Enhanced Investments - Financial Portal

Published: 2021-10-22

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
	(Stated in thousands of Canadian dollars)	September 30, 2021 December 31, 2020
	ASSETS
	Current assets:
	Cash	$		57,096 $	108,772
	Accounts receivable			249,553	207,209
	Inventory			25,770	26,282
	Total current assets			332,419	342,263
	Non-current assets:
	Deferred tax assets			1,098	1,098
	Right-of-use assets			52,337	55,168
	Property, plant and equipment			2,301,873	2,472,683
	Intangibles			25,087	27,666
	Investments and other assets (Note 5)			7,601	—
	Total non-current assets			2,387,996	2,556,615
	Total assets	$		2,720,415 $	2,898,878

	LIABILITIES AND EQUITY
	Current liabilities:
	Accounts payable and accrued liabilities	$		198,129 $	150,957
	Income taxes payable		654		3,702
	Current portion of lease obligations			11,152	11,285
	Current portion of long-term debt (Note 7)			2,225	896
	Total current liabilities			212,160	166,840

	Non-current liabilities:
	Share-based compensation (Note 9)			25,430	11,507
	Provisions and other			6,934	7,563
	Lease obligations			46,503	48,882
	Long-term debt (Note 7)			1,162,841	1,236,210
	Deferred tax liabilities			12,600	21,236
	Total non-current liabilities			1,254,308	1,325,398
	Shareholders’ equity:
	Shareholders’ capital (Note 10)			2,281,444	2,285,738
	Contributed surplus			76,753	72,915
	Deficit			(1,239,644 )	(1,089,594 )
	Accumulated other comprehensive income (Note 12)			135,394	137,581
	Total shareholders’ equity			1,253,947	1,406,640
	Total liabilities and shareholders’ equity	$		2,720,415 $	2,898,878

	See accompanying notes to condensed interim consolidated financial statements.
1

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF NET LOSS (UNAUDITED)
		Three Months Ended September 30, Nine Months Ended September 30,
	(Stated in thousands of Canadian dollars, except per share amounts)		2021	2020	2021	2020


	Revenue (Note 3)	$	253,813 $	164,822 $	691,645 $	734,065
	Expenses:
	Operating (Note 6)		184,422	103,147	485,998	457,926
	General and administrative (Note 6)		23,983	11,954	76,756	49,938
	Restructuring (Note 6)		—	1,950	—	18,061
	Earnings before income taxes, loss (gain) on repurchase of unsecured senior notes, gain on investments and other assets, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization		45,408	47,771	128,891	208,140

	Depreciation and amortization		69,431	77,588	211,148	241,626
	Gain on asset disposals		(3,261 )	(3,032 )	(6,224 )	(10,111 )
	Foreign exchange		464	1,161	104	2,924
	Finance charges (Note 8)		20,639	27,613	70,783	83,276
	Gain on investments and other assets		(327 )	—	(327 )	—
	Loss (gain) on repurchase of unsecured senior notes		—	(27,971 )	9,520	(29,942 )
	Loss before income taxes		(41,538 )	(27,588 )	(156,113 )	(79,633 )
	Income taxes:
	Current		890	2,946	2,462	6,121
	Deferred		(4,396 )	(2,058 )	(8,525 )	(3,134 )
			(3,506 )	888	(6,063 )	2,987
	Net loss	$	(38,032 ) $	(28,476 ) $	(150,050 ) $	(82,620 )
	Net loss per share: (Note 11)
	Basic	$	(2.86 ) $	(2.08 ) $	(11.27 ) $	(6.02 )
	Diluted	$	(2.86 ) $	(2.08 ) $	(11.27 ) $	(6.02 )
	See accompanying notes to condensed interim consolidated financial statements.
	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
		Three Months Ended September 30, Nine Months Ended September 30,
	(Stated in thousands of Canadian dollars)		2021	2020	2021	2020
	Net loss	$	(38,032 ) $	(28,476 ) $	(150,050 ) $	(82,620 )
	Unrealized gain (loss) on translation of assets and		33,364	(36,384 )	(9,182 )	49,313
	liabilities of operations denominated in foreign currency
	Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt		(24,544 )	29,404	6,995	(34,832 )

	Comprehensive loss	$	(29,212 ) $	(35,456 ) $	(152,237 ) $	(68,139 )
	See accompanying notes to condensed interim consolidated financial statements.
2

