UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Section 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the month of, July 2015
Commission File Number: 001-14534
Precision Drilling Corporation
(Exact name of registrant as specified in its charter)
800, 525 - 8 Avenue S.W.
Calgary, Alberta
Canada T2P 1G1
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F _____ Form 40-F X
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1). _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: July 24, 2015 |
PRECISION DRILLING CORPORATION |
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By: /s/Robert J McNally |
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Name: Robert J McNally |
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Title: Executive Vice President & Chief Financial Officer |
Exhibit |
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DESCRIPTION |
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31.1 |
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Certification of Chief Executive Officer, Kevin Neveu, regarding the “Certification of Interim Filings” pursuant to Form 52-109F2. |
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31.2 |
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Certification of Chief Financial Officer, Robert McNally, regarding the “Certification of Interim Filings” pursuant to Form 52-109F2. |
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99.1 |
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Management’s Discussion and Analysis for the period ended June 30, 2015. |
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99.2 |
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Consolidated Financial Statements for the period ended June 30, 2015. |
Exhibit 31.1
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, Kevin A. Neveu, President and Chief Executive Officer of Precision Drilling Corporation, certify the following:
1.
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Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Precision Drilling Corporation (the "issuer"), for the interim period ended June 30, 2015.
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2.
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No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
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3.
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Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
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4.
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Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
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5.
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Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the end of the period covered by the interim filings
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(a)
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designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
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(i)
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material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
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(ii)
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information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
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(b)
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designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
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5.1
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Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (1992) and the Control Objectives for Information and Related Technologies (COBIT).
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5.2
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ICFR – material weakness relating to design: N/A.
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5.3
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Limitation on scope of design: N/A.
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6.
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Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2015 and ended on June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
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Date: July 24, 2015
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By:
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/s/ Kevin A. Neveu
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Name: Kevin A. Neveu
Title: President and Chief Executive Officer
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Exhibit 31.2
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, Robert J. McNally, Executive Vice President and Chief Financial Officer of Precision Drilling Corporation, certify the following:
1.
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Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Precision Drilling Corporation (the "issuer"), for the interim period ended June 30, 2015.
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2.
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No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
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3.
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Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
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4.
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Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
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5.
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Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the end of the period covered by the interim filings
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(a)
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designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
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(i)
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material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
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(ii)
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information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
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(b)
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designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
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5.1
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Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (1992) and the Control Objectives for Information and Related Technologies (COBIT).
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5.2
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ICFR – material weakness relating to design: N/A.
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5.3
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Limitation on scope of design: N/A.
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6.
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Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2015 and ended on June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
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Date: July 24, 2015
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By:
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/s/ Robert J. McNally
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Name: Robert J. McNally
Title: Executive Vice President and Chief Financial Officer
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Exhibit 99.1
Precision Drilling Corporation
Second Quarter Report for the six months ended June 30, 2015 and 2014
MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis for the three and six month period ended June 30, 2015 of Precision Drilling Corporation (“Precision” or the “Corporation”) prepared as at July 22, 2015 focuses on the unaudited Interim Consolidated Financial Statements and related notes and pertains to known risks and uncertainties relating to the oilfield services sector. This discussion should not be considered all inclusive as it does not include all changes regarding general economic, political, governmental and environmental events. This discussion should be read in conjunction with the Corporation’s 2014 Annual Report, Annual Information Form, unaudited June 30, 2015 Interim Consolidated Financial Statements and related notes and the cautionary statement regarding forward-looking information and statements on page 14 of this report
SELECT FINANCIAL AND OPERATING INFORMATION
Adjusted EBITDA and funds provided by operations are additional GAAP measures. See “ADDITIONAL GAAP MEASURES”.
Financial Highlights
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Three months ended June 30,
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Six months ended June 30,
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(Stated in thousands of Canadian dollars, except per share amounts)
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2015
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2014
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% Change
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2015
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2014
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% Change
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Revenue
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334,462 |
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475,174 |
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(29.6 |
) |
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846,582 |
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1,147,423 |
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(26.2 |
) |
Adjusted EBITDA
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88,355 |
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129,695 |
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(31.9 |
) |
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251,739 |
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366,969 |
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(31.4 |
) |
Adjusted EBITDA % of revenue
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26.4 |
% |
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27.3 |
% |
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29.7 |
% |
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32.0 |
% |
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Net earnings (loss)
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(29,817 |
) |
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(7,174 |
) |
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315.6 |
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(5,784 |
) |
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94,383 |
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(106.1 |
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Cash provided by operations
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169,877 |
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228,412 |
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(25.6 |
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385,015 |
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398,539 |
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(3.4 |
) |
Funds provided by operations
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53,173 |
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97,805 |
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(45.6 |
) |
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208,359 |
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329,198 |
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(36.7 |
) |
Capital spending:
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Expansion
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94,204 |
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117,654 |
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(19.9 |
) |
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291,521 |
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185,839 |
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56.9 |
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Upgrade
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12,092 |
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25,593 |
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(52.8 |
) |
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32,035 |
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45,450 |
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(29.5 |
) |
Maintenance and infrastructure
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6,749 |
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31,607 |
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(78.6 |
) |
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15,311 |
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49,564 |
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(69.1 |
) |
Proceeds on sale
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(3,598 |
) |
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(9,979 |
) |
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(63.9 |
) |
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(6,474 |
) |
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(17,236 |
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(62.4 |
) |
Net capital spending
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109,447 |
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164,875 |
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(33.6 |
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332,393 |
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263,617 |
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26.1 |
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Earnings (loss) per share:
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Basic
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(0.10 |
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(0.02 |
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400.0 |
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(0.02 |
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0.32 |
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(106.3 |
) |
Diluted
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(0.10 |
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(0.02 |
) |
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400.0 |
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(0.02 |
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0.32 |
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(106.3 |
) |
Dividends paid per share
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0.07 |
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0.06 |
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16.7 |
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0.14 |
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0.12 |
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16.7 |
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Operating Highlights
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Three months ended June 30,
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Six months ended June 30,
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2015
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2014
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% Change
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2015
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2014
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% Change
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Contract drilling rig fleet
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329 |
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333 |
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(1.2 |
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329 |
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333 |
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(1.2 |
) |
Drilling rig utilization days:
Canada
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2,327 |
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4,805 |
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(51.6 |
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8,557 |
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16,189 |
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(47.1 |
) |
U.S.
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5,219 |
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8,490 |
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(38.5 |
) |
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12,416 |
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16,963 |
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(26.8 |
) |
International
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1,129 |
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962 |
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17.4 |
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2,263 |
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1,952 |
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15.9 |
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Service rig fleet
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177 |
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221 |
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(19.9 |
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177 |
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221 |
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(19.9 |
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Service rig operating hours
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28,374 |
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51,270 |
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(44.7 |
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76,375 |
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133,834 |
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(42.9 |
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Financial Position
(Stated in thousands of Canadian dollars, except ratios)
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June 30,
2015
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December 31,
2014
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Working capital
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508,738 |
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653,630 |
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Long-term debt(1)
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1,980,575 |
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1,852,186 |
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Total long-term financial liabilities
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2,012,913 |
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1,881,275 |
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Total assets
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5,193,847 |
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5,308,996 |
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Long-term debt to long-term debt plus equity ratio(1)
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0.45 |
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0.43 |
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(1) Net of unamortized debt issue costs.
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Net loss this quarter was $30 million, or $0.10 per diluted share, compared to a net loss of $7 million, or $0.02 per diluted share, in the second quarter of 2014.
Revenue this quarter was $334 million, or 30% less than the second quarter of 2014. The decrease, of $141 million, was primarily due to a year-over-year decrease in activity from our North American operations. Revenue from our Contract Drilling Services and Completion and Production Services segments both decreased over the comparative prior year period by 27% and 46%, respectively.
Earnings before income taxes, finance charges, foreign exchange, and depreciation and amortization (adjusted EBITDA see “Additional GAAP Measures”) this quarter were $88 million or 32% lower than the second quarter of 2014.
Adjusted EBITDA as a percent of revenue was 26% this quarter, compared to 27% in the second quarter of 2014. The decrease in adjusted EBITDA as a percent of revenue was mainly due decreased activity and lower pricing in our Completion and Production Services segment and costs associated with restructuring, which were $3 million this quarter partially offset by improved average pricing in our North America contract drilling operations. Our activity for the quarter, as measured by drilling rig utilization days, decreased 52% in Canada and 39% in the U.S. and increased 17% internationally, compared to the second quarter of 2014.
For the six months ended June 30, 2015, Precision reported a net loss of $6 million or $0.02 per diluted share compared to net earnings of $94 million or $0.32 per diluted share for the same period of 2014.
Revenue for the first half of 2015 was $847 million compared to $1,147 million for the corresponding period of 2014. Adjusted EBITDA totaled $252 million for the first six months of 2015 compared to $367 million in the first six months of 2014. The decrease in revenue and EBITDA was mainly the result of lower activity levels and day rates across our North American operations partially offset by higher activity and higher average day rates in our international contract drilling operations. Activity for Precision, as measured by drilling utilization days, decreased 47% in Canada, 27% in the United States and increased 16% internationally for the first six months of the year compared with the same period in 2014.
Our current expected capital plan for 2015 is $546 million, an increase of $40 million compared to the $506 million capital plan announced in April 2015. The capital increase is due to one additional new-build contract for a ST-1200 rig for deep basin drilling in Canada and long lead items. A portion of the 2015 capital plan is utilization based and if activity levels change, Precision has the ability to adjust its plan accordingly. Of the 18 new-build drilling rigs scheduled for delivery in 2015 (13 rigs in the U.S., four in Canada and one internationally) ten were delivered in the first quarter and four were delivered in the second quarter. After delivery of the remaining contracted new-build rig in 2015, Precision’s drilling rig fleet will consist of 331 drilling rigs, including 236 Tier 1 rigs, 73 Tier 2 rigs and 22 PSST rigs. For the Tier 1 rigs, 124 will be in Canada, 106 in the U.S. and six internationally.
On July 22, 2015 the Board of Directors declared a dividend of $0.07 per common share payable on August 21, 2015 to shareholders of record on August 10, 2015.
Precision’s strategic priorities for 2015 are as follows:
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1.
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Work with our customers to lower well costs – Deliver High Performance, High Value services to customers to create maximum efficiency and lower risks for development drilling programs. Utilize our unique platform of Tier 1 assets, geographically diverse operations and highly efficient service offering to deliver cost-reducing solutions. Grow our cost-reducing integrated directional drilling service.
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2.
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Maximize cost efficiency throughout the organization – Continue to leverage Precision’s scale to reduce costs and continue to deliver High Performance. Maximize the benefits of the variable nature of operating and capital expenses. Maintain an efficient corporate cost structure by optimizing systems for assets, people and business management. Maintain our uncompromising focus on worker safety, premium service quality and employee development.
