(Canadian dollars except as indicated)
This news release contains "forward-looking information and
statements" within the meaning of applicable securities laws. For a
full disclosure of the forward-looking information and statements
and the risks to which they are subject, see the "Cautionary
Statement Regarding Forward-Looking Information and Statements"
later in this news release.
Effective January 1, 2011, Precision Drilling Corporation
(TSX:PD)(NYSE:PDS) ("Precision" or the "Corporation") began
reporting its financial results in accordance with International
Financial Reporting Standards ("IFRS"). Prior year comparative
amounts have been changed to reflect results as if Precision had
always prepared its financial results using IFRS.
Precision Drilling Corporation reported net earnings of $28
million or $0.10 per diluted share for the three months ended
December 31, 2011 compared to a net loss of $0.3 million for the
fourth quarter of 2010. Net earnings and net earnings per diluted
share for the quarter include the impact of the previously
disclosed charge associated with asset decommissioning, which
decreased net earnings and net earnings per diluted share by $76
million and $0.26, respectively.
Revenue for the fourth quarter of 2011 was $587 million and
earnings before income taxes, other items, loss on asset
decommissioning and depreciation and amortization ("EBITDA")
totalled $230 million compared to $436 million and $145 million,
respectively, during the comparable period in 2010. The increase in
revenue and EBITDA was the result of increases in pricing, margins,
activity and new asset additions over the prior year period.
Fourth quarter 2011 revenue and EBITDA were higher than the
third quarter 2011 revenue and EBITDA of $493 million and $186
million, respectively, primarily as a result of higher dayrates and
margins in the United States and Canada coupled with increased
activity and margins in the Completion and Production Services
segment.
For the year ended December 31, 2011, Precision reported net
earnings of $193 million or $0.67 per diluted share compared to net
earnings of $44 million or $0.15 per diluted share for 2010.
Revenue for the year was $1,951 million compared to $1,430 million
for 2010. Net earnings and net earnings per diluted share for the
year include the impact of previously disclosed charges associated
with asset decommissioning and Canadian income tax settlements.
EBITDA totalled $695 million for 2011 compared to $435 million for
2010, an increase of 60%. Improved pricing and margins along with
higher activity levels in both operating segments have led to the
year-over-year improvement. Activity for Precision in 2011, as
measured by drilling rig utilization days, increased 22% in Canada
and 17% in the United States compared to 2010.
During the fourth quarter of 2011 Precision provided an update
on its 2011 capital expenditure program and planned capital
expenditures in 2012. Precision concluded 2011 with $726 million in
capital expenditures. Planned capital expenditures for 2012 are
$1.1 billion and include capital expenditures from new build
announcements in 2011 that will be completed in 2012. A substantial
portion of the 2012 plan is utilization and demand based and if
activity levels decline, Precision has the ability to reduce the
plan accordingly.
Kevin Neveu, Precision's President and Chief Executive Officer,
stated: "Precision's strong fourth quarter performance highlights
our successful repositioning to oil and natural gas liquids
directed activity as the Western Canadian Sedimentary Basin and
United States markets increase development of oil and liquids-rich
resources. Precision is currently running 274 rigs, and
approximately 75% of those rigs are pursuing wells licensed as oil,
up from 25% at the start of 2010. Equally as important, 85 to 90%
of our active rigs are drilling horizontal or directional wells.
The 25% of our rigs drilling "gas" licensed wells includes rigs
which we believe are primarily targeting natural gas liquids. We
are cognizant of the over-supplied natural gas market and expect a
continued re-balancing of North American gas supply through reduced
dry gas drilling activity and increased natural gas demand, both as
a result of low natural gas commodity prices."
"Customers' recognition of Precision's ability to perform in
today's market is evidenced by the day rate increases we achieved
and the substantial backlog of new build Super Series rigs
contracted during 2011. We are encouraged by our customers'
long-term outlook for North American unconventional resource
development as today we report that three more of the seven new
builds we announced in December have been fully contracted,
bringing the total number of contracted rigs announced in December
to five."
"Precision's financial performance strengthened throughout 2011
with annual revenue growth of 36% and EBITDA growth of 60% over
2010 levels. The company's revenue and cash flow grew through
increased activity levels, high quality asset additions, and
improved pricing and profitability. Precision further strengthened
its financial position through balance sheet improvements,
completing two financing transactions in 2011. At year end 2011,
Precision had $467 million cash on hand and US$527 million undrawn
availability on its revolving credit facility. Finally, Precision
has improved its contract position with the addition of new build
and upgraded rigs to its drilling rig fleet, increasing the
percentage of active rigs under contract from 50% in Q4 2010 to 63%
in Q4 2011."
"The market demand for Precision's Super Series rigs and High
Performance, High Value services is reflected in the company's new
build drilling rig orders. Of the 49 new build drilling rigs
announced since the beginning of 2011, 47 now have signed long-term
contracts with an average term of 3.5 years. The market share of
new build orders for Super Series rigs meaningfully exceeds the
Corporation's active drilling rig market share in both Canada and
the United States. We continue to have active discussions with our
customers about new build rigs and expect to announce more new
build contracts as the year progresses. Precision's fleet today has
273 high performance Tier 1 and Tier 2 drilling rigs, compared with
246 high performance Tier 1 and Tier 2 drilling rigs at the
beginning of 2011."
"In 2011 Precision delivered on the three strategic priorities
we highlighted at the beginning of 2011: delivering High
Performance, High Value services to drill the technically
challenging wells of today's unconventional resource plays;
pursuing an intense focus on organic growth; and improving our
financial flexibility to ensure we could capitalize on growth
opportunities. Some of the key highlights include:
-- The Corporation completed 19 new build Super Series rigs in
2011 and
expects to complete an additional 35 Super Series rigs in 2012.
Of these
35 rigs, 18 are expected to be deployed to the Canadian market,
16
are expected to be deployed to the U.S. market and one is
expected to be
deployed internationally.
-- Precision completed 18 rig upgrades during 2011 of which
approximately
50% were tier upgrades and the vast majority are supported with
contracts.
-- The significant new build orders, upgrade program and
previously
announced retirement of 36 Tier 3 rigs continues the fleet
upgrade
process.
-- Directional drilling growth through acquisitions in both
Canada and the
United States that provide a platform for organic growth.
Precision
started 2011 with a seven job capability and has current
capacity to run
70 jobs. The company plans to add equipment and personnel in
2012 to
continue to grow the directional drilling service offerings.
-- International expansion through development of a high
quality
international team and securing three long-term contracts for
work in
Saudi Arabia.
-- Increased vertical integration through the opening of the
Houston
Technology Center, the centralized location for training,
maintenance,
repair and rig up in the U.S. market. The company also expanded
drilling
rig new build capacity through investments in people,
infrastructure and
supply chain development, from four rigs per quarter at the
beginning of
2011 to nine rigs per quarter at the end of 2011.
-- Precision's Completion and Production Services segment
generated $104
million in EBITDA in 2011. Precision made $77 million of
capital
expenditure investments in the Completion and Production
Services
business in 2011 representing the largest capital expenditures
for the
segment since 2005.
-- Precision completed two unsecured financings to fund our
organic
growth and acquisitions, improving the strength and flexibility
of our
balance sheet."