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
			Three Months Ended September 30, Nine Months Ended September 30,
	(Stated in thousands of Canadian dollars)		2021	2020	2021	2020
	Cash provided by (used in):
	Operations:
	Net loss	$	(38,032 ) $	(28,476 ) $	(150,050 ) $	(82,620 )
	Adjustments for:
	Long-term compensation plans		7,887	3,106	28,688	8,727
	Depreciation and amortization		69,431	77,588	211,148	241,626
	Gain on asset disposals		(3,261 )	(3,032 )	(6,224 )	(10,111 )
	Foreign exchange		415	1,293	1,437	2,447
	Finance charges		20,639	27,613	70,783	83,276
	Income taxes		(3,506 )	888	(6,063 )	2,987
	Other		2	(142 )	(562 )	(905 )
	Gain on investments and other assets		(327 )	—	(327 )	—
	Loss (gain) on repurchase of unsecured senior notes		—	(27,971 )	9,520	(29,942 )
	Income taxes paid		(1,134 )	(2,137 )	(5,200 )	(6,085 )
	Income taxes recovered		44	1,228	47	1,228
	Interest paid		(18,804 )	(22,644 )	(63,982 )	(75,687 )
	Interest received		171	175	347	504
	Funds provided by operations		33,525	27,489	89,562	135,445
	Changes in non-cash working capital balances		(11,654 )	14,461	(10,050 )	85,936
			21,871	41,950	79,512	221,381
	Investments:
	Purchase of property, plant and equipment		(19,500 )	(3,211 )	(48,191 )	(38,623 )
	Purchase of intangibles		—	—	—	(57 )
	Proceeds on sale of property, plant and equipment		4,476	5,705	10,390	16,416

	Purchase of investments and other assets		(3,000 )	—	(3,000 )	—
	Changes in non-cash working capital balances		500	(1,367 )	3,213	(6,773 )
			(17,524 )	1,127	(37,588 )	(29,037 )
	Financing:
	Issuance of long-term debt		—	123,029	696,341	128,059
	Repayments of long-term debt		(8,209 )	(158,921 )	(769,668 )	(204,386 )
	Repurchase of share capital		—	—	(4,294 )	(5,259 )
	Debt issuance costs		344	—	(9,450 )	—
	Debt amendment fees		(3 )	(22 )	(913 )	(690 )
	Lease payments		(1,633 )	(1,987 )	(4,963 )	(5,612 )
	Changes in non-cash working capital balances		(1,829 )	—	—	—
			(11,330 )	(37,901 )	(92,947 )	(87,888 )
	Effect of exchange rate changes on cash		642	(2,516 )	(653 )	(1,372 )
	Increase (decrease) in cash		(6,341 )	2,660	(51,676 )	103,084
	Cash, beginning of period		63,437	175,125	108,772	74,701
	Cash, end of period	$	57,096 $	177,785 $	57,096 $	177,785

	See accompanying notes to condensed interim consolidated financial statements.
3

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
					Accumulated
						Other
					Comprehensive
		Shareholders’		Contributed		Income	Total
	(Stated in thousands of Canadian dollars)		Capital	Surplus	(Note 12)		Deficit	Equity
	Balance at January 1, 2021	$ 2,285,738 $							72,915 $	137,581 $ (1,089,594 ) $ 1,406,640
	Net loss for the period		—						—	— (150,050 ) (150,050 )
	Other comprehensive loss for the period		—						—	(2,187 )	—	(2,187 )
	Share repurchases		(4,294 )						—	—	—	(4,294 )
	Share-based compensation reclassification		—						(2,349 )	—	—	(2,349 )
	Share-based compensation expense		—						6,187	—	—	6,187
	Balance at September 30, 2021	$ 2,281,444 $							76,753 $	135,394 $ (1,239,644 ) $ 1,253,947


					Accumulated
						Other
		Shareholders’		Contributed	Comprehensive	Total
	(Stated in thousands of Canadian dollars)		Capital	Surplus		Income	Deficit	Equity
	Balance at January 1, 2020	$ 2,296,378 $		66,255 $	134,255 $ (969,456 ) $ 1,527,432
	Net loss for the period		—						—	—	(82,620 )	(82,620 )
	Other comprehensive income for the period		—						—	14,481	—	14,481
	Share repurchases		(5,259 )						—	—	—	(5,259 )
	Redemption of non-management director DSUs		677						(502 )	—	—	175
	Share-based compensation reclassification		—						(1,498 )	—	—	(1,498 )
	Share-based compensation expense		—						8,842	—	—	8,842
	Balance at September 30, 2020	$ 2,291,796 $		73,097 $	148,736 $ (1,052,076 ) $ 1,461,553