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3.
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Reinforce our competitive advantage – Gain market share as Tier 1 assets remain most in demand rigs. High-grade our active rig fleet by delivering new-build rigs and maximizing customer opportunities to utilize High Performance assets. Deliver consistent, reliable, High Performance service. Retain and continue to develop the industry’s best people.
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4.
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Manage liquidity and focus activities on cash flow generation. Monitor working capital, debt and liquidity. Maintain a scalable cost structure that is responsive to changing competition and market demand. Adjust capital plans according to utilization and customer demand.
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For the second quarter of 2015, the average natural gas prices and the West Texas Intermediate price of oil were lower than the 2014 averages.
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Three months ended June 30,
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Year ended Dec 31,
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2015
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2014
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2014
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Average oil and natural gas prices
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Oil
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West Texas Intermediate (per barrel) (US$)
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57.68 |
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103.14 |
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93.06 |
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Natural gas
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Canada
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AECO (per MMBtu) (Cdn$)
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2.66 |
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4.69 |
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4.45 |
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U.S.
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Henry Hub (per MMBtu) (US$)
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2.72 |
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4.58 |
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|
4.33 |
|
Summary for the three months ended June 30, 2015:
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·
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Operating loss (see “Additional GAAP Measures” in this news release) this quarter was $32 million, or negative 9% of revenue, compared to operating earnings of $24 million and 5% of revenue in 2014. Operating results were negatively impacted by the decrease in drilling activity and day rates in our North American operating segments partially offset by improved results internationally.
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·
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General and administrative expenses this quarter were $37 million, $5 million lower than the second quarter of 2014. The decrease is primarily due to cost saving initiatives and lower incentive compensation which is tied to the price of our common shares partially offset by the effect of the weakening Canadian dollar on our U.S. dollar denominated expenses and restructuring charges incurred this quarter.
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|
·
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Net finance charges were $32 million, an increase of $7 million compared with the second quarter of 2014 due to the issuance of US$400 million of 5.25% Senior Notes on June 3, 2014 and the effect of the weakening Canadian dollar on our U.S. dollar denominated interest.
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·
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Average revenue per utilization day for contract drilling rigs increased in the second quarter of 2015 to $22,939 from the prior year second quarter of $22,217 in Canada and increased in the U.S. to US$27,731 from US$24,320. The increase in revenue rates for Canada is primarily due to rig mix and additional Tier 1 rigs operating partially offset by competitive pricing in some rig segments. In Canada, for the second quarter of 2015, 62% of our utilization days were achieved from drilling rigs working under term contracts compared to 53% in the 2014 comparative period. The increase in revenue rates for the U.S. was primarily due to a higher percentage of revenue being generated from Tier 1 rigs compared to the prior year quarter, idle-but-contracted payments and larger turnkey jobs relative to the prior year quarter. In the U.S., for the second quarter of 2015, 78% of our utilization days were generated from rigs working under term contracts compared to 72% in the 2014 comparative period. Turnkey revenue for the second quarter of 2015 was US$17 million compared with US$20 million in the 2014 comparative period. Within the Completion and Production Services segment, average hourly rates for service rigs were $718 in the second quarter of 2015 compared to $940 in the second quarter of 2014. The decrease in the average hourly rate is the result of pricing pressure across all service rig classes and the absence of our U.S. coil tubing assets, which were sold in the fourth quarter of 2014.
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|
·
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Average operating costs per utilization day for drilling rigs increased in the second quarter of 2015 in both Canada and the United States. In Canada costs increased to $12,818, compared to the prior year second quarter of $11,695 and in the U.S. costs increased to US$15,896 in 2015 compared to US$13,502 in 2014. The cost increase in both markets was primarily due to higher labour burden and a lower activity base to spread fixed costs and larger turnkey jobs during the quarter in the United States.
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|
·
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We realized revenue from international contract drilling of $63 million in the second quarter of 2015, a $17 million increase over the prior year period due to expansion in the Middle East with three new-build rigs deployed in 2014, one rig deployed to the country of Georgia in the first quarter of 2015 and one new-build rig deployed in the second quarter of 2015 to Kuwait. Average revenue per utilization day in our international contract drilling business was US$45,700 an increase of 4% over the comparable prior year quarter.
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|
·
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Directional drilling services realized revenue of $5 million in the second quarter of 2015 compared with $23 million in the prior year period. The decrease was primarily the result of a decline in activity in both the U.S. and Canada.
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|
·
|
Funds provided by operations in the second quarter of 2015 were $53 million, a decrease of $45 million from the prior year comparative quarter of $98 million. The decrease was primarily the result of lower activity levels.
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|
·
|
Capital expenditures for the purchase of property, plant and equipment were $113 million in the second quarter, a decrease of $62 million over the same period in 2014. Capital spending for the second quarter of 2015 included $94 million for expansion capital, $12 million for upgrade capital and $7 million for the maintenance of existing assets and infrastructure spending.
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Summary for the six months ended June 30, 2015:
|
·
|
Revenue for the first half of 2015 was $847 million, a decrease of 26% from the 2014 period.
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|
·
|
Operating earnings were $16 million, a decrease of $140 million or 90% from 2014. Operating earnings were 2% of revenue in 2015 compared to 14% in 2014. Operating earnings were negatively impacted by the decreased drilling activity and rates in our North American operations and depreciation from capital asset additions over the past year and a half.
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·
|
General and administrative costs were $82 million, an increase of $1 million over the first half of 2014 primarily as a result of restructuring costs of $[5] million and the effect of the weakening Canadian dollar on our U.S. dollar denominated expenses partially offset by cost savings initiatives and lower incentive compensation.
|
|
·
|
Net finance charges were $52 million, an increase of $2 million from the first half of 2014 due to the issuance of US$400 million of 5.25% Senior Notes on June 3, 2014 and the effect of the weakening Canadian dollar on our U.S. dollar denominated interest partially offset by $14 million in interest revenue related to an income tax dispute settlement.
|
|
·
|
Funds provided by operations (see “Additional GAAP Measures” in this news release) in the first half of 2015 were $208 million, a decrease of $121 million from the prior year comparative period of $329 million.
|
|
·
|
Capital expenditures for the purchase of property, plant and equipment were $339 million in the first half of 2015, an increase of $58 million over the same period in 2014. Capital spending for 2015 to date included $292 million for expansion capital, $32 million for upgrade capital and $15 million for the maintenance of existing assets and infrastructure.
|
OUTLOOK
Contracts
Our portfolio of term customer contracts provides a base level of activity and revenue and, as of July 22, 2015, we had term contracts in place for an average of 45 rigs in Canada, 43 in the U.S. and nine internationally for the third quarter of 2015 and an average of 46 rig contracts in Canada, 47 in the U.S. and 11 internationally for the full year. In Canada, term contracted rigs normally generate 250 utilization days per year because of the seasonal nature of well site access. In most regions in the U.S. and internationally, term contracts normally generate 365 utilization days per year.
Drilling Activity
In the U.S., our average active rig count in the quarter was 58 rigs, down 36 rigs over the second quarter in 2014 and down 22 rigs from the first quarter of 2015. We currently have 52 rigs active in the U.S.
In Canada, our average active rig count in the quarter was 26 rigs, a decrease of 27 over the second quarter in 2014. We currently have 56 rigs active in Canada and expect typical seasonal volatility through the third quarter, but in general we expect to benefit from the fleet enhancements over the past several years.
Internationally, our average active rig count in the quarter was 13 rigs, up 2 rigs over the second quarter in 2014 and in line with the first quarter of 2015. During the quarter one new-build rig went to work in Kuwait and was operating at the end of the quarter. We currently have 12 rigs active internationally.
Industry Conditions
To date in 2015, drilling activity has decreased relative to this time last year for both Canada and the U.S. According to industry sources, as of July 17, 2015, the U.S. active land drilling rig count was down approximately 54% from the same point last year and the Canadian active land drilling rig count was down approximately 50%. The decrease in the North American rig count has resulted in the trend of high-grading toward Tier 1 rigs, which continue to show relative strength given the current market conditions.
In Canada there has been strength in natural gas and gas liquids drilling activity related to deep basin drilling in northwestern Alberta and northeastern British Columbia while the trend towards oil-directed drilling in the U.S. continues. To date in 2015, approximately 45% of the Canadian industry’s active rigs and 77% of the U.S. industry’s active rigs were drilling for oil targets, compared to 60% for Canada and 82% for the U.S. at the same time last year.
Capital Spending
Capital spending in 2015 is expected to be $546 million:
|
·
|
The 2015 capital expenditure plan includes $422 million for expansion capital, $78 million for sustaining and infrastructure expenditures, and $46 million to upgrade existing rigs. We expect that the $546 million will be split $540 million in the Contract Drilling segment and $6 million in the Completion and Production Services segment.
|
|
·
|
Precision’s expansion capital plan for 2015 includes 18 new-build drilling rigs, 16 of which were delivered in the first half of the year. Of the remaining two rigs, one rig was deployed to Canada early in the third quarter and one is expected to be deployed in Canada in the fourth quarter. Of the 16 rigs delivered, 13 rigs went to the U.S., two to Canada and one to Kuwait, all of which are on long-term contracts.
|
|
·
|
Precision’s sustaining and infrastructure capital plan is based upon currently anticipated activity levels for 2015.
|
SEGMENTED FINANCIAL RESULTS
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, coil tubing, rental, camp and catering and wastewater treatment divisions.
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
(Stated in thousands of Canadian dollars)
|
|
2015
|
|
|
2014
|
|
|
% Change
|
|
|
2015
|
|
|
2014
|
|
|
% Change
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services
|
|
|
299,943 |
|
|
|
410,882 |
|
|
|
(27.0 |
) |
|
|
748,008 |
|
|
|
982,804 |
|
|
|
(23.9 |
) |
Completion and Production Services
|
|
|
35,589 |
|
|
|
66,508 |
|
|
|
(46.5 |
) |
|
|
101,671 |
|
|
|
169,573 |
|
|
|
(40.0 |
) |
Inter-segment eliminations
|
|
|
(1,070 |
) |
|
|
(2,216 |
) |
|
|
(51.7 |
) |
|
|
(3,097 |
) |
|
|
(4,954 |
) |
|
|
(37.5 |
) |
|
|
|
334,462 |
|
|
|
475,174 |
|
|
|
(29.6 |
) |
|
|
846,582 |
|
|
|
1,147,423 |
|
|
|
(26.2 |
) |
Adjusted EBITDA:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling Services
|
|
|
109,897 |
|
|
|
148,491 |
|
|
|
(26.0 |
) |
|
|
293,016 |
|
|
|
388,189 |
|
|
|
(24.5 |
) |
Completion and Production Services
|
|
|
(704 |
) |
|
|
5,137 |
|
|
|
(113.7 |
) |
|
|
6,353 |
|
|
|
24,590 |
|
|
|
(74.2 |
) |
Corporate and other
|
|
|
(20,838 |
) |
|
|
(23,933 |
) |
|
|
(12.9 |
) |
|
|
(47,630 |
) |
|
|
(45,810 |
) |
|
|
4.0 |
|
|
|
|
88,355 |
|
|
|
129,695 |
|
|
|
(31.9 |
) |
|
|
251,739 |
|
|
|
366,969 |
|
|
|
(31.4 |
) |
(1) See “ADDITIONAL GAAP MEASURES”.