"Canadian drilling dayrates and margins increased by $2,822 and
$2,183 per utilization day, respectively over the previous year
comparable quarter and U.S. drilling dayrates and margins increased
by $3,586 and $2,715, respectively, over the previous year
comparable quarter. These operating results point not only to the
strength of the Canadian and U.S. markets, but also to Precision's
ability to deploy new build drilling rigs to its active fleet at
higher dayrates and continue to obtain higher rates for
re-contracted rigs. The strong dayrate and margin performance
helped drive Precision's fourth quarter revenue increase of 35% and
EBITDA increase of 59% over the comparable quarter in 2010."
"Canadian drilling activity continues to be strong with
substantially all of Precision's rigs in Canada drilling for oil
and liquids-rich targets. Precision's current active rig count in
Canada is 163 and the average rig count of 117 for the fourth
quarter of 2011 was 10% higher than the comparable quarter in 2010.
Meaningful dayrate increases realized throughout 2011 reflect the
continued demand for high performance assets in the Canadian
marketplace."
"United States drilling activity continued to increase in 2011
driven by oil and liquids-rich activity. Precision's current active
U.S. rig count is 109 and its average rig count of 107 during the
fourth quarter of 2011 was 10% higher than the average rig count
during the comparable quarter in 2010. In addition to active rig
count growth, Precision realized continued dayrate increases
throughout the year."
"Precision is well positioned in today's marketplace with the
largest land drilling presence in Canada, a high percentage of rigs
currently drilling oil or liquids-rich targets, and more rigs
drilling directionally or horizontally today than any other
drilling contractor in North America. Precision believes its
customers' long-term focus and the growing number of unconventional
oil and liquids-rich drilling opportunities in North America
provide Precision the foundation to grow its active rig count. We
also believe that throughout 2012, we will effectively utilize
Precision's people, sizeable equipment base and proven systems to
reduce our operating costs and continue to expand operating
margins," concluded Mr. Neveu.
SELECT FINANCIAL AND OPERATING INFORMATION
(Stated in
thousands of
Canadian
dollars, except
per share Three months ended
amounts) December 31, Year ended December 31,
2011 2010 % Change 2011 2010 % Change
----------------------------------------------------------------------------
Revenue $ 587,408 $435,537 34.9 $1,951,027 $1,429,653 36.5
EBITDA(1) 229,839 144,518 59.0 695,064 434,908 59.8
Net earnings 28,046 (250) n/m 193,477 43,535 344.4
Funds provided
by operations 256,103 133,903 91.3 592,388 404,165 46.6
Cash provided by
operations 218,857 75,064 191.6 532,772 306,264 74.0
Capital
spending:
Expansion
capital
expenditures 221,195 56,940 288.5 455,302 71,179 539.7
Upgrade and
maintenance
capital
expenditures 106,792 54,008 97.7 271,055 104,722 158.8
Proceeds on
sale (7,289) (2,885) 152.7 (15,983) (12,256) 30.4
----------------------------------------------------------
Net capital
spending 320,698 108,063 196.8 710,374 163,645 334.1
Net earnings per
share:
Basic 0.10 - n/m 0.70 0.16 337.5
Diluted 0.10 - n/m 0.67 0.15 346.7
Contract
drilling rig
fleet 337 355 (5.1) 337 355 (5.1)
Drilling rig
utilization
days:
Canada 10,724 9,730 10.2 37,970 31,176 21.8
United States 9,834 8,915 10.3 37,887 32,450 16.8
International 172 122 41.0 702 622 12.9
Service rig
fleet 207 220 (5.9) 207 220 (5.9)
Service rig
operating hours 87,477 84,758 3.2 315,536 294,126 7.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
n/m-calculation not meaningful
FINANCIAL POSITION AND RATIOS
(Stated in thousands of Canadian dollars, December 31, December 31,
except ratios) 2011 2010
----------------------------------------------------------------------------
Working capital $ 610,429 $ 458,003
Long-term debt(1) $ 1,239,616 $ 804,494
Total long-term financial liabilities $ 1,267,040 $ 834,813
Total assets $ 4,427,874 $ 3,564,540
Long-term debt to long-term debt plus
equity ratio(1) 0.37 0.29
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Net of unamortized debt issue costs.
Precision's average active rig count of 109 rigs in the United
States and International for the fourth quarter of 2011 was up 11
rigs over the same period of 2010 and one rig over the third
quarter of 2011. Precision expects its active rig count to modestly
increase in the United States and International over the coming
months as its new build and upgraded rigs enter the market and the
three contracted Middle East rigs begin drilling in Saudi
Arabia.
In Canada, Precision averaged 117 rigs operating during the
fourth quarter of 2011, up 11 rigs over the same period in 2010 and
three rigs over the third quarter of 2011. Precision expects high
levels of market activity and new build and upgraded rigs entering
the fleet to support its active rig count during the winter
drilling season.
Revenue in the fourth quarter of 2011 was $152 million higher
than the prior year period. The increase was mainly due to a
period-over-period increase in rates and drilling utilization days
in both Canada and the United States. Revenue in Precision's
Contract Drilling Services segment increased by 38% while revenue
increased 16% in the Completion and Production Services segment in
the fourth quarter of 2011 compared to the prior year.
EBITDA margin (EBITDA as a percentage of revenue) was 39% for
the fourth quarter of 2011 compared to 33% for the same period in
2010. The increase in EBITDA margin was primarily attributable to
higher average dayrates and higher utilization in both Canada and
the United States in the fourth quarter of 2011 versus the prior
year period. Precision's term contract position with customers, a
highly variable operating cost structure and economies achieved
through vertical integration continue to support EBITDA
margins.
Precision's 2012 priorities are threefold:
1. Execute our High Performance, High Value strategy. Continue to deliver
safe, repeatable, predictable and reliable performance with high
environmental responsibility and community standards.
2. Continue to pursue growth opportunities. Execute on existing organic
growth opportunities including contracting additional new build and
upgraded drilling rigs, adding assets and people to the directional
drilling and Completion and Production Services business and pursuing
additional rig deployments internationally. Continue to evaluate
accretive acquisitions.
3. Build our brand. Continue to promote Precision's High Performance, High
Value brand with customers, employees, investors and within the
communities in which we operate.
In the Contract Drilling Services segment, Precision currently
owns 339 contract drilling rigs, including 189 in Canada, 144 in
the United States and 6 rigs in international locations. Precision
currently maintains directional drilling equipment and personnel
capacity to run 70 jobs. Precision's Completion and Production
Services segment includes 187 service rigs, 20 snubbing units, 95
wastewater treatment units, 63 drilling and base camps and a broad
mix of rental equipment.
Oil prices were higher and natural gas prices were lower during
the fourth quarter of 2011 compared with the prior year period. For
the fourth quarter of 2011, West Texas Intermediate crude oil
averaged US$93.88 per barrel, 10% higher when compared to US$85.06
per barrel in the same period in 2010. AECO natural gas spot prices
averaged $3.18 per MMBtu, 12% lower than the fourth quarter 2010
average of $3.62 per MMBtu. In the United States, Henry Hub natural
gas spot prices averaged US$3.31 per MMBtu in the fourth quarter of
2011, a decrease of 12% over the fourth quarter 2010 average of
US$3.78 per MMBtu.