	See accompanying notes to condensed interim consolidated financial statements.
4

	NOTES TO CONDENSED 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 interim consolidated 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 interim consolidated 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, 2020.
	These condensed interim consolidated 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, 2020.
	These condensed interim consolidated financial statements were approved by the Board of Directors on October 20, 2021.
	(b) Use of Estimates and Judgments
	The preparation of the condensed interim consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingencies. These estimates and judgments are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The estimation of anticipated future events involves uncertainty and, consequently, the estimates used in preparation of the condensed interim consolidated financial statements may change as future events unfold, more experience is acquired, or the Corporation’s operating environment changes.
	Significant estimates and judgments used in the preparation of these condensed interim consolidated financial statements remained unchanged from those disclosed in the Corporation’s consolidated audited annual financial statements for the year ended December 31, 2020. As described in Note 4 of the consolidated audited annual financial statements for the year ended December 31, 2020, due to the outbreak of the Novel Coronavirus (COVID-19) and the resulting impact on the economy and in particular the prices of oil and natural gas, the estimates and judgments used to prepare these financial statements were subject to a higher degree of measurement uncertainty.
	NOTE 3. REVENUE
	(a) Disaggregation of revenue
	The following table includes a reconciliation of disaggregated revenue by reportable segment. Revenue has been disaggregated by primary geographical market and type of service provided.
5

				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Three Months Ended September 30, 2021		Services	Services				Eliminations	Total
	United States		$	96,751 $		3,301 $					— $	— $		100,052
	Canada		93,869		24,842					—	(1,287 )		117,424
	International		36,337		—					—	—		36,337
		$	226,957 $		28,143 $					— $	(1,287 ) $		253,813

	Day rate/hourly services	$	223,380 $		28,143 $					— $	(198 ) $		251,325
	Directional services		2,028		—					—	—		2,028
	Other		1,549		—					—	(1,089 )	460
		$	226,957 $		28,143 $					— $	(1,287 ) $		253,813


				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Three Months Ended September 30, 2020		Services	Services				Eliminations	Total
	United States	$	73,974 $		2,714 $					— $	(1 ) $		76,687
	Canada		35,906		11,729					—	(393 )		47,242
	International			40,893		—					—	—		40,893
		$	150,773 $		14,443 $					— $	(394 ) $		164,822

	Day rate/hourly services	$	133,385 $		14,443 $					— $	(62 ) $		147,766
	Shortfall payments/idle but contracted		12,731		—					—	—		12,731
	Turnkey drilling services		3,328		—					—	—		3,328
	Directional services											485	—		—	—	485
	Other											844	—		—	(332 )	512
		$	150,773 $		14,443 $					— $	(394 ) $		164,822



				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Nine Months Ended September 30, 2021		Services	Services				Eliminations	Total
	United States		$	269,553 $		9,149 $					— $	(1 ) $		278,701
	Canada			234,659		72,205					—	(2,740 )		304,124
	International			108,820		—					—	—		108,820
			$	613,032 $		81,354 $					— $	(2,741 ) $		691,645

	Day rate/hourly services	$	590,995 $		81,354 $					— $	(358 ) $		671,991
	Shortfall payments/idle but contracted											235	—		—	—	235
	Turnkey drilling services		9,630		—					—	—		9,630
	Directional services		7,871		—					—	—		7,871
	Other		4,301		—					—	(2,383 )		1,918
		$	613,032 $		81,354 $					— $	(2,741 ) $		691,645



6

				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Nine Months Ended September 30, 2020		Services	Services				Eliminations	Total
	United States		$	347,598 $	11,757 $						— $	(11 ) $		359,344
	Canada		188,295	41,874						—	(1,615 )		228,554
	International		146,167		—					—	—		146,167
		$	682,060 $	53,631 $						— $	(1,626 ) $		734,065

	Day rate/hourly services	$	619,847 $	53,631 $						— $	(309 ) $		673,169
	Shortfall payments/idle but contracted		41,550		—					—	—		41,550
	Turnkey drilling services		7,930		—					—	—		7,930
	Directional services		8,084		—					—	—		8,084
	Other		4,649		—					—	(1,317 )		3,332
		$	682,060 $	53,631 $						— $	(1,626 ) $		734,065

	(b) Seasonality
	Precision has operations that are carried on in Canada which represent approximately 44% (2020 - 31%) of consolidated revenue for the nine months ended September 30, 2021 and 36% (2020 - 36%) of consolidated total assets as at September 30, 2021. 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 4. SEGMENTED INFORMATION
	The Corporation has two reportable operating segments; Contract Drilling Services and Completion and Production Services. Contract Drilling Services includes drilling rigs, procurement and distribution of oilfield supplies, and manufacture, sale and repair of drilling equipment. Completion and Production Services includes service rigs, oilfield equipment rental and camp and catering services. The Corporation provides services primarily in Canada, the United States and certain international locations.

