holding foreign cash.
CAPITAL STRUCTURE AND DISTRIBUTIONS
Precision also announced today that its Board of Trustees will
be recommending to unitholders that they approve the conversion of
Precision's capital structure from an income trust to a traditional
corporate structure during the second quarter of 2010. The
conversion, subject to unitholder vote at the annual general
meeting on May 11, 2010, is in response to legislated Canadian tax
changes scheduled for January 1, 2011. In addition, the conversion
aligns with Precision's stated strategy to reduce debt and grow its
high performance high value energy service business in North
America and international markets.
On December 16, 2009 the Trust announced the continued
indefinite suspension of cash distributions in order to maintain
focus on debt reduction.
Precision has initiated a number of cost reduction and cash
generation plans designed to strengthen its capability to reduce
net long-term debt and improve its underlying credit quality and
capital structure. The near-term management strategy involves
retaining funds from available distributable cash to repay debt and
fund required capital expenditures and finance working capital
needs. Planned asset growth will generally be financed through
existing debt facilities or cash retained from continuing
operations.
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per unit amounts)
2009
----------------------------------------------------------------------------
Quarters ended March 31 June 30 September 30 December 31
----------------------------------------------------------------------------
Revenue $ 448,445 $ 209,597 $ 253,337 $ 286,067
EBITDA (1) 169,387 59,260 85,739 92,615
Net earnings (loss): 57,417 57,475 71,696 (24,885)
Per basic unit (2) 0.30 0.23 0.26 (0.09)
Per diluted unit (2) 0.27 0.22 0.25 (0.09)
Cash provided by
continuing operations 201,596 212,554 19,948 70,631
Distributions declared $ 6,408 $ - $ - $ -
----------------------------------------------------------------------------
2008
----------------------------------------------------------------------------
Quarters ended March 31 June 30 September 30 December 31
----------------------------------------------------------------------------
Revenue $ 342,689 $ 138,514 $ 285,639 $ 335,049
EBITDA (1) 147,347 35,574 118,820 134,795
Net earnings: 106,266 21,739 82,349 92,376
Per basic unit (2) 0.79 0.16 0.61 0.67
Per diluted unit (2) 0.79 0.16 0.61 0.66
Cash provided by
continuing operations 57,307 200,458 3,241 82,904
Distributions declared $ 49,046 $ 49,045 $ 49,046 $ 77,551
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
(2) Net earnings per basic and diluted unit have been adjusted to reflect
the rights offering completed in the second quarter of 2009.
NON-GAAP MEASURES
Precision uses certain measures that are not recognized under
Canadian generally accepted accounting principles to assess
performance and believe these non-GAAP measures provide useful
supplemental information to investors. Following are the non-GAAP
measures Precision uses in assessing performance.
EBITDA
Management believes that in addition to net earnings, EBITDA as
derived from information reported in the Consolidated Statements of
Earnings and Retained Earnings (Deficit) is a useful supplemental
measure as it provides an indication of the results generated by
Precision's principal business activities prior to consideration of
how those activities are financed, the impact of foreign exchange,
how the results are taxed, how funds are invested or how non-cash
depreciation and amortization charges affect results.
The following table provides a reconciliation of net earnings
(loss) under GAAP, as disclosed in the Consolidated Statement of
Earnings and Retained Earnings (Deficit), to EBITDA.
Three months ended Year ended
(Stated in thousands December 31, December 31,
of Canadian dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
EBITDA $ 92,615 $ 134,795 $ 407,001 $ 436,536
Add (deduct):
Loss on asset decommissioning (82,173) - (82,173) -
Depreciation and amortization (35,451) (23,270) (138,000) (83,829)
Foreign exchange 17,791 (1,710) 122,846 2,041
Financing charges (34,454) (7,603) (147,401) (14,174)
Income taxes 16,787 (9,836) (570) (37,844)
----------------------------------------------------------------------------
Net earnings (loss) $ (24,885) $ 92,376 $ 161,703 $ 302,730
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings (loss)
Management believes that in addition to net earnings (loss),
operating earnings (loss) as reported in the Consolidated
Statements of Earnings and Retained Earnings (Deficit) is a useful
supplemental measure as it provides an indication of the results
generated by Precision's principal business activities prior to
consideration of how those activities are financed, the impact of
foreign exchange or how the results are taxed. Operating earnings
as calculated by Precision was changed in the year and it now
excludes the effects of foreign exchange. The revised calculation
is a better reflection of results from operations without
consideration as to how results were impacted by foreign
exchange.