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
(Stated in thousands of Canadian dollars, except where noted)
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
% Change
|
|
|
2015
|
|
|
2014
|
|
|
% Change
|
|
Revenue
|
|
|
299,943 |
|
|
|
410,882 |
|
|
|
(27.0 |
) |
|
|
748,008 |
|
|
|
982,804 |
|
|
|
(23.9 |
) |
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
178,630 |
|
|
|
249,937 |
|
|
|
(28.5 |
) |
|
|
429,869 |
|
|
|
568,844 |
|
|
|
(24.4 |
) |
General and administrative
|
|
|
11,416 |
|
|
|
12,454 |
|
|
|
(8.3 |
) |
|
|
25,123 |
|
|
|
25,771 |
|
|
|
(2.5 |
) |
Adjusted EBITDA(1)
|
|
|
109,897 |
|
|
|
148,491 |
|
|
|
(26.0 |
) |
|
|
293,016 |
|
|
|
388,189 |
|
|
|
(24.5 |
) |
Depreciation
|
|
|
108,407 |
|
|
|
92,365 |
|
|
|
17.4 |
|
|
|
212,238 |
|
|
|
184,476 |
|
|
|
15.0 |
|
Operating earnings(1)
|
|
|
1,490 |
|
|
|
56,126 |
|
|
|
(97.3 |
) |
|
|
80,778 |
|
|
|
203,713 |
|
|
|
(60.3 |
) |
Operating earnings as a percentage ofrevenue
|
|
|
0.5 |
% |
|
|
13.7 |
% |
|
|
|
|
|
|
10.8 |
% |
|
|
20.7 |
% |
|
|
|
|
Drilling rig revenue per utilization day inCanada
|
|
|
22,939 |
|
|
|
22,217 |
|
|
|
3.2 |
|
|
|
23,357 |
|
|
|
22,608 |
|
|
|
3.3 |
|
Drilling rig revenue per utilization day inthe United States(2) (US$)
|
|
|
27,731 |
|
|
|
24,320 |
|
|
|
14.0 |
|
|
|
26,251 |
|
|
|
24,235 |
|
|
|
8.3 |
|
Drilling rig revenue per utilization day inInternational (US$)
|
|
|
45,700 |
|
|
|
43,864 |
|
|
|
4.2 |
|
|
|
44,331 |
|
|
|
41,362 |
|
|
|
7.2 |
|
(1) See “ADDITIONAL GAAP MEASURES”.
(2) Includes revenue from idle but contracted rig days and lump sum payouts.
|
|
Three months ended June 30,
|
|
Canadian onshore drilling statistics:(1)
|
|
2015
|
|
|
2014
|
|
|
|
Precision
|
|
|
Industry(2)
|
|
|
Precision
|
|
|
Industry(2)
|
|
Number of drilling rigs (end of period)
|
|
|
176 |
|
|
|
766 |
|
|
|
189 |
|
|
|
810 |
|
Drilling rig operating days (spud to release)
|
|
|
2,088 |
|
|
|
8,868 |
|
|
|
4,312 |
|
|
|
18,293 |
|
Drilling rig operating day utilization
|
|
|
13 |
% |
|
|
13 |
% |
|
|
25 |
% |
|
|
25 |
% |
Number of wells drilled
|
|
|
205 |
|
|
|
733 |
|
|
|
393 |
|
|
|
1,430 |
|
Average days per well
|
|
|
10.2 |
|
|
|
12.1 |
|
|
|
11.0 |
|
|
|
12.8 |
|
Number of metres drilled (000s)
|
|
|
529 |
|
|
|
2,005 |
|
|
|
793 |
|
|
|
3,430 |
|
Average metres per well
|
|
|
2,580 |
|
|
|
2,736 |
|
|
|
2,018 |
|
|
|
2,399 |
|
Average metres per day
|
|
|
253 |
|
|
|
226 |
|
|
|
184 |
|
|
|
188 |
|
|
|
Six months ended June 30,
|
|
Canadian onshore drilling statistics:(1)
|
|
2015
|
|
|
2014
|
|
|
|
Precision
|
|
|
Industry(2)
|
|
|
Precision
|
|
|
Industry(2)
|
|
Number of drilling rigs (end of period)
|
|
|
176 |
|
|
|
766 |
|
|
|
189 |
|
|
|
810 |
|
Drilling rig operating days (spud to release)
|
|
|
7,545 |
|
|
|
33,686 |
|
|
|
14,366 |
|
|
|
63,070 |
|
Drilling rig operating day utilization
|
|
|
24 |
% |
|
|
24 |
% |
|
|
42 |
% |
|
|
43 |
% |
Number of wells drilled
|
|
|
672 |
|
|
|
2,516 |
|
|
|
1,343 |
|
|
|
4,881 |
|
Average days per well
|
|
|
11.2 |
|
|
|
13.4 |
|
|
|
10.7 |
|
|
|
12.9 |
|
Number of metres drilled (000s)
|
|
|
1,560 |
|
|
|
6,711 |
|
|
|
2,627 |
|
|
|
11,090 |
|
Average metres per well
|
|
|
2,321 |
|
|
|
2,667 |
|
|
|
1,956 |
|
|
|
2,272 |
|
Average metres per day
|
|
|
207 |
|
|
|
199 |
|
|
|
183 |
|
|
|
176 |
|
(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)
|
|
2015
|
|
|
2014
|
|
|
|
Precision
|
|
|
Industry(2)
|
|
|
Precision
|
|
|
Industry(2)
|
|
Average number of active land rigs
for quarters ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
80 |
|
|
|
1,353 |
|
|
|
94 |
|
|
|
1,724 |
|
June 30
|
|
|
57 |
|
|
|
873 |
|
|
|
93 |
|
|
|
1,802 |
|
Year to date average
|
|
|
69 |
|
|
|
1,104 |
|
|
|
94 |
|
|
|
1,760 |
|
(1) United States lower 48 operations only.
(2) Baker Hughes rig counts.
Revenue from Contract Drilling Services was $300 million this quarter, or 27% lower than the second quarter of 2014, while adjusted EBITDA decreased by 26% to $110 million. The decreases were mainly due to lower drilling rig utilization days in our Canadian and U.S. contract drilling businesses partially offset by higher average day rates in Canada and the U.S. along with higher activity and average day rates in our international drilling business.
Drilling rig utilization days in Canada (drilling days plus move days) were 2,327 during the second quarter of 2015, a decrease of 52% compared to 2014 primarily due to the decrease in industry activity resulting from lower commodity prices. Drilling rig utilization days in the U.S. were 5,219 or 39% lower than the same quarter of 2014 as U.S. activity was down due to lower industry activity. The majority of our North American activity came from oil and liquids-rich natural gas related plays. Drilling rig utilization days in our international business were 1,129 or 17% higher than the same quarter of 2014 due to contracted rigs added in Kuwait and the Kingdom of Saudi Arabia in 2014 and the country of Georgia and Kuwait in 2015 partially offset by lower activity in Mexico.
Compared to the same quarter in 2014, drilling rig revenue per utilization day was up 3% in Canada, 14% in the U.S. and 4% in international. The increase in average day rates for the U.S. was primarily due to a higher percentage of revenue being generated from Tier 1 rigs compared to the prior year quarter, idle-but-contracted payments and large turnkey jobs in the quarter relative to the prior year comparative quarter. In Canada the day rate increase was the result of rig mix as proportionately more Tier 1 rigs are working compared to the prior year. The average international day rate is up as we are realizing a higher percentage of our fleet utilization from our Middle East operations.
In Canada, 62% of utilization days in the quarter were generated from rigs under term contract, compared to 53% in the second quarter of 2014. In the U.S., 78% of utilization days were generated from rigs under term contract as compared to 72% in the second quarter of 2014. At the end of the quarter, we had 48 drilling rigs under contract in Canada, 47 in the U.S. and 12 internationally.
Operating costs were 60% of revenue for the quarter, which was one percentage point lower than the prior year period. On a per utilization day basis, operating costs for the drilling rig division in Canada were higher over the prior year primarily because of the impact of fixed costs on lower activity increase and an increase in crew labour rates. In the U.S., operating costs for the quarter on a per day basis were higher than the prior year primarily from higher labour burden costs and large turnkey jobs in the quarter relative to the prior year comparative quarter.
Depreciation expense in the quarter was 17% higher than in the second quarter of 2014 due to the addition of new-build rigs deployed in 2014 and the first half of 2015.
SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
(Stated in thousands of Canadian dollars, except where noted)
|
|
2015
|
|
|
2014
|
|
|
% Change
|
|
|
2015
|
|
|
2014
|
|
|
% Change
|
|
Revenue
|
|
|
35,589 |
|
|
|
66,508 |
|
|
|
(46.5 |
) |
|
|
101,671 |
|
|
|
169,573 |
|
|
|
(40.0 |
) |
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
31,993 |
|
|
|
56,564 |
|
|
|
(43.4 |
) |
|
|
85,970 |
|
|
|
135,548 |
|
|
|
(36.6 |
) |
General and administrative
|
|
|
4,300 |
|
|
|
4,807 |
|
|
|
(10.5 |
) |
|
|
9,348 |
|
|
|
9,435 |
|
|
|
(0.9 |
) |
Adjusted EBITDA(1)
|
|
|
(704 |
) |
|
|
5,137 |
|
|
|
(113.7 |
) |
|
|
6,353 |
|
|
|
24,590 |
|
|
|
(74.2 |
) |
Depreciation
|
|
|
8,706 |
|
|
|
11,433 |
|
|
|
(23.9 |
) |
|
|
17,464 |
|
|
|
22,861 |
|
|
|
(23.6 |
) |
Operating earnings (loss)(1)
|
|
|
(9,410 |
) |
|
|
(6,296 |
) |
|
|
49.5 |
|
|
|
(11,111 |
) |
|
|
1,729 |
|
|
|
(742.6 |
) |
Operating earnings (loss) as a percentage of revenue
|
|
|
(26.4 |
%) |
|
|
(9.5 |
%) |
|
|
|
|
|
|
(10.9 |
%) |
|
|
1.0 |
% |
|
|
|
|
Well servicing statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of service rigs (end of period)
|
|
|
177 |
|
|
|
221 |
|
|
|
(19.9 |
) |
|
|
177 |
|
|
|
221 |
|
|
|
(19.9 |
) |
Service rig operating hours
|
|
|
28,374 |
|
|
|
51,270 |
|
|
|
(44.7 |
) |
|
|
76,375 |
|
|
|
133,834 |
|
|
|
(42.9 |
) |
Service rig operating hour utilization
|
|
|
17 |
% |
|
|
25 |
% |
|
|
|
|
|
|
23 |
% |
|
|
36 |
% |
|
|
|
|
Service rig revenue per operating hour(2)
|
|
|
718 |
|
|
|
940 |
|
|
|
(23.6 |
) |
|
|
792 |
|
|
|
904 |
|
|
|
(12.4 |
) |
|
(1)
|
See “ADDITIONAL GAAP MEASURES”.
|
|
(2)
|
Prior year comparative has been changed to conform to the current year calculation.
|
Revenue from Completion and Production Services was down $31 million or 46% compared to the second quarter of 2014 due to lower activity levels in all service lines and lower average rates. In response to lower oil prices, customers curtailed spending and activity including well completion and production programs. Our well servicing activity in the quarter was down 45% from the second quarter of 2014. Revenue was also negatively impacted by the sale of our U.S. coil tubing operations in the fourth quarter of last year. Approximately 92% of our first quarter Canadian service rig activity was oil related.
During the quarter, Completion and Production Services generated 76% of its revenue from Canadian and 24% from U.S. operations.
Average service rig revenue per operating hour in the second quarter was $718 or $222 lower than the second quarter of 2014. The decrease was primarily the result of industry pricing pressure and the sale of our U.S. coil tubing assets which generally received a higher rate per hour.
Adjusted EBITDA was $6 million lower than the second quarter of 2014 due to a decline in activity and pricing.
Operating costs as a percentage of revenue increased to 90% in the second quarter of 2015, from 85% in the second quarter of 2014. Operating costs per service rig operating hour were lower than in the second quarter of 2014 due to cost cutting measures and the sale of our U.S. coil tubing which typically operates at a higher cost per hour.
Depreciation in the quarter was 24% lower than the second quarter of 2014 because of decommissioning assets in the fourth quarter of 2014 and the disposal of our U.S. coil tubing assets.
SEGMENT REVIEW OF CORPORATE AND OTHER
Our Corporate and Other segment provides support functions to our operating segments. The Corporate and Other segment had an adjusted EBITDA loss of $21 million for the second quarter of 2015, $3 million less than 2014 comparative period due primarily to lower share based incentive compensation.
OTHER ITEMS
Net financial charges for the quarter were $32 million, an increase of $7 million from the second quarter of 2014. The increase is due to the impact of the weaker Canadian dollar on the value of our U.S. dollar denominated debt and the issuance of US$400 million 5.25% Senior Notes on June 3, 2014. We had a foreign exchange loss of $8 million during the second quarter of 2014 due to the strengthening of the Canadian dollar versus the U.S. dollar from March 31, 2015, which affected our net U.S. dollar denominated monetary position in the Canadian dollar-based companies.
Income tax expense for the quarter was a recovery of $43 million compared with an expense of $6 million in the same quarter in 2014. Income tax expense is recognized by applying the income tax rate expected for the full financial year to the pre-tax income of the interim reporting period. On June 29, 2015, the province of Alberta increased the Alberta corporate income tax rate from 10% to 12% effective July 1, 2015. The impact of this income tax rate increase was recognized in the current quarter.
In August 2014 the Ontario Court of Appeal ruled in favour of Precision’s wholly owned subsidiary, reversing a decision by the Ontario Superior Court of Justice in June 2013 regarding the reassessment of Ontario income tax for the subsidiary’s 2001 through 2004 taxation years. The Ontario Minister of Revenue made an application to the Supreme Court of Canada seeking leave to appeal this decision. On March 5, 2015, the Supreme Court of Canada brought the appeal process to an end and in April we received payment of $69 million from the Ontario tax authorities, $55 million for the refund of assessed taxes and $14 million in interest.
LIQUIDITY AND CAPITAL RESOURCES
The oilfield services business is inherently cyclical in nature. To manage this, we focus on maintaining a strong balance sheet so we have the financial flexibility we need to continue to manage our growth and cash flow throughout the business cycle.
We apply a disciplined approach to managing and tracking results of our operations to keep costs down. We maintain a variable cost structure so we can respond to changes in demand.
Our maintenance capital expenditures are tightly governed by and highly responsive to activity levels with additional cost savings leverage provided through our internal manufacturing and supply divisions. Term contracts on expansion capital for new-build rig programs provide more certainty of future revenues and return on our capital investments.
Liquidity
During the quarter we increased the size of our demand letter of credit facility from US$25 million to US$40 million to provide additional availability to issue letters of credit for international opportunities.
In June 2014 we issued US$400 million of 5.25% Senior Notes due in 2024 in a private offering. The Notes are guaranteed on a senior unsecured basis by current and future U.S. and Canadian subsidiaries that also guarantee our revolving credit facility and certain other indebtedness.
In addition, we amended our credit agreement governing our revolving credit facility to, among other things, voluntarily reduce the size of the revolving credit facility from US$850 million to US$650 million and extend the maturity to June 3, 2019.
As at June 30, 2015 we had $2,009 million outstanding under our senior unsecured notes. The current blended cash interest cost of our debt is approximately 6.2%.
|
|
|
|
Amount
|
Availability
|
Used for
|
Maturity
|
Senior facility (secured)
|
|
|
|
US$650 million (extendible, revolving term credit facility with US$250 million accordion feature)
|
Undrawn, except US$26 million in outstanding letters of credit
|
General corporate purposes
|
June 3, 2019
|
Operating facilities (secured)
|
|
|
$40 million
|
Undrawn, except $21 million in outstanding letters of credit
|
Letters of credit and general corporate purposes
|
|
US$15 million
|
Undrawn
|
Short term working capital requirements
|
|
Demand letter of credit facility (secured)
|
US$40 million
|
Undrawn, except US$33 million in outstanding letters of credit
|
Letters of credit
|
|
Senior notes (unsecured)
|
|
|
$200 million
|
Fully drawn
|
Debt repayment
|
March 15, 2019
|
US$650 million
|
Fully drawn
|
Debt repayment and general corporate purposes
|
November 15, 2020
|
US$400 million
|
Fully drawn
|
Capital expenditures and general corporate purposes
|
December 15, 2021
|
US$400 million
|
Fully drawn
|
Capital expenditures and general corporate purposes
|
November 15, 2024
|
Covenants
Senior Facility
The revolving term credit facility requires that we comply with certain financial covenants including leverage ratios of consolidated senior debt to earnings before interest, taxes, depreciation and amortization as defined in the agreement (Adjusted EBITDA) of less than 3:1 and consolidated total debt to Adjusted EBITDA of less than 4:1 for the most recent four consecutive fiscal quarters. During the first quarter we received temporary relief for the period up to and including December 31, 2016 for the ratio of consolidated total debt to Adjusted EBITDA whereby the ratio of less than 4:1 is increased to less than 6:1. For purposes of calculating the leverage ratios, consolidated total debt includes all outstanding secured and unsecured indebtedness, while consolidated senior debt only includes secured indebtedness. EBITDA as defined in our revolving term facility agreement differs from Adjusted EBITDA as defined under Additional GAAP Measures by the exclusion of bad debt expense and certain foreign exchange amounts. As at June 30, 2015 our consolidated senior debt to Adjusted EBITDA ratio was 0.14:1 while our consolidated total debt to EBITDA ratio was 3.14:1.
Under the revolving credit facility we are also required to maintain an Adjusted EBITDA coverage ratio, calculated as Adjusted EBITDA to interest expense, of greater than 2.75:1 for the most recent four consecutive fiscal quarters. During the first quarter we received temporary relief for the period up to and including December 31, 2016 for the interest to Adjusted EBITDA coverage ratio whereby ratio of greater than 2.75:1 is reduced to greater than 2.5:1. As at June 30, 2015 our Adjusted EBITDA coverage ratio was 5.89:1.
In addition, the revolving credit facility contains certain covenants that place restrictions on our ability to incur or assume additional indebtedness; dispose of assets; pay dividends, share redemptions or other distributions; change its primary business; incur liens on assets; engage in transactions with affiliates; enter into mergers, consolidations or amalgamations; and enter into speculative swap agreements. At June 30, 2015, we were in compliance with the covenants of the revolving credit facility.
Senior Notes
The senior notes require that we comply with certain financial covenants including an Adjusted EBITDA to interest coverage ratio of greater than 2.5:1 for the most recent four consecutive fiscal quarters.
In addition, the senior notes contain certain covenants that limit our ability and the ability of certain subsidiaries to incur additional indebtedness and issue preferred shares; create liens; make restricted payments (including the payment of dividends); create or permit to exist restrictions on our ability or certain subsidiaries to make certain payments and distributions; engage in amalgamations, mergers or consolidations; make certain dispositions and engage in transactions with affiliates. At June 30, 2015, we were in compliance with the covenants of our senior notes.
Hedge of investments in foreign operations
We utilize foreign currency long-term debt to hedge our exposure to changes in the carrying values of our net investment in certain foreign operations as a result of changes in foreign exchange rates.
Effective January 1, 2015 we have included the US$400 million of 5.25% Senior Notes due in 2024 as a designated hedge of our investment in our U.S. dollar denominated foreign operations and now all of our U.S. dollar Senior notes are designated as a net investment hedge.
Effective April 30, 2015 a portion of our U.S. dollar denominated debt that was previously treated as a hedge of our net investment in our U.S. operations was designated as a hedge of the investment in our foreign operations that have a U.S. dollar functional currency.
To be accounted for as a hedge, the foreign currency denominated long-term debt must be designated and documented as such and must be effective at inception and on an ongoing basis. We recognize the effective amount of this hedge (net of tax) in other comprehensive income. We recognize ineffective amounts (if any) in earnings.