					Completion
				Contract		and	Inter-
				Drilling	Production	Corporate and Other	Segment
	Three Months Ended September 30, 2021			Services	Services		Eliminations		Total
	Revenue		$ 226,957 $		28,143 $			— $	(1,287 ) $ 253,813
	Operating earnings (loss)			(4,332 )	1,570 (18,000 )						— (20,762 )
	Depreciation and amortization			62,751	4,004					2,676	—	69,431
	Gain on asset disposals			(3,035 )		(95 )		(131 )			—	(3,261 )
	Total assets		2,453,922		127,186 139,307						— 2,720,415
	Capital expenditures			18,337	1,143			20			—	19,500

7


				Completion
		Contract			and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Three Months Ended September 30, 2020		Services		Services				Eliminations	Total
	Revenue	$ 150,773 $		14,443 $				— $	(394 ) $ 164,822
	Operating earnings (loss)		(16,397 )			167 (10,555 )		— (26,785 )
	Depreciation and amortization		70,675		4,014	2,899	—		77,588
	Gain on asset disposals		(2,684 )		(236 )					(112 )	—	(3,032 )
	Total assets	2,699,247		127,792 246,285			— 3,073,324
	Capital expenditures		2,906		207			98	—		3,211


				Completion
		Contract			and		Inter-
		Drilling		Production		Corporate and Other	Segment
	Nine Months Ended September 30, 2021		Services		Services				Eliminations	Total
	Revenue	$ 613,032 $		81,354 $				— $	(2,741 ) $ 691,645
	Operating earnings (loss)		(22,611 )			6,225 (59,647 )		— (76,033 )
	Depreciation and amortization	191,084		11,859		8,205	— 211,148
	Gain on asset disposals		(5,355 )		(551 )					(318 )	—	(6,224 )
	Total assets	2,453,922		127,186 139,307			— 2,720,415
	Capital expenditures		45,460		2,553					178	—	48,191


				Completion
		Contract			and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Nine Months Ended September 30, 2020		Services		Services				Eliminations	Total
	Revenue	$ 682,060 $		53,631 $				— $	(1,626 ) $ 734,065
	Operating earnings (loss)		25,096		(5,219 ) (43,252 )		— (23,375 )
	Depreciation and amortization	220,461		12,416		8,749	— 241,626
	Gain on asset disposals		(8,617 )		(1,237 )					(257 )	— (10,111 )
	Total assets	2,699,247		127,792 246,285			— 3,073,324
	Capital expenditures		36,261		2,086					333	—	38,680

	A reconciliation of total segment operating earnings (loss) to loss before taxes is as follows:
			Three Months Ended September 30, Nine Months Ended September 30,
				2021		2020	2021	2020
	Total segment operating loss		$	(20,762 ) $	(26,785 ) $		(76,033 ) $		(23,375 )
	Deduct:
	Foreign exchange			464		1,161	104		2,924
	Finance charges			20,639		27,613	70,783		83,276
	Gain on investments and other assets			(327 )		—	(327 )	—
	Loss (gain) on repurchase of unsecured senior notes			—	(27,971 )		9,520		(29,942 )
	Loss before income taxes		$	(41,538 ) $	(27,588 ) $			(156,113 ) $	(79,633 )
	NOTE 5. DISPOSAL OF DIRECTIONAL DRILLING
	During the third quarter of 2021, Precision sold its directional drilling business to Cathedral Energy Services Ltd. (Cathedral) for a purchase price of $6 million resulting in a gain on disposal of $1 million. The directional drilling business was previously contained within the Contract Drilling Services segment.
	The purchase price was satisfied through the issuance of 13,400,000 Cathedral common shares, along with warrants to purchase an additional 2,000,000 Cathedral common shares at a price of $0.60 per common share within a two-year period.
8