The following table provides a reconciliation of net earnings
(loss) under GAAP, as disclosed in the Consolidated Statement of
Earnings and Retained Earnings (Deficit), to operating earnings
(loss).
Three months ended Year ended
(Stated in thousands December 31, December 31,
of Canadian dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
Operating earnings (loss) $ (25,009) $ 111,525 $ 186,828 $ 352,707
Add (deduct):
Foreign exchange 17,791 (1,710) 122,846 2,041
Financing charges (34,454) (7,603) (147,401) (14,174)
Income taxes 16,787 (9,836) (570) (37,844)
----------------------------------------------------------------------------
Net earnings (loss) $ (24,885) $ 92,376 $ 161,703 $ 302,730
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND
STATEMENTS
Certain statements contained in this report, including
statements that contain words such as "could", "should", "can",
"anticipate", "estimate", "propose", "plan", "expect", "believe",
"will", "may" 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: that finance charges are expected
to be lower in future quarters; that Precision expects the working
rig count to continue to modestly improve; that a certain number of
rigs will work under day work term contracts in future periods;
that Precision currently expects additional term contracts for
existing equipment during 2010; that there are potential market
opportunities to construct several new rigs; and that Precision's
positioning in most of the onshore growth basins in North America
is expected to provide an opportunity to demonstrate its value.
These forward-looking information and statements are based on
certain assumptions and analysis made by the Trust in light of its
experience and its perception of historical trends, current
conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However,
whether actual results, performance or achievements will conform to
the Trust's expectations and predictions is subject to a number of
known and unknown risks and uncertainties which could cause actual
results to differ materially from the Trust's expectations. Such
risks and uncertainties include, but are not limited to:
fluctuations 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 well
servicing, contract drilling and ancillary oilfield services; the
effects of seasonal and weather conditions on operations and
facilities; the existence of competitive operating risks inherent
in well servicing, contract drilling and ancillary oilfield
services; general economic, market or business conditions; changes
in laws or regulations, including taxation, environmental and
currency regulations; the lack of availability of qualified
personnel, management or other key inputs; currency exchange
fluctuations; and other unforeseen conditions which could impact
the use of services supplied by Precision.
Consequently, all of the forward-looking information and
statements made in this report are qualified by these cautionary
statements and there can be no assurance that the actual results or
developments anticipated by the Trust will be realized or, even if
substantially realized, that they will have the expected
consequences to, or effects on, the Trust or its business or
operations. Readers are therefore cautioned not to place undue
reliance on such forward-looking information and statements. Except
as may be required by law, the Trust assumes no obligation to
update publicly any such forward-looking information and
statements, whether as a result of new information, future events
or otherwise.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31, December 31,
(Stated in thousands of Canadian dollars) 2009 2008
----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 130,799 $ 61,511
Accounts receivable 283,899 601,753
Income tax recoverable 25,753 13,313
Inventory 9,008 8,652
----------------------------------------------------------------------------
449,459 685,229
Income tax recoverable 64,579 58,055
Property, plant and equipment 2,913,966 3,243,213
Intangibles 3,156 5,676
Goodwill 760,553 841,529
----------------------------------------------------------------------------
$ 4,191,713 $ 4,833,702
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 128,376 $ 270,122
Distributions payable - 20,825
Current portion of long-term debt 223 48,953
----------------------------------------------------------------------------
128,599 339,900
Long-term liabilities 26,693 30,951
Long-term debt 748,725 1,368,349
Future income taxes 703,195 770,623
----------------------------------------------------------------------------
1,607,212 2,509,823
----------------------------------------------------------------------------
Unitholders' equity:
Unitholders' capital 2,770,708 2,355,590
Contributed surplus 4,063 998
Retained earnings (deficit) 107,227 (48,068)
Accumulated other comprehensive