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share amounts)
|
|
2014
|
|
|
2015
|
|
Quarters ended
|
|
September 30
|
|
|
December 31
|
|
|
March 31
|
|
|
June 30
|
|
Revenue
|
|
|
584,590 |
|
|
|
618,525 |
|
|
|
512,120 |
|
|
|
334,462 |
|
Adjusted EBITDA(1)
|
|
|
199,390 |
|
|
|
234,011 |
|
|
|
163,384 |
|
|
|
88,355 |
|
Net earnings (loss):
|
|
|
52,813 |
|
|
|
(114,044 |
) |
|
|
24,033 |
|
|
|
(29,817 |
) |
Per basic share
|
|
|
0.18 |
|
|
|
(0.39 |
) |
|
|
0.08 |
|
|
|
(0.10 |
) |
Per diluted share
|
|
|
0.18 |
|
|
|
(0.39 |
) |
|
|
0.08 |
|
|
|
(0.10 |
) |
Funds provided by operations(1)
|
|
|
196,217 |
|
|
|
172,059 |
|
|
|
155,186 |
|
|
|
53,173 |
|
Cash provided by operations
|
|
|
146,733 |
|
|
|
134,887 |
|
|
|
215,138 |
|
|
|
169,877 |
|
Dividends paid per share
|
|
|
0.06 |
|
|
|
0.07 |
|
|
|
0.07 |
|
|
|
0.07 |
|
|
|
2013
|
|
|
2014
|
|
Quarters ended
|
|
September 30
|
|
|
December 31
|
|
|
March 31
|
|
|
June 30
|
|
Revenue
|
|
|
488,450 |
|
|
|
566,909 |
|
|
|
672,249 |
|
|
|
475,174 |
|
Adjusted EBITDA(1)
|
|
|
137,660 |
|
|
|
197,744 |
|
|
|
237,274 |
|
|
|
129,695 |
|
Net earnings (loss):
|
|
|
29,443 |
|
|
|
67,921 |
|
|
|
101,557 |
|
|
|
(7,174 |
) |
Per basic share
|
|
|
0.11 |
|
|
|
0.24 |
|
|
|
0.35 |
|
|
|
(0.02 |
) |
Per diluted share
|
|
|
0.10 |
|
|
|
0.24 |
|
|
|
0.35 |
|
|
|
(0.02 |
) |
Funds provided by operations(1)
|
|
|
127,684 |
|
|
|
155,816 |
|
|
|
231,393 |
|
|
|
97,805 |
|
Cash provided by operations
|
|
|
88,341 |
|
|
|
94,452 |
|
|
|
170,127 |
|
|
|
228,412 |
|
Dividends paid per share
|
|
|
0.05 |
|
|
|
0.06 |
|
|
|
0.06 |
|
|
|
0.06 |
|
(1) See “ADDITIONAL GAAP MEASURES”.
ADDITIONAL GAAP MEASURES
We reference Generally Accepted Accounting Principles (GAAP) measures that are not defined terms under International Financial Reporting Standards to assess performance because we believe they provide useful supplemental information to investors.
Adjusted EBITDA
We believe that adjusted EBITDA (earnings before income taxes, financing charges, foreign exchange, and depreciation and amortization) as reported in the Consolidated Statement of Earnings (Loss) is a useful measure, because it gives an indication of the results from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and non-cash depreciation and amortization charges.
Operating Earnings (Loss)
We believe that operating earnings (loss), as reported in the Consolidated Statements of Earnings (Loss), is a useful measure because it provides an indication of the results of our principal business activities before consideration of how those activities are financed and the impact of foreign exchange and taxation.
Funds Provided by Operations
We believe that funds provided by operations, as reported in the Consolidated Statements of Cash Flow is a useful measure because it provides an indication of the funds our principal business activities generate prior to consideration of working capital, which is primarily made up of highly liquid balances.
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:
|
·
|
the payment of our declared quarterly dividend;
|
|
·
|
our capital expenditure plans for 2015;
|
|
·
|
timing on the expected delivery of rigs under our 2015 new-build program;
|
|
·
|
the expected changes in the size and distribution of our rig fleet following the delivery of all remaining contracted new-build rigs in 2015; and
|
|
·
|
our strategic priorities for the remainder of 2015.
|
These forward-looking information and statements are based on certain assumptions and analysis made by Precision in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. These include, among other things:
|
·
|
the decline in oil prices will continue to pressure customers into reducing or limiting their drilling budgets;
|
|
·
|
the status of current negotiations with our customers and vendors;
|
|
·
|
continued demand for Tier 1 rigs;
|
|
·
|
customer focus on safety performance;
|
|
·
|
our ability to deliver rigs to customers on a timely basis; and
|
|
·
|
the general stability of the economic and political environments in the jurisdictions where we operate.
|
Undue reliance should not be placed on forward-looking information and statements. Whether actual results, performance or achievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from our expectations. Such risks and uncertainties include, but are not limited to:
|
·
|
volatility in the price and demand for oil and natural gas;
|
|
·
|
fluctuations in the demand for contract drilling, well servicing and ancillary oilfield services and its impact on customer spending;
|
|
·
|
the risks associated with investing in capital assets and the impact arising out of the emergence of potentially disruptive technology;
|
|
·
|
shortages, delays and interruptions in the delivery of equipment supplies and other key inputs;
|
|
·
|
the effects of seasonal and weather conditions on operations and facilities;
|
|
·
|
the availability of qualified personnel and management;
|
|
·
|
the existence of competitive operating risks inherent in our businesses;
|
|
·
|
changes in environmental and safety rules or regulations including increased regulatory burden on horizontal drilling and hydraulic fracturing;
|
|
·
|
terrorism, social, civil and political unrest in the foreign jurisdictions where we operate;
|
|
·
|
fluctuations in foreign exchange, interest rates and tax rates; and
|
|
·
|
other unforeseen conditions which could impact the use of services supplied by Precision and Precision’s ability to respond to such conditions.
|
Readers are cautioned that the forgoing list of risk factors is not exhaustive. Additional information on these and other factors that could affect our business, operations or financial results are included in reports on file with applicable securities regulatory authorities, including but not limited to Precision’s Annual Information Form for the year ended December 31, 2014, which may be accessed on Precision’s SEDAR profile at www.sedar.com or under Precision’s EDGAR profile at www.sec.gov. The forward-looking information and statements contained in this news release are made as of the date hereof and Precision undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a results of new information, future events or otherwise, unless so requires by applicable securities laws.
Exhibit 99.2
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(Stated in thousands of Canadian dollars)
|
|
June 30,
2015
|
|
|
December 31,
2014
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$ |
433,693 |
|
|
$ |
491,481 |
|
Accounts receivable
|
|
|
315,591 |
|
|
|
598,063 |
|
Income tax recoverable
|
|
|
– |
|
|
|
55,138 |
|
Inventory
|
|
|
18,417 |
|
|
|
9,170 |
|
Total current assets
|
|
|
767,701 |
|
|
|
1,153,852 |
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Income tax recoverable
|
|
|
3,297 |
|
|
|
3,297 |
|
Property, plant and equipment
|
|
|
4,196,907 |
|
|
|
3,928,826 |
|
Intangibles
|
|
|
3,931 |
|
|
|
3,302 |
|
Goodwill
|
|
|
222,011 |
|
|
|
219,719 |
|
Total non-current assets
|
|
|
4,426,146 |
|
|
|
4,155,144 |
|
Total assets
|
|
$ |
5,193,847 |
|
|
$ |
5,308,996 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ |
252,601 |
|
|
$ |
493,038 |
|
Income tax payable
|
|
|
6,362 |
|
|
|
7,184 |
|
Total current liabilities
|
|
|
258,963 |
|
|
|
500,222 |
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Share based compensation (Note 7)
|
|
|
14,977 |
|
|
|
14,252 |
|
Provisions and other
|
|
|
17,361 |
|
|
|
14,837 |
|
Long-term debt (Note 4)
|
|
|
1,980,575 |
|
|
|
1,852,186 |
|
Deferred tax liabilities
|
|
|
485,632 |
|
|
|
486,133 |
|
Total non-current liabilities
|
|
|
2,498,545 |
|
|
|
2,367,408 |
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Shareholders’ capital (Note 5)
|
|
|
2,316,321 |
|
|
|
2,315,539 |
|
Contributed surplus
|
|
|
33,284 |
|
|
|
31,109 |
|
Retained earnings
|
|
|
1,647 |
|
|
|
48,426 |
|
Accumulated other comprehensive income (Note 6)
|
|
|
85,087 |
|
|
|
46,292 |
|
Total shareholders’ equity
|
|
|
2,436,339 |
|
|
|
2,441,366 |
|
Total liabilities and shareholders’ equity
|
|
$ |
5,193,847 |
|
|
$ |
5,308,996 |
|
See accompanying notes to interim consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
(Stated in thousands of Canadian dollars, except per share amounts)
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Revenue
|
|
$ |
334,462 |
|
|
$ |
475,174 |
|
|
$ |
846,582 |
|
|
$ |
1,147,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
209,553 |
|
|
|
304,285 |
|
|
|
512,742 |
|
|
|
699,438 |
|
General and administrative
|
|
|
36,554 |
|
|
|
41,194 |
|
|
|
82,101 |
|
|
|
81,016 |
|
Earnings before income taxes, finance charges, foreign exchange and depreciation and amortization
|
|
|
88,355 |
|
|
|
129,695 |
|
|
|
251,739 |
|
|
|
366,969 |
|
Depreciation and amortization
|
|
|
120,128 |
|
|
|
105,923 |
|
|
|
236,225 |
|
|
|
211,628 |
|
Operating earnings (loss)
|
|
|
(31,773 |
) |
|
|
23,772 |
|
|
|
15,514 |
|
|
|
155,341 |
|
Foreign exchange
|
|
|
8,318 |
|
|
|
(298 |
) |
|
|
(20,088 |
) |
|
|
(3,927 |
) |
Finance charges (Note 8)
|
|
|
32,348 |
|
|
|
25,562 |