Summary for the three months ended December 31, 2011:
-- Operating earnings were $44 million, a decrease of $42 million from the
fourth quarter in 2010. In the fourth quarter of 2011, Precision
recorded an impairment charge of $115 million related to the
decommissioning of 36 drilling rigs and 13 well servicing rigs.
Excluding the decommissioning charge, operating earnings were $159
million or 27% of revenue, compared to 20% in 2010. Operating earnings
were positively impacted by the increase in activity and rates in the
majority of Precision's operations.
-- General and administrative expenses were $36 million, in-line with the
fourth quarter of 2010. Increased costs associated with higher activity
were offset by lower incentive compensation costs tied to the price of
Precision's common shares.
-- Finance charges were $22 million, a decrease of $86 million from the
fourth quarter of 2010. The decrease was due to $91 million of non-cash
charges Precision incurred during the fourth quarter of 2010 associated
with the refinancing of Precision's debt partially offset by interest
charges on an increased long-term debt balance.
-- Funds provided by operations in the fourth quarter of 2011 were $256
million, an increase of $122 million from the prior year comparative
quarter of $134 million.
-- Capital expenditures for the purchase of property, plant and equipment
were $328 million in the fourth quarter, an increase of $217 million
over the same period in 2010. Capital spending for the fourth quarter of
2011 included $221 million for expansion capital and $107 million for
the maintenance and upgrade of existing assets.
-- Average revenue per utilization day for contract drilling rigs increased
in the fourth quarter of 2011 to US$23,010 from the prior year fourth
quarter of US$19,424 in the United States and increased in Canada to
$19,971 in the fourth quarter of 2011 from $17,149 for the fourth
quarter of 2010. The increase in revenue rates for the fourth quarter in
Canada and the United States reflects the pricing leverage of higher
overall industry utilization and additional Tier 1 and upgraded rigs
entering the fleet compared to the prior year quarter. In
Canada, for the fourth quarter of 2011, 38% of Precision's utilization
days were achieved from drilling rigs working under term contracts
compared to 30% in the 2010 comparative period. In the United States,
for the fourth quarter of 2011, 79% of Precision's utilization days were
generated from rigs working under term contracts compared to 64% in the
2010 comparative period. Turnkey revenue for the fourth quarter of 2011
was US$15 million compared with US$12 million in the 2010 comparative
period. Within Precision's Completion and Production Services segment,
average hourly rates for service rigs were $748 in the fourth quarter
of 2011 compared to $679 in the fourth quarter of 2010.
-- Average operating costs per utilization day for drilling rigs increased
in the fourth quarter of 2011 to US$13,552 from the prior year fourth
quarter of US$12,681 in the United States while in Canada costs
increased to $9,326 in 2011 from $8,687 in 2010. The cost increase in
the United States was primarily due to labour rate increases that became
effective in December 2010 and October 2011 partially offset by 2011
cost control initiatives. The cost increase in Canada was primarily due
to a labour rate increase that became effective in October 2011. Within
Precision's Completion and Production Services segment, average hourly
operating costs for service rigs increased to $516 in the fourth quarter
of 2011 as compared to $476 in the fourth quarter of 2010 primarily due
to a labour rate increase and higher maintenance costs to prepare for
increased activity. Typically, labour rate increases in both operating
segments are recovered in dayrate increases.
-- Precision realized revenue from directional services of $38 million in
the fourth quarter of 2011 compared with $3 million in the prior year
period. The increase is primarily due to the acquisitions of Drake
Directional Drilling, LLC and Drake MWD Services, LLC in the first
quarter of 2011 and Axis Energy Services Holdings Inc. in the third
quarter of 2011.
Summary for the year ended December 31, 2011:
-- Revenue for 2011 was $1,951 million an increase of 36% over
2010.
-- Operating earnings were $329 million, an increase of $104
million or 46%
over 2010. Excluding the decommissioning charge, operating
earnings were
$444 million or 23% of revenue, compared to 16% in 2010.
-- General and administrative costs were $125 million, an
increase of $17
million compared to 2010 primarily as a result of increased
activity and
the increased costs for stock-based compensation in 2011.
-- Finance charges were $115 million, a decrease of $96 million
from 2010
due to lower interest costs and lower amortization of debt issue
costs
partially offset by interest expense associated with Canadian
income tax
settlements. During 2011, Precision refinanced the $175 million
10% senior
unsecured notes resulting in a charge of $27 million for the
make-whole
premium while 2010 includes a loss on settlement of debt
facilities of
$116 million.
-- Funds provided by operations for 2011 were $592 million, an
increase of
$188 million from the prior year of $404 million. The increase
was due
to stronger operating results compared to the prior year
period
partially offset by the previously disclosed cash payment to
tax
authorities in Canada of $50 million.
-- Capital expenditures for the purchase of property, plant and
equipment
were $726 million in 2011, an increase of $550 million from
2010.
Capital spending for 2011 included $455 million for expansion
capital
and $271 million for the maintenance and upgrade of existing
assets.
OUTLOOK
Precision has a strong portfolio of term customer contracts that
provides a base level of activity and revenue. Precision currently
has 145 rigs committed under term contracts in North America in the
first quarter of 2012, 121 rigs contracted for the second quarter
of 2012 and 88 for the third quarter of 2012. In Canada, term
contracted rigs normally generate 250 utilization days per rig year
due to the seasonal nature of well access, whereas in the United
States they normally generate 365 utilization days per rig year in
most regions.
For 2012, based on current drilling rig contracts, Precision has
53 rigs in Canada under term contract and 59 rigs in the United
States and internationally. For 2013, Precision currently has term
contracts in place for an average of 71 rigs, with 41 in Canada and
30 in the United States and internationally. Since the third
quarter 2011 earnings release, Precision has added term contracts
that increased the contracted rig average for 2012 from 89 rigs to
112 rigs working under term contract.
Capital expenditures are expected to be approximately $1.1
billion for 2012 and include:
-- $702 million for expansion capital which includes the cost to
complete the 28 drilling rigs from the 2011 new build rig program
and the seven new build rigs from the 2012 new build program;
-- $182 million for upgrade capital which includes the upgrade
of approximately 14 rigs; and
-- $244 million for sustaining and infrastructure expenditures
which is based upon currently anticipated activity levels.
Expansion and upgrade capital includes the purchase of long-lead
items for the Corporation's capital inventory which includes top
drives, drill pipe, control systems, engines and other long-lead
items, which can be used for North American or international new
build rig opportunities and rig tier upgrades. Precision expects
that the $1.1 billion will be split $950 million for the Contract
Drilling segment and $178 million for the Completion and Production
Services segment.
To date in 2012, there has been higher drilling activity in
Canada and the United States than in the prior year. According to
industry sources, as at February 3, 2012, the U.S. active land
drilling rig count was up about 14% from the same point in the
prior year while the Canadian drilling rig count had also increased
about 13%. With the year-over-year improvements in rig utilization,
there have been continued improvements in spot market dayrates
charged to customers in both Canada and the United States.