income (loss) (297,497) 15,359
----------------------------------------------------------------------------
2,584,501 2,323,879
----------------------------------------------------------------------------
$ 4,191,713 $ 4,833,702
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(DEFICIT) (UNAUDITED)
(Stated in thousands of Three months ended Year ended
Canadian dollars, except December 31, December 31,
per unit amounts) 2009 2008 2009 2008
----------------------------------------------------------------------------
Revenue $ 286,067 $ 335,049 $1,197,446 $1,101,891
Expenses:
Operating 169,832 181,873 692,243 598,181
General and administrative 23,620 18,381 98,202 67,174
Loss on asset decommissioning 82,173 - 82,173 -
Depreciation and amortization 35,451 23,270 138,000 83,829
Foreign exchange (17,791) 1,710 (122,846) (2,041)
Finance charges 34,454 7,603 147,401 14,174
----------------------------------------------------------------------------
Earnings (loss) before income
taxes (41,672) 102,212 162,273 340,574
Income taxes:
Current (recovery) (28,281) (716) (14,901) 6,102
Future 11,494 10,552 15,471 31,742
----------------------------------------------------------------------------
(16,787) 9,836 570 37,844
----------------------------------------------------------------------------
Net earnings (loss) (24,885) 92,376 161,703 302,730
Retained earnings (deficit),
beginning of period 132,112 (62,893) (48,068) (126,110)
Distributions declared - (77,551) (6,408) (224,688)
----------------------------------------------------------------------------
Retained earnings (deficit),
end of period $ 107,227 $ (48,068) $ 107,227 $ (48,068)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings (loss) per unit:
Basic $ (0.09) $ 0.67 $ 0.65 $ 2.23
Diluted $ (0.09) $ 0.66 $ 0.63 $ 2.23
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(Stated in thousands of Canadian Three months ended Year ended
dollars) December 31, December 31,
2009 2008 2009 2008
----------------------------------------------------------------------------
Net earnings (loss) $ (24,885) $ 92,376 $ 161,703 $302,730
Unrealized loss recorded on
translation of assets and
liabilities of self-sustaining
operations denominated in
foreign currency (47,390) 11,222 (312,856) 11,222
----------------------------------------------------------------------------
Comprehensive income (loss) $ (72,275) $103,598 $(151,153) $313,952
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Three months ended Year ended
December 31, December 31,
(Stated in thousands of Canadian
dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
Cash provided by (used in):
Operations:
Net earnings (loss) $ (24,885) $92,376 $161,703 $302,730
Adjustments and other items not
involving cash:
Long-term compensation plans 396 373 3,310 2,163
Loss on asset decommissioning 82,173 - 82,173 -
Depreciation and amortization 35,451 23,270 138,000 83,829
Future income taxes 11,494 10,552 15,471 31,742
Unrealized foreign exchange 4,670 7,259 (113,649) 7,219
Amortization of debt issue costs
and debt settlement 13,774 798 43,893 798
Other 655 - 655 -
Changes in non-cash working
capital balances (53,097) (51,724) 173,173 (84,571)
----------------------------------------------------------------------------
70,631 82,904 504,729 343,910
Investments:
Purchase of property, plant and
equipment (13,992) (99,310) (193,435) (229,579)
Proceeds on sale of property,
plant and equipment 5,721 5,115 15,978 10,440
Business acquisitions - (752,873) - (768,392)
Changes in income tax recoverable (6,524) - (6,524) (55,148)
Changes in non-cash working
capital balances (6,103) 11,914 (26,250) 22,583
----------------------------------------------------------------------------
(20,898) (835,154) (210,231) (1,020,096)
Financing:
Increase in long-term debt - 1,087,523 408,893 1,308,040
Repayment of long-term debt (86,666) (71,267) (974,271) (179,826)
Debt issue costs - (160,098) (21,628) (160,098)
Distributions paid - (49,046) (27,233) (216,304)
Issuance of trust units, net of
issue costs - - 413,223 -
Change in bank indebtedness - - - (14,115)
----------------------------------------------------------------------------
(86,666) 807,112 (201,016) 737,697
----------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents (9,797) - (24,194) -
----------------------------------------------------------------------------
Change in cash and cash
equivalents (46,730) 54,862 69,288 61,511
Cash and cash equivalents,
beginning of period 177,529 6,649 61,511 -
----------------------------------------------------------------------------
Cash and cash equivalents, end
of period $ 130,799 $ 61,511 $ 130,799 $ 61,511
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The following tabular information is stated in thousands of Canadian
dollars, except for unit amounts which are stated in thousands of units.