|
|
|
52,030 |
|
|
|
49,994 |
|
Earnings (loss) before income taxes
|
|
|
(72,439 |
) |
|
|
(1,492 |
) |
|
|
(16,428 |
) |
|
|
109,274 |
|
Income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
1,213 |
|
|
|
204 |
|
|
|
7,516 |
|
|
|
5,648 |
|
Deferred
|
|
|
(43,835 |
) |
|
|
5,478 |
|
|
|
(18,160 |
) |
|
|
9,243 |
|
|
|
|
(42,622 |
) |
|
|
5,682 |
|
|
|
(10,644 |
) |
|
|
14,891 |
|
Net earnings (loss)
|
|
$ |
(29,817 |
) |
|
$ |
(7,174 |
) |
|
$ |
(5,784 |
) |
|
$ |
94,383 |
|
Net earnings (loss) per share: (Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(0.10 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.32 |
|
Diluted
|
|
$ |
(0.10 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.32 |
|
See accompanying notes to interim consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
(Stated in thousands of Canadian dollars)
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Net earnings (loss)
|
|
$ |
(29,817 |
) |
|
$ |
(7,174 |
) |
|
$ |
(5,784 |
) |
|
$ |
94,383 |
|
Unrealized gain (loss) on translation of assets and liabilities of operations denominated in foreign currency
|
|
|
(39,087 |
) |
|
|
(64,952 |
) |
|
|
165,380 |
|
|
|
5,383 |
|
Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt, net of tax
|
|
|
30,305 |
|
|
|
39,585 |
|
|
|
(126,585 |
) |
|
|
(4,200 |
) |
Comprehensive income (loss)
|
|
$ |
(38,599 |
) |
|
$ |
(32,541 |
) |
|
$ |
33,011 |
|
|
$ |
95,566 |
|
See accompanying notes to interim consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
|
|
Three months ended June 30, |
|
|
Six months ended June 30,
|
|
(Stated in thousands of Canadian dollars) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$ |
(29,817 |
) |
|
$ |
(7,174 |
) |
|
$ |
(5,784 |
) |
|
$ |
94,383 |
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term compensation plans
|
|
|
9,300 |
|
|
|
8,480 |
|
|
|
12,707 |
|
|
|
18,791 |
|
Depreciation and amortization
|
|
|
120,128 |
|
|
|
105,923 |
|
|
|
236,225 |
|
|
|
211,628 |
|
Foreign exchange
|
|
|
9,068 |
|
|
|
2,080 |
|
|
|
(20,377 |
) |
|
|
(2,309 |
) |
Finance charges
|
|
|
32,348 |
|
|
|
25,562 |
|
|
|
52,030 |
|
|
|
49,994 |
|
Income taxes
|
|
|
(42,622 |
) |
|
|
5,682 |
|
|
|
(10,644 |
) |
|
|
14,891 |
|
Other
|
|
|
(50 |
) |
|
|
(3,427 |
) |
|
|
1,349 |
|
|
|
(1,928 |
) |
Income taxes paid
|
|
|
(4,092 |
) |
|
|
(3,838 |
) |
|
|
(9,788 |
) |
|
|
(12,869 |
) |
Income taxes recovered
|
|
|
249 |
|
|
|
3,342 |
|
|
|
1,111 |
|
|
|
3,354 |
|
Interest paid
|
|
|
(55,744 |
) |
|
|
(38,945 |
) |
|
|
(63,193 |
) |
|
|
(46,970 |
) |
Interest received
|
|
|
14,405 |
|
|
|
120 |
|
|
|
14,723 |
|
|
|
233 |
|
Funds provided by operations
|
|
|
53,173 |
|
|
|
97,805 |
|
|
|
208,359 |
|
|
|
329,198 |
|
Changes in non-cash working capital balances
|
|
|
116,704 |
|
|
|
130,607 |
|
|
|
176,656 |
|
|
|
69,341 |
|
|
|
|
169,877 |
|
|
|
228,412 |
|
|
|
385,015 |
|
|
|
398,539 |
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(113,045 |
) |
|
|
(174,854 |
) |
|
|
(338,867 |
) |
|
|
(280,853 |
) |
Proceeds on sale of property, plant and equipment
|
|
|
3,598 |
|
|
|
9,979 |
|
|
|
6,474 |
|
|
|
17,236 |
|
Income taxes recovered
|
|
|
55,138 |
|
|
|
– |
|
|
|
55,138 |
|
|
|
– |
|
Changes in non-cash working capital balances
|
|
|
(99,649 |
) |
|
|
16,612 |
|
|
|
(154,276 |
) |
|
|
304 |
|
|
|
|
(153,958 |
) |
|
|
(148,263 |
) |
|
|
(431,531 |
) |
|
|
(263,313 |
) |
Financing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in long-term debt
|
|
|
– |
|
|
|
436,600 |
|
|
|
– |
|
|
|
436,600 |
|
Repayment of long-term debt
|
|
|
– |
|
|
|
(13,942 |
) |
|
|
– |
|
|
|
(30,670 |
) |
Debt issue costs
|
|
|
– |
|
|
|
(10,166 |
) |
|
|
(975 |
) |
|
|
(10,166 |
) |
Dividends paid
|
|
|
(20,498 |
) |
|
|
(17,553 |
) |
|
|
(40,995 |
) |
|
|
(35,080 |
) |
Issuance of common shares on the exercise of options
|
|
|
93 |
|
|
|
3,493 |
|
|
|
93 |
|
|
|
6,103 |
|
|
|
|
(20,405 |
) |
|
|
398,432 |
|
|
|
(41,877 |
) |
|
|
366,787 |
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(11,005 |
) |
|
|
(8,253 |
) |
|
|
30,605 |
|
|
|
(6,126 |
) |
Increase (decrease) in cash and cash equivalents
|
|
|
(15,491 |
) |
|
|
470,328 |
|
|
|
(57,788 |
) |
|
|
495,887 |
|
Cash and cash equivalents, beginning of period
|
|
|
449,184 |
|
|
|
106,165 |
|
|
|
491,481 |
|
|
|
80,606 |
|
Cash and cash equivalents, end of period
|
|
$ |
433,693 |
|
|
$ |
576,493 |
|
|
$ |
433,693 |
|
|
$ |
576,493 |
|
See accompanying notes to interim consolidated financial statements.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Stated in thousands of Canadian dollars)
|
|
Shareholders’
capital
|
|
|
Contributed
surplus
|
|
|
Accumulated
other
comprehensive income
(Note 6)
|
|
|
Retained earnings
|
|
|
Total
equity
|
|
Balance at January 1, 2015
|
|
$ |
2,315,539 |
|
|
$ |
31,109 |
|
|
$ |
46,292 |
|
|
$ |
48,426 |
|
|
$ |
2,441,366 |
|
Net loss for the period
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(5,784 |
) |
|
|
(5,784 |
) |
Other comprehensive income for the period
|
|
|
– |
|
|
|
– |
|
|
|
38,795 |
|
|
|
– |
|
|
|
38,795 |
|
Dividends
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(40,995 |
) |
|
|
(40,995 |
) |
Share options exercised (Note 5)
|
|
|
142 |
|
|
|
(49 |
) |
|
|
– |
|
|
|
– |
|
|
|
93 |
|
Shares issued on redemption of non-management directors’ DSUs
|
|
|
640 |
|
|
|
(324 |
) |
|
|
– |
|
|
|
– |
|
|
|
316 |
|
Share based compensation expense (Note 7)
|
|
|
– |
|
|
|
2,548 |
|
|
|
– |
|
|
|
– |
|
|
|
2,548 |
|
Balance at June 30, 2015
|
|
$ |
2,316,321 |
|
|
$ |
33,284 |
|
|
$ |
85,087 |
|
|
$ |
1,647 |
|
|
$ |
2,436,339 |
|
(Stated in thousands of Canadian dollars)
|
|
Shareholders’
capital
|
|
|
Contributed
surplus
|
|
|
Accumulated
other
comprehensive
loss
|
|
|
Retained earnings
|
|
|
Total
equity
|
|
Balance at January 1, 2014
|
|
$ |
2,305,227 |
|
|
$ |
29,175 |
|
|
$ |
(23,475 |
) |
|
$ |
88,416 |
|
|
$ |
2,399,343 |
|
Net earnings for the period
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
94,383 |
|
|
|
94,383 |
|
Other comprehensive income for the period
|
|
|
– |
|
|
|
– |
|
|
|
1,183 |
|
|
|
– |
|
|
|
1,183 |
|
Dividends
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(35,080 |
) |
|
|
(35,080 |
) |
Share options exercised
|
|
|
8,806 |
|
|
|
(2,703 |
) |
|
|
– |
|
|
|
– |
|
|
|
6,103 |
|
Share based compensation expense (Note 7)
|
|
|
– |
|
|
|
2,792 |
|
|
|
– |
|
|
|
– |
|
|
|
2,792 |
|
Balance at June 30, 2014
|
|
$ |
2,314,033 |
|
|
$ |
29,264 |
|
|
$ |
(22,292 |
) |
|
$ |
147,719 |
|
|
$ |
2,468,724 |
|
See accompanying notes to interim consolidated financial statements.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Tabular amounts are stated in thousands of Canadian dollars except share numbers and per share amounts)
NOTE 1. DESCRIPTION OF BUSINESS
Precision Drilling Corporation (“Precision” or the “Corporation”) is incorporated under the laws of the Province of Alberta, Canada and is a provider of contract drilling and completion and production services primarily to oil and natural gas exploration and production companies in Canada, the United States and certain international locations. The address of the registered office is Suite 800, 525 - 8th Avenue S.W., Calgary, Alberta, Canada, T2P 1G1.
NOTE 2. BASIS OF PRESENTATION
(a) Statement of Compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Corporation as at and for the year ended December 31, 2014.
These condensed consolidated interim financial statements were prepared using accounting policies and methods of their application consistent with those used in the preparation of the Corporation’s consolidated audited annual financial statements for the year ended December 31, 2014.
These condensed consolidated interim financial statements were approved by the Board of Directors on July 22, 2015.
(b) Seasonality
Precision has operations that are carried on in Canada which represent approximately 42% (2014 - 50%) of consolidated total assets as at June 30, 2015 and 35% (2014 - 46%) of consolidated revenue for the six months ended June 30, 2015. The ability to move heavy equipment in Canadian oil and natural gas fields is dependent on weather conditions. As warm weather returns in the spring, the winter's frost comes out of the ground rendering many secondary roads incapable of supporting the weight of heavy equipment until they have thoroughly dried out. The duration of this “spring break-up” has a direct impact on Precision’s activity levels. In addition, many exploration and production areas in northern Canada are accessible only in winter months when the ground is frozen hard enough to support equipment. The timing of freeze up and spring break-up affects the ability to move equipment in and out of these areas. As a result, late March through May is traditionally Precision’s slowest time in this region.
NOTE 3. BANK INDEBTEDNESS
During May 2015, Precision increased the borrowing capacity of an existing secured operating facility to US$40.0 million from US$25.0 million. This secured operating facility is used for the issuance of letters of credit and performance and bid bonds to support international operations.