Natural gas production in the United States has remained very
strong despite reduced natural gas drilling activity over the past
two years. The United States natural gas storage levels as at
February 3, 2012 were 25% above the five-year average and 25% above
storage levels of a year ago. The increase in oil and liquids-rich
drilling in areas like West Texas, Bakken and Eagle Ford has
resulted in the United States oil rig count as at February 3, 2012
to be 52% higher than it was a year ago. Precision has more
equipment working in oil and liquids plays than at any time in the
last 20 years. With high storage levels, consistent production and
the view that North America has an oversupply of natural gas,
natural gas prices have reached 10-year lows. To date, customer
changes in natural gas drilling plans are reflected in a decline in
the rig count targeting dry gas plays. If low natural gas prices
continue, Precision and the North American drilling industry could
see a further reduction in demand for natural gas drilling.
Precision, along with the land drilling industry, is in the
process of upgrading the fleet of drilling rigs through newly built
rigs and the upgrade of existing equipment. Precision believes that
this "retooling" of the industry wide fleet will result in the
virtual obsolescence of Tier 3 rigs in the North American markets
over the next five years. As such, in the fourth quarter of 2011
Precision decommissioned 36 Tier 3 drilling rigs and 13 service
rigs from its fleet. Additionally, Precision is changing its
depreciation policy on its remaining Tier 3 rigs beginning in 2012.
This new policy will change the depreciation method on the Tier 3
rigs that are not expected to be upgraded from a unit of production
method to a straight-line method over four years. Therefore, the
Tier 3 rigs will be depreciated to their estimated salvage value
over the next four years whether the rigs are working or not to
match our belief of the estimated useful lives of those rigs.
Precision estimates that this will add approximately $17 million in
2012 of annual depreciation over what the current unit of
production method would have provided.
SEGMENTED FINANCIAL RESULTS
To align with the management of the operating divisions,
Precision now considers the camp and catering division to be within
the Completion and Production Services segment. Precision views its
corporate segment as a support function that provides assistance to
more than one segment. Beginning with the first quarter of 2011,
Precision has included United States based corporate costs,
previously included in Contract Drilling Services, in the Corporate
and Other segment. Prior period numbers have been restated to
reflect these changes. Precision's operations are reported in two
segments: the Contract Drilling Services segment which includes the
drilling rig, directional drilling, oilfield supply and
manufacturing divisions; and the Completion and Production Services
segment which includes the service rig, snubbing, rental, camp and
catering and wastewater treatment divisions.
(Stated in
thousands of Three months ended
Canadian dollars) December 31, Year ended December 31,
2011 2010 % Change 2011 2010 % Change
----------------------------------------------------------------------------
Revenue:
Contract
Drilling
Services $494,397 $357,415 38.3 $1,632,037 $1,186,007 37.6
Completion and
Production
Services 95,265 82,036 16.1 330,225 255,827 29.1
Inter-segment
eliminations (2,254) (3,914) (42.4) (11,235) (12,181) (7.8)
----------------------------------------------------------------------------
$587,408 $435,537 34.9 $1,951,027 $1,429,653 36.5
----------------------------------------------------------------------------
----------------------------------------------------------------------------
EBITDA:(1)
Contract
Drilling
Services $216,720 $143,676 50.8 $ 665,389 $ 434,167 53.3
Completion and
Production
Services 33,558 25,188 33.2 104,252 66,443 56.9
Corporate and
Other (20,439) (24,346) (16.0) (74,577) (65,702) 13.5
----------------------------------------------------------------------------
$229,839 $144,518 59.0 $ 695,064 $ 434,908 59.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
(Stated in thousands of Canadian
dollars, except where noted) Three months ended December 31,
2011 2010 % Change
----------------------------------------------------------------------------
Revenue $ 494,397 $ 357,415 38.3
Expenses:
Operating 266,027 206,456 28.9
General and administrative 11,650 7,283 60.0
----------------------------------------------------------------------------
EBITDA(1) 216,720 143,676 50.8
Depreciation 62,563 49,540 26.3
Loss on asset decommissioning 113,366 - n/m
----------------------------------------------------------------------------
Operating earnings(1) $ 40,791 $ 94,136 (56.7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings as a
percentage of revenue 8.3% 26.3%
----------------------------------------------------------------------------
Drilling rig revenue per
utilization day in Canada $ 19,971 $ 17,149 16.5
----------------------------------------------------------------------------
Drilling rig revenue per
utilization day in the United
States(2) US$ 23,010 US$ 19,424 18.5
----------------------------------------------------------------------------
(Stated in thousands of Canadian
dollars, except where noted) Year ended December 31,
2011 2010 % Change
---------------------------------------------------------------------------
Revenue $ 1,632,037 $ 1,186,007 37.6
Expenses:
Operating 931,062 720,347 29.3
General and administrative 35,586 31,493 13.0
---------------------------------------------------------------------------
EBITDA(1) 665,389 434,167 53.3
Depreciation 219,194 177,516 23.5
Loss on asset decommissioning 113,366 - n/m
---------------------------------------------------------------------------
Operating earnings(1) $ 332,829 $ 256,651 29.7
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Operating earnings as a
percentage of revenue 20.4% 21.6%
---------------------------------------------------------------------------
Drilling rig revenue per
utilization day in Canada $ 18,442 $ 16,139 14.3
---------------------------------------------------------------------------
Drilling rig revenue per
utilization day in the United
States(2) US$ 21,744 US$ 18,965 14.7
---------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
(2) Includes revenue from idle but contracted rig days and lump
sum payouts.
n/m-calculation not meaningful
Three months ended December 31,
Canadian onshore
drilling statistics:(1) 2011 2010
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling
rigs (end of period) 188 805 202 799
Drilling rig operating
days (spud to
release) 9,572 40,538 8,661 35,944
Drilling rig operating
day utilization 50% 54% 47% 49%
Number of wells
drilled 1,074 3,198 1,119 4,034
Average days per well 8.9 12.7 7.7 8.9
Number of metres
drilled (000s) 1,781 6,561 1,662 6,542
Average metres per
well 1,658 2,051 1,485 1,622
Average metres per day 186 162 192 182
----------------------------------------------------------------------------
Year ended December 31,
Canadian onshore
drilling statistics:(1) 2011 2010
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling
rigs (end of period) 188 805 202 799
Drilling rig operating
days (spud to
release) 33,965 144,646 27,975 119,300
Drilling rig operating
day utilization 46% 49% 38% 41%
Number of wells
drilled 3,566 11,832 3,196 11,936
Average days per well 9.5 12.2 8.8 10.0
Number of metres
drilled (000s) 5,717 22,613 5,119 20,298
Average metres per
well 1,603 1,911 1,602 1,701
Average metres per day 168 156 183 170
----------------------------------------------------------------------------
(1) Canadian operations only.
(2) Canadian Association of Oilwell Drilling Contractors
("CAODC") and Precision - excludes non-CAODC rigs and non-reporting
CAODC members.
United States
onshore
drilling
statistics:(1) 2011 2010
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Average number
of active land
rigs for
quarters ended:
March 31 100 1,695 78 1,297
June 30 102 1,803 88 1,464
September 30 106 1,915 93 1,603
December 31 107 1,972 97 1,665
----------------------------------------------------------------------------
Year to date
average 104 1,846 89 1,514
----------------------------------------------------------------------------
(1) United States lower 48 operations only.
(2) Baker Hughes rig counts.
Contract Drilling Services segment revenue for the fourth
quarter of 2011 increased by 38% to $494 million and EBITDA
increased by 51% to $217 million compared to the same period in
2010. The increase in revenue and EBITDA was due to the higher
drilling rig activity and higher average rates per day for both
Canada and the United States.