Long-term debt
As at December 31, 2009 2008
----------------------------------------------------------------------------
Secured facility:
Term Loan A $ 288,887 $ 489,215
Term Loan B 422,097 489,840
Revolving credit facility - 107,981
Unsecured senior notes 175,000 -
Unsecured facility - 168,352
Unsecured convertible notes:
3.75% notes - 168,413
Floating rate notes - 152,801
----------------------------------------------------------------------------
885,984 1,576,602
Less net unamortized debt issue costs (137,036) (159,300)
----------------------------------------------------------------------------
748,948 1,417,302
Less current portion (223) (48,953)
----------------------------------------------------------------------------
$ 748,725 $ 1,368,349
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per Unit Amounts
The following tables reconcile the net earnings (loss) and weighted average
units outstanding used in computing basic and diluted earnings (loss) per
unit:
Three months ended Year ended
December 31, December 31,
2009 2008 2009 2008
----------------------------------------------------------------------------
Net earnings (loss) - basic $ (24,885) $ 92,376 $ 161,703 $ 302,730
Impact of assumed conversion
of convertible debt,
net of tax - 164 1,229 164
----------------------------------------------------------------------------
Net earnings (loss) - diluted $ (24,885) $ 92,540 $ 162,932 $ 302,894
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average units
outstanding 275,636 128,752 243,748 126,507
Effect of rights offering - 9,222 6,177 9,061
----------------------------------------------------------------------------
Weighted average units
outstanding - basic 275,636 137,974 249,925 135,568
Effect of trust unit warrants 8,363 - 5,261 -
Effect of stock options and
other equity compensation
plans 257 53 181 33
Effect of convertible debt - 1,488 3,896 372
Effect of rights offering - 110 342 29
----------------------------------------------------------------------------
Weighted average units
outstanding - diluted 284,256 139,625 259,605 136,002
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Finance Charges
The following table provides a summary of the finance charges:
Three months ended Year ended
December 31, December 31,
2009 2008 2009 2008
----------------------------------------------------------------------------
Interest:
Long-term debt $ 20,846 $ 6,969 $ 101,108 $ 13,680
Other 27 40 2,883 151
Income (193) (204) (483) (455)
Amortization of debt issue costs 5,461 798 25,681 798
Accelerated amortization of
debt issue cost from voluntary
debt repayment 8,313 - 18,212 -
----------------------------------------------------------------------------
Finance charges $ 34,454 $ 7,603 $ 147,401 $ 14,174
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income Taxes
The provision for income taxes differs from that which would be expected by
applying Canadian statutory income tax rates as follows:
Three months ended Year ended
December 31, December 31,
2009 2008 2009 2008
----------------------------------------------------------------------------
Earnings (loss) before income taxes $(41,672) $102,212 $162,273 $340,574
Federal and provincial statutory
rate 29% 30% 29% 30%
----------------------------------------------------------------------------
Tax (recovery) at statutory rates (12,085) 30,663 47,059 102,172
Adjusted for the effect of:
Non-deductible expenses 1,190 1,253 7,562 1,802
Non-taxable gains (3,320) (471) (20,136) (1,430)
Income taxed at lower rates 5,829 - (30,983) -
Income to be distributed to
unitholders, not subject to
tax in the Trust (246) (18,894) (2,771) (67,463)
Other (8,155) (2,715) (161) 2,763
----------------------------------------------------------------------------
Income tax expense (recovery) before
tax rate reductions $(16,787) $ 9,836 $ 570 $ 37,844