NOTE 4. LONG-TERM DEBT
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Secured revolving credit facility
|
|
$ |
– |
|
|
$ |
– |
|
Unsecured senior notes:
|
|
|
|
|
|
|
|
|
6.625% senior notes due 2020 (US$650 million)
|
|
|
810,810 |
|
|
|
754,065 |
|
6.5% senior notes due 2021 (US$400 million)
|
|
|
498,960 |
|
|
|
464,040 |
|
5.25% senior notes due 2024 (US$400 million)
|
|
|
498,960 |
|
|
|
464,040 |
|
6.5% senior notes due 2019
|
|
|
200,000 |
|
|
|
200,000 |
|
|
|
|
2,008,730 |
|
|
|
1,882,145 |
|
Less net unamortized debt issue costs
|
|
|
(28,155 |
) |
|
|
(29,959 |
) |
|
|
$ |
1,980,575 |
|
|
$ |
1,852,186 |
|
|
|
|
|
|
|
|
|
|
During March 2015, Precision entered into an agreement to amend certain financial covenants governing its secured revolving credit facility. This amendment among other things increased (i) the maximum consolidated total debt to Adjusted EBITDA ratio from 4.0:1.0 to 6.0:1.0 and (ii) Adjusted EBITDA to interest coverage ratio from 2.75:1.0 to 2.5:1.0. This amendment is in place for a period up to and including December 31, 2016.
Long-term debt obligations at June 30, 2015 will mature as follows:
2019
|
|
$ |
200,000 |
|
Thereafter
|
|
|
1,808,730 |
|
|
|
$ |
2,008,730 |
|
NOTE 5. SHAREHOLDERS’ CAPITAL
|
|
Number
|
|
|
Amount
|
|
Common shares
|
|
|
|
|
|
|
Balance December 31, 2014
|
|
|
292,819,921 |
|
|
$ |
2,315,539 |
|
Options exercised:
|
|
|
|
|
|
|
|
|
Cash consideration
|
|
|
16,000 |
|
|
|
93 |
|
Reclassification from contributed surplus
|
|
|
- |
|
|
|
49 |
|
Issued on redemption of non-management directors’ DSUs
|
|
|
76,169 |
|
|
|
640 |
|
Balance June 30, 2015
|
|
|
292,912,090 |
|
|
$ |
2,316,321 |
|
NOTE 6. ACCUMULATED OTHER COMPREHENSIVE INCOME
|
|
Unrealized Foreign Currency Translation Gains
|
|
|
Foreign Exchange Loss on Net Investment Hedge
|
|
|
Accumulated Other
Comprehensive
Income
|
|
Balance, December 31, 2014
|
|
$ |
219,422 |
|
|
$ |
(173,130 |
) |
|
$ |
46,292 |
|
Other comprehensive income
|
|
|
165,380 |
|
|
|
(126,585 |
) |
|
|
38,795 |
|
Balance, June 30, 2015
|
|
$ |
384,802 |
|
|
$ |
(299,715 |
) |
|
$ |
85,087 |
|
NOTE 7. SHARE BASED COMPENSATION PLANS
Liability Classified Plans
|
|
Restricted Share Units(a)
|
|
|
Performance Share Units(a)
|
|
|
Share Appreciation Rights(b)
|
|
|
Non-Management Directors’ DSUs(c)
|
|
|
Total
|
|
Balance, December 31, 2014
|
|
$ |
10,584 |
|
|
$ |
13,769 |
|
|
$ |
81 |
|
|
$ |
1,989 |
|
|
$ |
26,423 |
|
Expensed during the period
|
|
|
6,027 |
|
|
|
7,185 |
|
|
|
(37 |
) |
|
|
924 |
|
|
|
14,099 |
|
Payments
|
|
|
(6,138 |
) |
|
|
(5,022 |
) |
|
|
– |
|
|
|
(315 |
) |
|
|
(11,475 |
) |
Balance, June 30, 2015
|
|
$ |
10,473 |
|
|
$ |
15,932 |
|
|
$ |
44 |
|
|
$ |
2,598 |
|
|
$ |
29,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$ |
6,856 |
|
|
$ |
7,170 |
|
|
$ |
44 |
|
|
$ |
– |
|
|
$ |
14,070 |
|
Long-term
|
|
|
3,617 |
|
|
|
8,762 |
|
|
|
– |
|
|
|
2,598 |
|
|
|
14,977 |
|
|
|
$ |
10,473 |
|
|
$ |
15,932 |
|
|
$ |
44 |
|
|
$ |
2,598 |
|
|
$ |
29,047 |
|
(a) Restricted Share Units and Performance Share Units
A summary of the activity under the restricted share unit (RSUs) and the performance share unit (PSUs) plans are presented below:
|
|
RSUs
Outstanding
|
|
|
PSUs
Outstanding
|
|
December 31, 2014
|
|
|
2,246,696 |
|
|
|
3,450,033 |
|
Granted
|
|
|
2,083,400 |
|
|
|
2,606,100 |
|
Issued as a result of cash dividends
|
|
|
56,106 |
|
|
|
90,209 |
|
Redeemed
|
|
|
(999,544 |
) |
|
|
(739,556 |
) |
Forfeitures
|
|
|
(227,337 |
) |
|
|
(230,925 |
) |
June 30, 2015
|
|
|
3,159,321 |
|
|
|
5,175,861 |
|
(b) Share Appreciation Rights
A summary of the activity under the share appreciation rights plan is presented below:
|
|
Outstanding
|
|
|
Range of Exercise Price (US$)
|
|
|
Weighted Average Exercise Price (US$)
|
|
|
Exercisable
|
|
December 31, 2014
|
|
|
443,741 |
|
|
$ |
13.26 – 17.38 |
|
|
$ |
15.32 |
|
|
|
443,741 |
|
Forfeitures
|
|
|
(100,609 |
) |
|
|
13.26 – 13.26 |
|
|
|
13.26 |
|
|
|
|
|
June 30, 2015
|
|
|
343,132 |
|
|
$ |
15.22 – 17.38 |
|
|
$ |
15.93 |
|
|
|
343,132 |
|
(c) Non-Management Directors – Deferred Share Unit Plan
A summary of the activity under the non-management director deferred share unit plan is presented below:
|
|
Outstanding
|
|
December 31, 2014
|
|
|
278,587 |
|
Granted
|
|
|
66,086 |
|
Issued as a result of cash dividends
|
|
|
4,934 |
|
Redeemed
|
|
|
(37,276 |
) |
June 30, 2015
|
|
|
312,331 |
|
Equity Settled Plans
(d) Non-Management Directors
Prior to January 1, 2012, Precision had a deferred share unit plan for non-management directors. Under the plan fully vested deferred share units were granted quarterly based upon an election by the non-management director to receive all or a portion of their compensation in deferred share units. These deferred share units are redeemable into an equal number of common shares any time after the director's retirement. A summary of the activity under this share based incentive plan is presented below:
Deferred Share Units
|
|
Outstanding
|
|
December 31, 2014
|
|
|
226,010 |
|
Issued as a result of cash dividends
|
|
|
3,631 |
|
Redeemed
|
|
|
(38,893 |
) |
June 30, 2015
|
|
|
190,748 |
|
(e) Option Plan
A summary of the activity under the option plan is presented below:
Canadian share options
|
|
Outstanding
|
|
|
Range of Exercise Price
|
|
|
Weighted Average Exercise Price
|
|
|
Exercisable
|
|
December 31, 2014
|
|
|
5,154,314 |
|
|
$ |
5.22 |
|
|
|
– |
|
|
|
14.50 |
|
|
$ |
9.43 |
|
|
|
3,185,500 |
|
Granted
|
|
|
1,447,400 |
|
|
|
7.32 |
|
|
|
– |
|
|
|
7.32 |
|
|
|
7.32 |
|
|
|
|
|
Exercised
|
|
|
(16,000 |
) |
|
|
5.85 |
|
|
|
– |
|
|
|
5.85 |
|
|
|
5.85 |
|
|
|
|
|
Forfeitures
|
|
|
(376,618 |
) |
|
|
5.85 |
|
|
|
– |
|
|
|
10.67 |
|
|
|
9.62 |
|
|
|
|
|
June 30, 2015
|
|
|
6,209,096 |
|
|
$ |
5.22 |
|
|
|
– |
|
|
|
14.50 |
|
|
$ |
8.93 |
|
|
|
3,881,119 |
|
U.S. share options
|
|
Outstanding
|
|
|
Range of Exercise Price (US$)
|
|
|
Weighted Average Exercise Price (US$)
|
|
Exercisable
|
December 31, 2014
|
|
|
3,405,774 |
|
|
$ |
4.95 |
|
|
|
– |
|
|
|
15.21 |
|
|
$ |
9.35 |
|
1,795,639 |
Granted
|
|
|
1,344,900 |
|
|
|
5.79 |
|
|
|
– |
|
|
|
5.79 |
|
|
|
5.79 |
|
|
Forfeitures
|
|
|
(104,035 |
) |
|
|
4.95 |
|
|
|
– |
|
|
|
15.21 |
|
|
|
9.06 |
|
|
June 30, 2015
|
|
|
4,646,639 |
|
|
$ |
4.95 |
|
|
|
– |
|
|
|
15.21 |
|
|
$ |
8.33 |
|
2,496,511 |
The per option weighted average fair value of the share options granted during 2015 was $1.60 estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: average risk-free interest rate 1%, average expected life of four years, expected forfeiture rate of 5% and expected volatility of 44%. Included in net earnings for the three and six months ended June 30, 2015 is an expense of $1.3 million (2014 - $1.4 million) and $2.5 million (2014 - $2.8 million), respectively.
NOTE 8. FINANCE CHARGES
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$ |
31,914 |
|
|
$ |
24,886 |
|
|
$ |
63,997 |
|
|
$ |
48,461 |
|
Other
|
|
|
46 |
|
|
|
77 |
|
|
|
713 |
|
|
|
275 |
|
Income
|
|
|
(739 |
) |
|
|
(217 |
) |
|
|
(14,831 |
) |
|
|
(308 |
) |
Amortization of debt issue costs
|
|
|
1,127 |
|
|
|
816 |
|
|
|
2,151 |
|
|
|
1,566 |
|
Finance charges
|
|
$ |
32,348 |
|
|
$ |
25,562 |
|
|
$ |
52,030 |
|
|
$ |
49,994 |
|
NOTE 9. PER SHARE AMOUNTS
The following tables reconcile the net earnings (loss) and weighted average shares outstanding used in computing basic and diluted earnings per share:
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Net earnings (loss) - basic and diluted
|
|
$ |
(29,817 |
) |
|
$ |
(7,174 |
) |
|
$ |
(5,784 |
) |
|
$ |
94,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
(Stated in thousands)
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Weighted average shares outstanding – basic
|
|
|
292,865 |
|
|
|
292,511 |
|
|
|
292,843 |
|
|
|
292,287 |
|
Effect of stock options and other equity compensation plans
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
424 |
|
Weighted average shares outstanding – diluted
|
|
|
292,865 |
|
|
|
292,511 |
|
|
|
292,843 |
|
|
|
292,711 |
|
NOTE 10. SEGMENTED INFORMATION
The Corporation operates primarily in Canada, the United States and certain international locations, in two industry segments; Contract Drilling Services and Completion and Production Services. Contract Drilling Services includes drilling rigs, directional drilling, procurement and distribution of oilfield supplies, and manufacture, sale and repair of drilling equipment. Completion and Production Services includes service rigs, snubbing units, coil tubing services, oilfield equipment rental, camp and catering services, and wastewater treatment units.