Activity in North America was impacted by increased customer
demand for oil and liquids-rich natural gas related drilling
activity as a result of higher global oil prices. In the fourth
quarter, drilling rig revenue per utilization day in Canada was up
16% over the prior year while in the United States drilling rig
revenue per utilization day was up 18%. The increase in average
dayrates for both Canada and the United States was the result of
increased rig demand. During the quarter, 38% of Precision's
utilization days in Canada were generated from rigs under term
contract compared with 30% in 2010 while in the United States 79%
of utilization days were generated from rigs under term contract as
compared to 64% in the prior year period. At the end of the
quarter, Precision had 85 drilling rigs working under term
contracts in the United States and 56 in Canada.
Drilling rig utilization days in Canada (drilling days plus move
days) during the fourth quarter of 2011 were 10,724, an increase of
10% compared to 9,730 in 2010. Drilling rig utilization days for
Precision in the United States were 9,834 or 10% higher than the
same quarter of 2010 due to increased customer demand with the
majority of the additional activity coming from oil and liquids
rich natural gas related plays. On average, Precision had two rigs
working internationally during the fourth quarter of 2011 compared
with one in the corresponding quarter of 2010.
Contract Drilling Services segment operating costs were 54% of
revenue for the quarter which is 4 percentage points lower than the
prior year period. On a per day basis, operating costs for the
drilling rig division in Canada were above the prior year primarily
because of an increase in crew wage expense effective October 2011.
Operating costs for the quarter in the United States on a per day
basis were marginally up from the comparable period in 2010 due to
a crew wage increases effective December 2010 and October 2011
offset by a reduction in costs resulting from 2011 cost control
initiatives. Typically, labour rate increases are recovered in
dayrate increases.
During the fourth quarter, the Contract Drilling Services
segment recognized a loss of $113 million related to the
decommissioning of 36 drilling rigs, 19 in Canada and 17 in the
United States. Quarterly depreciation in the Contract Drilling
Services segment increased 26% from the prior year due to the
increase in activity in both Canada and the United States and $1
million of depreciation in 2011 recorded on idle contract drilling
assets. In 2011 and 2010, both the United States and Canadian
contract drilling operations used the unit of production method of
calculating depreciation. Beginning in 2012, Tier 3 drilling rigs
that are not scheduled for upgrade will be depreciated using the
straight-line method.
SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES
(Stated in thousands
of Canadian dollars, Three months ended
except where noted) December 31, Year ended December 31,
2011 2010 % Change 2011 2010 % Change
----------------------------------------------------------------------------
Revenue $ 95,265 $ 82,036 16.1 $330,225 $255,827 29.1
Expenses:
Operating 57,983 53,308 8.8 211,195 178,585 18.3
General and
administrative 3,724 3,540 5.2 14,778 10,799 36.8
----------------------------------------------------------------------------
EBITDA(1) 33,558 25,188 33.2 104,252 66,443 56.9
Depreciation 6,768 6,261 8.1 25,598 24,128 6.1
Loss on asset
decommissioning 1,527 - n/m 1,527 - n/m
----------------------------------------------------------------------------
Operating earnings(1) $ 25,263 $ 18,927 33.5 $ 77,127 $ 42,315 82.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings as
a percentage of
revenue 26.5% 23.1% 23.4% 16.5%
----------------------------------------------------------------------------
Well servicing
statistics:(2)
Number of service
rigs (end of
period) 207 220 (5.9) 207 220 (5.9)
Service rig
operating hours 87,477 84,758 3.2 315,536 294,126 7.3
Service rig
operating hour
utilization 43% 42% 39% 37%
Service rig revenue
per operating hour $ 748 $ 679 10.2 $ 705 $ 637 10.7
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
(2) Now includes snubbing services. Comparative numbers have
been restated to reflect this change.
n/m calculation not meaningful
Completion and Production Services segment revenue for the
fourth quarter increased by 16% from the fourth quarter of 2010 to
$95 million and EBITDA increased by 33% to $34 million. The
increase in revenue and EBITDA is attributable to increased
activity in all of the divisions as customers increase spending in
response to higher oil prices.
Well servicing activity increased 3% from the prior year
quarter, with the fleet generating 87,477 operating hours in the
fourth quarter of 2011 compared with 84,758 hours in the prior year
quarter for utilization of 43% and 42%, respectively. The increase
was a result of increased service rig activity due to completion
and production work on oil wells. Approximately 96% of the fourth
quarter service rig activity was oil related. Precision's rental
division activity was 20% higher than the prior year comparative
period primarily due to completion related activity and new
equipment added to the fleet.
Average service rig revenue increased $69 per operating hour
from the prior year period to $748 due to increased labour and fuel
costs passed through to customers.
Operating costs as a percentage of revenue decreased to 61% in
the fourth quarter of 2011 from 65% in the same period of 2010.
Operating costs per service rig operating hour increased over the
comparable period in 2010 due primarily to higher wages and higher
maintenance costs to prepare for increased activity.
Depreciation in the Completion and Production Services segment
in the fourth quarter of 2011 was 8% higher than the prior year due
to increased activity. In the fourth quarter, the Completion and
Production Services segment recorded a $2 million loss related to
the decommissioning of 13 well service rigs. The well servicing
division uses the unit of production method of calculating
depreciation while the other operating divisions within the
Completion and Production Services segment use the straight-line
method.
SEGMENT REVIEW OF CORPORATE AND OTHER
Precision views its corporate segment as support functions that
provide assistance to more than one segment. Beginning with the
first quarter of 2011, Precision has included United States based
corporate costs, which were previously in the Contract Drilling
services segment, in the Corporate segment and restated prior
period comparatives. The Corporate and Other segment had an EBITDA
loss of $20 million for the fourth quarter of 2011, $4 million
lower than the prior year comparative period due to lower share
based performance incentive costs partially offset by increased
costs associated with higher activity.
OTHER ITEMS
Net financial charges for the quarter were $22 million, a
decrease of $86 million from the fourth quarter of 2010. Current
period costs include interest expense of $22 million compared to
$16 million in 2010. In the fourth quarter of 2010, the Corporation
recorded a loss on settlement of debt facilities of $91 million
compared with nil in the current quarter.
The Corporation had a foreign exchange loss of $8 million during
the fourth quarter of 2011 due to the strengthening of the Canadian
dollar versus the U.S. dollar and the impact thereof on the net
U.S. dollar denominated monetary position in the Canadian
dollar-based companies.
Precision's effective tax rate on earnings before income taxes
for 2011 was 20% compared to a tax recovery in the prior year. The
increase in taxes for 2011 is primarily the result of the tax on
higher earnings as compared to the prior period and the settlement
of a prior period income tax audit.
LIQUIDITY AND CAPITAL RESOURCES
The oilfield services business is inherently cyclical in nature.
Precision employs a disciplined approach to minimize costs through
operational management practices and a variable cost structure, and
to maximize revenues through term contract positions with a focus
of maintaining a strong balance sheet. This operational discipline
provides Precision with the financial flexibility to capitalize on
strategic acquisitions and internal growth opportunities at all
points in the business cycle.