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Effective income tax rate 0% 11%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segmented Information
Completion
Three months Contract and
ended December Drilling Production Corporate Inter-segment
31, 2009 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 239,356 $ 49,119 $ - $ (2,408) $ 286,067
Segment profit
(loss) (10,752) (6,477) (7,780) - (25,009)
Depreciation
and
amortization 31,882 4,781 (1,212) - 35,451
Total assets 3,566,078 388,245 237,390 - 4,191,713
Goodwill 648,414 112,139 - - 760,553
Capital
expenditures 11,086 1,875 1,031 - 13,992
----------------------------------------------------------------------------
Completion
Three months Contract and
ended December Drilling Production Corporate Inter-segment
31, 2008 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 261,379 $ 79,644 $ - $ (5,974) $ 335,049
Segment profit
(loss) (1) 98,809 21,811 (9,095) - 111,525
Depreciation
and
amortization 18,259 4,023 988 - 23,270
Total assets 4,289,517 448,697 95,488 - 4,833,702
Goodwill 729,390 112,139 - - 841,529
Capital
expenditures 89,616 8,466 1,228 - 99,310
----------------------------------------------------------------------------
Completion
Year ended Contract and
December 31, Drilling Production Corporate Inter-segment
2009 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $1,030,852 $ 176,422 $ - $ (9,828) $1,197,446
Segment profit
(loss) 210,784 10,934 (34,890) - 186,828
Depreciation
and
amortization 118,889 17,186 1,925 - 138,000
Total assets 3,566,078 388,245 237,390 - 4,191,713
Goodwill 648,414 112,139 - - 760,553
Capital
expenditures 182,855 2,897 7,683 - 193,435
----------------------------------------------------------------------------
Completion
Year ended Contract and
December 31, Drilling Production Corporate Inter-segment
2008 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 809,317 $ 308,624 $ - $ (16,050) $1,101,891
Segment profit
(loss) (1) 302,061 86,088 (35,442) - 352,707
Depreciation
and
amortization 57,076 22,966 3,787 - 83,829
Total assets 4,289,517 448,697 95,488 - 4,833,702
Goodwill 729,390 112,139 - - 841,529
Capital
expenditures 202,863 23,713 3,003 - 229,579
----------------------------------------------------------------------------
(1) Amounts have been restated to effect the removal of foreign exchange
expense which is now excluded from the calculation of segment profit.
FOURTH QUARTER AND YEAR ENDED 2009 RESULTS CONFERENCE CALL AND
WEBCAST
Precision Drilling Trust has scheduled a conference call and
webcast to begin promptly at 10:00 a.m. MT (12:00 p.m. ET) on
Friday, February 12, 2010.
The conference call dial in numbers are 866-223-7781 or
416-340-8018
A live webcast of the conference call will be accessible on
Precision's website at www.precisiondrilling.com by selecting
"Investor Centre", then "Webcasts". Shortly after the live webcast,
an archived version will be available for approximately 30
days.
An archived recording of the conference call will also be
available approximately one hour after the completion of the call
until February 19, 2010 by dialing 1-800-408-3053 or 416-695-5800,
pass code 5141527.
About Precision
Precision is a leading provider of safe, high performance energy
services to the North American oil and gas industry. Precision
provides customers with access to an extensive fleet of contract
drilling rigs, service rigs, camps, snubbing units, wastewater
treatment units and rental equipment 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.UN" and on the New York Stock Exchange under the trading
symbol "PDS".
Contacts: David Wehlmann, Executive Vice President, Investor
Relations Precision Drilling Corporation, Administrator of
Precision Drilling Trust (403) 716-4575 (403) 716-4755 (FAX)
Precision Drilling Trust 4200, 150 - 6th Avenue S.W. Calgary,
Alberta T2P 3Y7 www.precisiondrilling.com
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