Three months ended June 30, 2015
|
|
Contract Drilling Services
|
|
|
Completion and Production Services
|
|
|
Corporate and Other
|
|
|
Inter-Segment Eliminations
|
|
|
Total
|
|
Revenue
|
|
$ |
299,943 |
|
|
$ |
35,589 |
|
|
$ |
– |
|
|
$ |
(1,070 |
) |
|
$ |
334,462 |
|
Operating loss
|
|
|
1,490 |
|
|
|
(9,410 |
) |
|
|
(23,853 |
) |
|
|
– |
|
|
|
(31,773 |
) |
Depreciation and amortization
|
|
|
108,407 |
|
|
|
8,706 |
|
|
|
3,015 |
|
|
|
– |
|
|
|
120,128 |
|
Total assets
|
|
|
4,425,338 |
|
|
|
339,838 |
|
|
|
428,671 |
|
|
|
– |
|
|
|
5,193,847 |
|
Goodwill
|
|
|
205,043 |
|
|
|
16,968 |
|
|
|
– |
|
|
|
– |
|
|
|
222,011 |
|
Capital expenditures
|
|
|
111,283 |
|
|
|
256 |
|
|
|
1,506 |
|
|
|
– |
|
|
|
113,045 |
|
Three months ended June 30, 2014
|
|
Contract Drilling Services
|
|
|
Completion and Production Services
|
|
|
Corporate and Other
|
|
|
Inter-Segment Eliminations
|
|
|
Total
|
|
Revenue
|
|
$ |
410,882 |
|
|
$ |
66,508 |
|
|
$ |
– |
|
|
$ |
(2,216 |
) |
|
$ |
475,174 |
|
Operating earnings
|
|
|
56,126 |
|
|
|
(6,296 |
) |
|
|
(26,058 |
) |
|
|
– |
|
|
|
23,772 |
|
Depreciation and amortization
|
|
|
92,365 |
|
|
|
11,433 |
|
|
|
2,125 |
|
|
|
– |
|
|
|
105,923 |
|
Total assets
|
|
|
3,861,317 |
|
|
|
571,838 |
|
|
|
628,321 |
|
|
|
– |
|
|
|
5,061,476 |
|
Goodwill
|
|
|
200,322 |
|
|
|
112,139 |
|
|
|
– |
|
|
|
– |
|
|
|
312,461 |
|
Capital expenditures
|
|
|
168,063 |
|
|
|
4,756 |
|
|
|
2,035 |
|
|
|
– |
|
|
|
174,854 |
|
Six months ended June 30, 2015
|
|
Contract Drilling Services
|
|
|
Completion and Production Services
|
|
|
Corporate and Other
|
|
|
Inter-Segment Eliminations
|
|
|
Total
|
|
Revenue
|
|
$ |
748,008 |
|
|
$ |
101,671 |
|
|
$ |
– |
|
|
$ |
(3,097 |
) |
|
$ |
846,582 |
|
Operating earnings
|
|
|
80,778 |
|
|
|
(11,111 |
) |
|
|
(54,153 |
) |
|
|
– |
|
|
|
15,514 |
|
Depreciation and amortization
|
|
|
212,238 |
|
|
|
17,464 |
|
|
|
6,523 |
|
|
|
– |
|
|
|
236,225 |
|
Total assets
|
|
|
4,425,338 |
|
|
|
339,838 |
|
|
|
428,671 |
|
|
|
– |
|
|
|
5,193,847 |
|
Goodwill
|
|
|
205,043 |
|
|
|
16,968 |
|
|
|
– |
|
|
|
– |
|
|
|
222,011 |
|
Capital expenditures
|
|
|
333,877 |
|
|
|
1,779 |
|
|
|
3,211 |
|
|
|
– |
|
|
|
338,867 |
|
Six months ended June 30, 2014
|
|
Contract Drilling Services
|
|
|
Completion and Production Services
|
|
|
Corporate and Other
|
|
|
Inter-Segment Eliminations
|
|
|
Total
|
|
Revenue
|
|
$ |
982,804 |
|
|
$ |
169,573 |
|
|
$ |
– |
|
|
$ |
(4,954 |
) |
|
$ |
1,147,423 |
|
Operating earnings
|
|
|
203,713 |
|
|
|
1,729 |
|
|
|
(50,101 |
) |
|
|
– |
|
|
|
155,341 |
|
Depreciation and amortization
|
|
|
184,476 |
|
|
|
22,861 |
|
|
|
4,291 |
|
|
|
– |
|
|
|
211,628 |
|
Total assets
|
|
|
3,861,317 |
|
|
|
571,838 |
|
|
|
628,321 |
|
|
|
– |
|
|
|
5,061,476 |
|
Goodwill
|
|
|
200,322 |
|
|
|
112,139 |
|
|
|
– |
|
|
|
– |
|
|
|
312,461 |
|
Capital expenditures
|
|
|
267,947 |
|
|
|
9,246 |
|
|
|
3,660 |
|
|
|
– |
|
|
|
280,853 |
|
The Corporation’s operations are carried on in the following geographic locations:
Three months ended June 30, 2015
|
|
Canada
|
|
|
United States
|
|
|
International
|
|
|
Inter-Segment Eliminations
|
|
|
Total
|
|
Revenue
|
|
$ |
82,901 |
|
|
$ |
193,507 |
|
|
$ |
63,497 |
|
|
$ |
(5,443 |
) |
|
$ |
334,462 |
|
Total assets
|
|
|
2,157,194 |
|
|
|
2,324,324 |
|
|
|
712,329 |
|
|
|
– |
|
|
|
5,193,847 |
|
Three months ended June 30, 2014
|
|
Canada
|
|
|
United States
|
|
|
International
|
|
|
Inter-Segment Eliminations
|
|
|
Total
|
|
Revenue
|
|
$ |
163,727 |
|
|
$ |
269,323 |
|
|
$ |
46,018 |
|
|
$ |
(3,894 |
) |
|
$ |
475,174 |
|
Total assets
|
|
|
2,533,518 |
|
|
|
2,003,956 |
|
|
|
524,002 |
|
|
|
– |
|
|
|
5,061,476 |
|
Six months ended June 30, 2015
|
|
Canada
|
|
|
United States
|
|
|
International
|
|
|
Inter-Segment Eliminations
|
|
|
Total
|
|
Revenue
|
|
$ |
296,847 |
|
|
$ |
437,834 |
|
|
$ |
124,003 |
|
|
$ |
(12,102 |
) |
|
$ |
846,582 |
|
Total assets
|
|
|
2,157,194 |
|
|
|
2,324,324 |
|
|
|
712,329 |
|
|
|
– |
|
|
|
5,193,847 |
|
Six months ended June 30, 2014
|
|
Canada
|
|
|
United States
|
|
|
International
|
|
|
Inter-Segment Eliminations
|
|
|
Total
|
|
Revenue
|
|
$ |
528,058 |
|
|
$ |
536,815 |
|
|
$ |
88,507 |
|
|
$ |
(5,957 |
) |
|
$ |
1,147,423 |
|
Total assets
|
|
|
2,533,518 |
|
|
|
2,003,956 |
|
|
|
524,002 |
|
|
|
– |
|
|
|
5,061,476 |
|
NOTE 11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying value of cash, accounts receivable, and accounts payable and accrued liabilities approximate their fair value due to the relatively short period to maturity of the instruments. The fair value of the unsecured senior notes at June 30, 2015 was approximately $1,921 million (December 31, 2014 - $1,668 million).
Financial assets and liabilities recorded or disclosed at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels are based on the amount of subjectivity associated with the inputs in the fair determination and are as follows:
Level I—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level II—Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level III—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The estimated fair value of unsecured senior notes is based on level II inputs. The fair value is estimated considering the risk free interest rates on government debt instruments of similar maturities, adjusted for estimated credit risk, industry risk and market risk premiums.
SHAREHOLDER INFORMATION
STOCK EXCHANGE LISTINGS
Shares of Precision Drilling Corporation are listed on the Toronto Stock Exchange under the trading symbol PD and on the New York Stock Exchange under the trading symbol PDS.
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company of Canada
Calgary, Alberta
TRANSFER POINT
Computershare Trust Company NA
Denver, Colorado
Q2 2015 TRADING PROFILE
Toronto (TSX: PD)
High: $9.43
Low: $8.03
Close: $8.40
Volume Traded: 95,437,208
New York (NYSE: PDS)
High: US$7.80
Low: US$6.34
Close: US$6.72
Volume Traded: 200,378,000
ACCOUNT QUESTIONS
Precision’s Transfer Agent can help you with a variety of shareholder related services, including:
• change of address
• lost unit certificates
• transfer of shares to another person
• estate settlement
Computershare Trust Company of Canada
100 University Avenue
9th Floor, North Tower
Toronto, Ontario M5J 2Y1
Canada
1-800-564-6253 (toll free in Canada and the United States)
1-514-982-7555 (international direct dialing)
Email: service@computershare.com
ONLINE INFORMATION
To receive news releases by email, or to view this interim report online, please visit Precision’s website at www.precisiondrilling.com and refer to the Investor Relations section. Additional information relating to Precision, including the Annual Information Form, Annual Report and Management Information Circular has been filed with SEDAR and is available at www.sedar.com.
|
|
CORPORATE INFORMATION
DIRECTORS
William T. Donovan
Brian J. Gibson
Allen R. Hagerman, FCA
Catherine J. Hughes
Steven W. Krablin
Stephen J.J. Letwin
Kevin O. Meyers
Kevin A. Neveu
Robert L. Phillips
OFFICERS
Kevin A. Neveu
President and Chief Executive Officer
Niels Espeland
President, International
Douglas B. Evasiuk
Senior Vice President, Sales and Marketing
Veronica Foley
Vice President, Legal and Corporate Secretary
Kenneth J. Haddad
Senior Vice President, Business Development
Robert J. McNally
Executive Vice President and Chief Financial Officer
Darren J. Ruhr
Senior Vice President, Corporate Services
Gene C. Stahl
President, Drilling Operations
Douglas J. Strong
President, Completion and Production Services
AUDITORS
KPMG LLP
Calgary, Alberta
HEAD OFFICE
Suite 800, 525-8th Avenue SW
Calgary, Alberta, Canada T2P 1G1
Telephone: 403-716-4500
Facsimile: 403-264-0251
Email: info@precisiondrilling.com
www.precisiondrilling.com
|
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