Operating within a highly variable cost structure, Precision's
maintenance capital expenditures are tightly governed by and highly
responsive to activity levels with additional cost savings leverage
provided through Precision's internal manufacturing and supply
divisions. Expansion capital for new build rig programs require two
to five year term contracts in order to mitigate capital recovery
risk.
Liquidity remains sufficient as Precision had a cash balance of
$467 million and the US$550 million senior secured revolving credit
facility ("Secured Facility") remains undrawn except for US$23
million in outstanding letters of credit as at December 31, 2011.
Subject to certain conditions, the Secured Facility may be
increased by an additional US$100 million. In addition to the
Secured Facility, Precision has available $40 million in operating
facilities, excluding letters of credit of $0.5 million, which are
used for working capital management. At December 31, 2011 Precision
had $1.3 billion in long-term debt as compared to $821 million at
December 31, 2010.
As at December 31, 2011, the Corporation was in compliance with
the covenants under the Secured Facility. Precision expects to
remain in compliance with financial covenants under its Secured
Facility and have full access to credit lines during 2012.
The current blended cash interest cost of Precision's debt is
approximately 6.6% compared to 7.3% as at December 31, 2010.
In November 2010 and again in July 2011, Precision designated
its U.S. dollar denominated long-term debt as a hedge of its
investment in its United States operations. To be accounted for as
a hedge, the foreign currency denominated long-term debt must be
designated and documented as such and must be effective at
inception and on an ongoing basis.
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share
amounts)
2011
----------------------------------------------------------------------------
Quarters ended March 31 June 30 September 30 December 31
----------------------------------------------------------------------------
Revenue $ 525,350 $ 345,325 $ 492,944 $ 587,408
EBITDA(1) 186,411 92,566 186,248 229,839
Net earnings: 65,560 16,403 83,468 28,046
Per basic
share 0.24 0.06 0.30 0.10
Per diluted
share 0.23 0.06 0.29 0.10
Funds provided
by
operations(1) 192,337 70,766 73,182 256,103
Cash provided
by operations 117,322 176,312 20,281 218,857
----------------------------------------------------------------------------
2010
----------------------------------------------------------------------------
Quarters ended March 31 June 30 September 30 December 31
----------------------------------------------------------------------------
Revenue $ 373,136 $ 261,828 $ 359,152 $ 435,537
EBITDA(1) 117,658 60,125 112,607 144,518
Net earnings
(loss): 56,917 (69,418) 56,286 (250)
Per basic
share 0.21 (0.25) 0.20 -
Per diluted
share 0.20 (0.25) 0.20 -
Funds provided
by
operations(1) 102,759 40,692 126,811 133,903
Cash provided
by operations 20,624 143,001 67,575 75,064
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
ADDITIONAL GAAP MEASURES
Precision uses certain additional GAAP measures that are not
defined terms under IFRS to assess performance and believes these
measures provide useful supplemental information to investors. The
following are the measures Precision uses in assessing
performance.
EBITDA
Management believes that in addition to net earnings, earnings
before income taxes, other items, loss on asset decommissioning and
depreciation and amortization ("EBITDA"), as derived from
information reported in the Consolidated Statements of Earnings, 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 or how
depreciation and amortization charges affect results.
Operating Earnings
Management believes that in addition to net earnings, operating
earnings as reported in the Consolidated Statements of Earnings 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.
Funds Provided by Operations
Management believes that in addition to cash provided by
operations, funds provided by operations, as reported in the
Consolidated Statements of Cash Flow is a useful supplemental
measure as it provides an indication of the funds generated by
Precision's principal business activities prior to consideration of
working capital, which is primarily made up of highly liquid
balances.
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS)
Precision is reporting its financial results in accordance with
IFRS from January 1, 2011, the changeover date set by the Canadian
Accounting Standards Board (AcSB). IFRS compliant comparative
financial information for one year prior to the effective date is
required.
For the three months and year ended December 31, 2010 Precision
has restated the operating results as if it had always prepared
financial results in accordance with IFRS. As a result of
componentization of capital assets and applying different
depreciation rates to the different components under IFRS,
partially offset by the write-down of certain assets to fair market
value, depreciation expense for the fourth quarter of 2010 has
increased by $8 million over the amount previously reported and for
the year period ended December 31, 2010 increased by $27 million.
In addition, Precision has a cash settled share appreciation rights
plan which was previously recorded based on the intrinsic value
method whereas IFRS requires the use of an option pricing model.
The difference in method resulted in a slight decrease to the stock
based compensation expense reported in the fourth quarter of 2010
of $871 thousand and $475 thousand for the year period ended
December 31, 2010. Together these adjustments had a net tax impact
of reducing the deferred tax expense in the fourth quarter of 2010
by $3 million and $9 million for the year ended December 31,
2010.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND
STATEMENTS
Certain statements contained in this report, including
statements that contain words such as "could", "should", "can",
"anticipate", "estimate", "intend", "plan", "expect", "believe",
"will", "may", "continue", "project", "potential" and similar
expressions and statements relating to matters that are not
historical facts constitute "forward-looking information" within
the meaning of applicable Canadian securities legislation and
"forward-looking statements" within the meaning of the "safe
harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995 (collectively, "forward-looking
information and statements").
In particular, forward-looking information and statements
include, but are not limited to, the following: Precision's planned
capital expenditures and anticipated uses of capital; the timing of
such expenditures; that strong activity levels experienced over the
past several quarters will continue; that Precision will announce
more new build contracts as the year progresses; the expected
timing and deployment of Super Series rigs to be completed in 2012;
plans to add equipment and personnel in 2012 to grow Precision's
directional drilling service offerings; that the long-term focus of
the Corporation's customers and the growing number of
unconventional oil and liquids drilling opportunities in North
America will provide Precision with the foundation to grow its
active rig count; that Precision will reduce operating costs and
expand operating margins throughout 2012; that Precision's active
rig count in the United States and internationally will increase
modestly in the coming months; that high levels of market activity
and new build and upgraded rigs will support Precision's active rig
count during the winter drilling season; the potential for a
further reduction in demand for natural gas drilling; the
obsolescence of Tier 3 rigs in North American markets over the next
five years; and the anticipated effects of changes to the
Corporation's depreciation policy on its Tier 3 rigs.
These forward-looking information and statements are based on
certain assumptions and analysis made by the Corporation 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 Corporation'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 Corporation'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 contract drilling, well servicing and ancillary oilfield
services; capital market liquidity available to fund customer
drilling programs; availability of cash flow, debt and/or equity
sources to fund the Corporation's capital and operating
requirements, as needed; the effects of seasonal and weather
conditions on operations and facilities; the existence of
competitive operating risks inherent in contract drilling,
directional drilling, well servicing and ancillary oilfield
services; general economic, market or business conditions; changes
in laws or regulations; the 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 Corporation will be realized or,
even if substantially realized, that they will have the expected
consequences to, or effects on, the Corporation 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 Corporation 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 STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
December 31, December 31,
(Stated in thousands of Canadian dollars) 2011 2010
----------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 467,476 $ 256,831
Accounts receivable 576,243 414,901
Inventory 7,163 4,933
----------------------------------------------------------------------------
Total current assets 1,050,882 676,665
Non-current assets:
Income tax recoverable 64,579 64,579
Property, plant and equipment 2,942,296 2,532,398
Intangibles 6,471 6,366
Goodwill 363,646 284,532
----------------------------------------------------------------------------
Total non-current assets 3,376,992 2,887,875
----------------------------------------------------------------------------
Total assets $4,427,874 $3,564,540
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 436,667 $ 217,799
Income tax payable 3,786 863
----------------------------------------------------------------------------
Total current liabilities 440,453 218,662
Non-current liabilities:
Share based compensation 11,303 12,268
Provisions and other 16,121 18,051
Long-term debt 1,239,616 804,494
Deferred tax liabilities 587,790 578,239
----------------------------------------------------------------------------
Total non-current liabilities 1,854,830 1,413,052
Shareholders' equity:
Shareholders' capital 2,248,217 2,244,417
Contributed surplus 18,396 11,266
Deficit (83,160) (276,637)
Accumulated other comprehensive loss (50,862) (46,220)
----------------------------------------------------------------------------
Total shareholders' equity 2,132,591 1,932,826
----------------------------------------------------------------------------
Total liabilities and shareholders' equity $4,427,874 $3,564,540
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three months ended Year ended
December 31, December 31,
(stated in thousands of
Canadian dollars, except per
share amounts) 2011 2010 2011 2010
----------------------------------------------------------------------------
Revenue $587,408 $ 435,537 $ 1,951,027 $1,429,653
Expenses:
Operating 321,756 255,850 1,131,022 886,751
General and administrative 35,813 35,169 124,941 107,994
----------------------------------------------------------------------------
Earnings before income taxes,
other items, loss on asset
decommissioning and
depreciation and amortization 229,839 144,518 695,064 434,908
Depreciation and amortization 71,067 58,454 251,483 210,103
Loss on asset decommissioning 114,893 - 114,893 -
----------------------------------------------------------------------------
Operating earnings 43,879 86,064 328,688 224,805
Other items:
Foreign exchange 7,626 (1,042) (23,674) (12,712)
Finance charges 22,392 108,508 115,332 211,327
Other (3,754) - (3,754) -
----------------------------------------------------------------------------
Earnings before tax 17,615 (21,402) 240,784 26,190
Income taxes:
Current 2,897 2,879 43,779 7,634
Deferred (13,328) (24,031) 3,528 (24,979)
----------------------------------------------------------------------------
(10,431) (21,152) 47,307 (17,345)
----------------------------------------------------------------------------
Net earnings $ 28,046 $ (250) $ 193,477 $ 43,535
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share:
Basic $ 0.10 $ nil $ 0.70 $ 0.16
Diluted $ 0.10 $ nil $ 0.67 $ 0.15
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)(UNAUDITED)
Three months ended Year ended
December 31, December 31,
(Stated in thousands of Canadian
dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Net earnings $ 28,046 $ (250) $ 193,477 $ 43,535
Unrealized gain (loss) on
translation of assets and
liabilities of operations
denominated in foreign currency (26,815) (41,187) 33,050 (61,037)
Foreign exchange gain (loss) on
net investment hedge with U.S.
denominated debt, net of tax 25,143 14,817 (37,692) 14,817
----------------------------------------------------------------------------
Comprehensive income (loss) $ 26,374 $ (26,620) $ 188,835 $ (2,685)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Three months ended Year ended
December 31, December 31,
(Stated in thousands of Canadian
dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Cash provided by (used in):
Operations:
Net earnings $ 28,046 $ (250) $ 193,477 $ 43,535
Adjustments for:
Long-term compensation plans 5,399 6,615 20,555 12,996
Depreciation and amortization 71,067 58,454 251,483 210,103
Loss on asset decommissioning 114,893 - 114,893 -
Foreign exchange 7,366 (1,885) (24,330) (12,480)
Finance charges 22,392 108,508 115,332 211,327
Income taxes (10,431) (21,152) 47,307 (17,345)
Other (5,248) 511 (6,318) (1,093)
Income taxes paid (13,516) (5,598) (124,682) (11,187)
Income taxes recovered 82,483 57 82,883 30,424
Interest paid (47,256) (11,661) (79,902) (62,832)
Interest received 908 304 1,690 717
----------------------------------------------------------------------------
Funds provided by operations 256,103 133,903 592,388 404,165
Changes in non-cash working
capital balances (37,246) (58,839) (59,616) (97,901)
----------------------------------------------------------------------------
218,857 75,064 532,772 306,264
Investments:
Business acquisitions, net of
cash acquired - - (92,886) -
Purchase of property, plant
and equipment (327,987) (110,948) (726,357) (175,901)
Proceeds on sale of property,
plant and equipment 7,289 2,885 15,983 12,256
Changes in non-cash working
capital balances 77,161 37,747 87,798 45,532
----------------------------------------------------------------------------
(243,537) (70,316) (715,462) (118,113)
Financing:
Repayment of long-term debt - (593,103) (175,000) (696,863)
Premium paid on settlement of
unsecured senior notes - - (26,688) -
Debt issue costs 1 (24,217) (13,303) (26,382)
Debt facility amendment costs - 128 (1,134) (869)
Re-purchase of trust units of
dissenting unitholders - - - (6)
Increase in long-term debt - 663,455 581,520 663,455
Issuance of common shares on
the exercise of options 138 122 2,238 122
Changes in non-cash working
capital balances - 985 (746) 985
----------------------------------------------------------------------------
139 47,370 366,887 (59,558)
----------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents (9,128) (3,996) 26,448 (2,561)
----------------------------------------------------------------------------
Increase in cash and cash
equivalents (33,669) 48,122 210,645 126,032
Cash and cash equivalents,
beginning of period 501,145 208,709 256,831 130,799
----------------------------------------------------------------------------
Cash and cash equivalents, end
of period $ 467,476 $ 256,831 $ 467,476 $ 256,831
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Stated in thousands of Canadian dollars)
Shareholders' Contributed
capital surplus
--------------------------------------------------------------------------
Balance at January 1, 2011 $ 2,244,417 $ 11,266
Net earnings for the period - -
Other comprehensive loss for the period - -
Share options exercised 3,416 (1,178)
Redemption of non-management directors
DSUs 384 (384)
Share based compensation expense - 8,692
--------------------------------------------------------------------------
Balance at December 31, 2011 $ 2,248,217 $ 18,396
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Accumulated
other
comprehensive Total
loss Deficit equity
----------------------------------------------------------------------------
Balance at January 1, 2011 $ (46,220) $(276,637) $1,932,826
Net earnings for the period - 193,477 193,477
Other comprehensive loss for the period (4,642) - (4,642)
Share options exercised - - 2,238
Redemption of non-management directors
DSUs - - -
Share based compensation expense - - 8,692
----------------------------------------------------------------------------
Balance at December 31, 2011 $(50,862) $ (83,160) $2,132,591
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Stated in thousands of Canadian dollars)
Shareholders'
/unitholders Contributed
capital surplus
--------------------------------------------------------------------------
Balance at January 1, 2010 $ 2,243,124 $ -
Net earnings for the period - -
Other comprehensive loss for the period - -
Redemption of non-management directors
DSUs 204 -
Cancellation of units owned by
dissenting unitholders (9) 3
Reclassification of exchangeable LP
unit liability on conversion to a
corporation 891 -
Reclassification of share option plan
and non-management directors DSU
liabilities on conversion to a
corporation - 7,271
Share options exercised 207 (85)
Share based compensation
expense - 4,077
--------------------------------------------------------------------------
Balance at December 31, 2010 $ 2,244,417 $ 11,266
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Accumulated
other
comprehensive Total
loss Deficit equity
----------------------------------------------------------------------------
Balance at January 1, 2010 $ - $(320,172) $1,922,952
Net earnings for the period - 43,535 43,535
Other comprehensive loss for the period (46,220) - (46,220)
Redemption of non-management directors
DSUs - - 204
Cancellation of units owned by
dissenting unitholders - - (6)
Reclassification of exchangeable LP
unit liability on conversion to a
corporation - - 891
Reclassification of share option plan
and non-management directors DSU
liabilities on conversion to a
corporation - - 7,271
Share options exercised - - 122
Share based compensation
expense - - 4,077
----------------------------------------------------------------------------
Balance at December 31, 2010 $ (46,220) $(276,637) $1,932,826
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The following tabular information is stated in thousands of
Canadian dollars except for share amounts which are stated in
thousands of shares.
Long-Term Debt
December 31, December 31,
2011 2010
----------------------------------------------------------------------------
Senior secured revolving credit facility $ - $ -
Unsecured senior notes:
6.625% senior notes due 2020 (US$650.0
million) 661,050 646,490
6.5% senior notes due 2021 (US$400.0
million) 406,800 -
6.5% senior notes due 2019 200,000 -
10.0% senior notes - 175,000
----------------------------------------------------------------------------
1,267,850 821,490
Less net unamortized debt issue costs (28,234) (16,996)
----------------------------------------------------------------------------
$ 1,239,616 $ 804,494
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per Share Amounts
The following tables reconcile the net earnings (loss) and
weighted average shares outstanding used in computing basic and
diluted earnings (loss) per share:
Three months ended Year ended
December 31, December 31,
2011 2010 2011 2010
----------------------------------------------------------------------------
Net earnings (loss) - basic and
diluted $ 28,046 $ (250) $ 193,477 $ 43,535
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average shares outstanding
- basic 276,073 275,670 275,899 275,655
Effect of warrants 10,610 9,259 11,106 8,787
Effect of share options and other
equity compensation plans 1,258 827 1,711 619
----------------------------------------------------------------------------
Weighted average shares outstanding
-diluted 287,941 285,756 288,716 285,061
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Finance Charges
The following table provides a summary of the finance
charges:
Three months ended Year ended
December 31, December 31,
2011 2010 2011 2010
----------------------------------------------------------------------------
Interest:
Long-term debt $ 21,544 $ 15,677 $ 69,959 $ 67,570
Tax settlement and reassessment 751 - 15,372 -
Other 63 34 164 97
Income (948) (269) (1,683) (803)
Amortization of debt issue costs 982 2,320 3,444 27,097
Accelerated amortization of debt
issue costs from voluntary debt
repayments - - - 1,590
Loss on settlement of debt
facilities - 90,746 26,942 115,776
Debt amendment fees - - 1,134 -
----------------------------------------------------------------------------
Finance charges $ 22,392 $ 108,508 $ 115,332 $ 211,327
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income Taxes
The provision for income taxes differs from that which would be
expected by applying statutory Canadian income tax rates. A
reconciliation of the difference at December 31 is as follows:
Three months ended Year ended
December 31, December 31,
2011 2010 2011 2010
----------------------------------------------------------------------------
Earnings (loss) before income
taxes $ 17,615 $ (21,402) $ 240,784 $ 26,190
Federal and provincial statutory
rates 27% 28% 27% 28%
----------------------------------------------------------------------------
Tax at statutory rates $ 4,756 $ (5,993) $ 65,012 $ 7,333
Adjusted for the effect of:
Non-deductible expenses 1,385 10,447 7,857 15,790
Non-taxable capital gains (1,168) (2,473) (1,245) (2,601)
Income taxed at lower rates (9,396) (22,384) (32,260) (43,557)
Taxes related to prior years (20) - 10,986 -
Other (5,988) (749) (3,043) 5,690
----------------------------------------------------------------------------
Income tax expense (recovery) $ (10,431) $ (21,152) $ 47,307 $ (17,345)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segmented Information
Completion
Three months Contract and Inter-
ended December Drilling Production Corporate segment
31, 2011 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 494,397 $ 95,265 $ - $(2,254) $ 587,408
Segment profit
(loss) 40,791 25,263 (22,175) - 43,879
Depreciation and
amortization 62,563 6,768 1,736 - 71,067
Loss on asset
decommissioning 113,366 1,527 - - 114,893
Total assets 3,380,843 473,811 573,220 - 4,427,874
Goodwill 251,507 112,139 - - 363,646
Capital
expenditures 294,734 29,540 3,713 - 327,987
----------------------------------------------------------------------------
Completion
Three months Contract and Inter-
ended December Drilling Production Corporate segment
31, 2010 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 357,415 $ 82,036 $ - $(3,914) $ 435,537
Segment profit
(loss) 94,136 18,927 (26,999) - 86,064
Depreciation and
amortization 49,540 6,261 2,653 - 58,454
Loss on asset
decommissioning - - - - -
Total assets 2,796,665 417,040 350,835 - 3,564,540
Goodwill 172,393 112,139 - - 284,532
Capital
expenditures 103,337 6,036 1,575 - 110,948
----------------------------------------------------------------------------
Completion
Year ended Contract and Inter-
December 31, Drilling Production Corporate segment
2011 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $1,632,037 $330,225 $ - $ (11,235) $1,951,027
Segment profit
(loss) 332,829 77,127 (81,268) - 328,688
Depreciation and
amortization 219,194 25,598 6,691 - 251,483
Loss on asset
decommissioning 113,366 1,527 - - 114,893
Total assets 3,380,843 473,811 573,220 - 4,427,874
Goodwill 251,507 112,139 - - 363,646
Capital
expenditures 637,060 76,922 12,375 - 726,357
----------------------------------------------------------------------------
Completion
Year ended Contract and Inter-
December 31, Drilling Production Corporate segment
2010 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $1,186,007 $255,827 $ - $ (12,181) $1,429,653
Segment profit
(loss) 256,651 42,315 (74,161) - 224,805
Depreciation and
amortization 177,516 24,128 8,459 - 210,103
Loss on asset
decommissioning - - - - -
Total assets 2,796,665 417,040 350,835 - 3,564,540
Goodwill 172,393 112,139 - - 284,532
Capital
expenditures 158,274 12,435 5,192 - 175,901
----------------------------------------------------------------------------
FOURTH QUARTER AND YEAR END 2011 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, February 9, 2012.
The conference call dial in numbers are 1-866-223-7781 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 be available
approximately one hour after the completion of the call until
February 16, 2012 by dialing 1-800-408-3053 or 905-694-9451, pass
code 8714471.
About Precision
Precision is a leading provider of safe and High Performance,
High Value services to the oil and gas industry. Precision provides
customers with access to an extensive fleet of contract drilling
rigs, directional drilling services, well service & snubbing
rigs, coiled tubing services, camps, rental equipment, and
wastewater treatment units 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".
Contacts: Precision Drilling Corporation Carey Ford Vice
President, Finance and Investor Relations 403.716.4575 403.716.4755
(FAX) Precision Drilling Corporation 800, 525 - 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1 www.precisiondrilling.com
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