	In addition to the statutory hold period, the parties agreed to resale restrictions on the common share consideration that limits the timing and quantities of common shares Precision can sell over a two-year period. The Cathedral common shares and share purchase warrants held by Precision are presented as long-term investments and other assets and will be revalued at each reporting period using Level I and II inputs, respectively.
	Pursuant to the transaction agreement, Precision fully disposed of its directional drilling operating assets and personnel, along with $3 million cash to support Cathedral’s growth and expansion.
	NOTE 6. RESTRUCTURING AND OTHER
	For the three and nine months ended September 30, 2020, Precision incurred restructuring charges of $2 million and $18 million, respectively. These charges were comprised of severance, as the Corporation aligned its cost structure to reflect reduced global activity, and certain costs associated with the shutdown of the directional drilling operations in the United States.
	In response to the economic slowdown caused by COVID-19, governments enacted various employer assistance and economic stimulus programs. In 2020, the Government of Canada introduced the Canadian Emergency Wage Subsidy program. For the three and nine months ended September 30, 2021, Precision recognized $6 million (2020 - $8 million) and $24 million (2020 - $16 million) of salary and wage subsidies, respectively. For the nine months ended September 30, 2021, these subsidies were presented as reductions of operating and general and administrative expense of $21 million (2020 - $12 million) and $3 million (2020 - $4 million), respectively.
	NOTE 7. LONG-TERM DEBT
				Canadian Facilities and
			U.S. Denominated Facilities	Translated U.S. Facilities
			September 30, December 31, September 30, December 31,
					2021	2020	2021	2020

	Current Portion of Long-Term Debt
	Canadian Real Estate Credit Facility	US $			— US $	— $	1,333 $	—
	U.S. Real Estate Credit Facility				704	704					892	896
										US $				704 US $	704 $	2,225 $	896

	Long-Term Debt
	Senior Credit Facility	US $	161,000 US $			74,650 $	203,886 $						95,041
	Canadian Real Estate Credit Facility				—	—	18,000	—
	U.S. Real Estate Credit Facility				9,269	9,797	11,738						12,474
	Unsecured Senior Notes:
									7.75% senior notes due 2023					—	285,734		—	363,782
									5.25% senior notes due 2024					—	263,205		—	335,099
									7.125% senior notes due 2026		347,765				347,765	440,399			442,757
									6.875% senior notes due 2029		400,000	—	506,548	—
		US $	918,034 US $			981,151	1,180,571						1,249,153
	Less net unamortized debt issue costs and original issue								(17,730 )						(12,943 )
	discount
								$	1,162,841 $ 1,236,210


9

							Debt Issue
			Canadian	U.S.			Costs and
		Senior	Real Estate		Real Estate	Unsecured	Original
		Credit	Credit	Credit		Senior		Issue
		Facility	Facility	Facility		Notes	Discount	Total
	Current								$	— $			— $	896 $						— $	— $	896
	Long-term									95,041			—	12,474 1,141,638			(12,943 ) 1,236,210
	Balance December 31, 2020									95,041			—	13,370 1,141,638			(12,943 ) 1,237,106
	Changes from financing cash flows:
	Proceeds from unsecured senior notes									—			—	— 482,064				— 482,064
	Proceeds from Senior Credit Facility									194,277			—	—						—	— 194,277
	Proceeds from Real Estate Credit Facility	—	20,000	—						—	—				20,000
	Repayment of unsecured senior notes									—			—	— (676,058 )				— (676,058 )
	Repayment of Senior Credit Facility									(92,282 )			—	—						—	—		(92,282 )
	Repayment of Real Estate Credit Facility	—	(667 )	(661 )						—	—				(1,328 )
	Payment of debt issue costs									—			—	—						—	(9,450 )			(9,450 )
										197,036	19,333	12,709		947,644	(22,393 ) 1,154,329
	Loss on repurchase of unsecured senior notes									—			—	—						9,520	—	9,520
	Amortization of debt issue costs									—			—	—						—	8,185	8,185
	Original issue discount									—			—	—						3,628	(3,520 )	108
	Foreign exchange adjustment									6,850			—	(79 )		(13,845 )		(2 )				(7,076 )
	Balance at September 30, 2021								$ 203,886 $	19,333 $	12,630 $ 946,947 $ (17,730 ) $ 1,165,066

	Current								$	— $	1,333 $	892 $						— $	— $	2,225
	Long-term									203,886	18,000	11,738		946,947	(17,730 ) 1,162,841
									$ 203,886 $	19,333 $	12,630 $ 946,947 $ (17,730 ) $ 1,165,066

	At September 30, 2021, Precision was in compliance with the covenants of the Senior Credit Facility and Real Estate Credit Facilities.
	Long-term debt obligations at September 30, 2021 will mature as follows:
	2021						$	556
	2022							2,225
	2023							2,225
	2024							2,225
	Thereafter										1,175,565
							$				1,182,796

	Senior Credit Facility
	On June 18, 2021, Precision agreed with the lenders of its Senior Credit Facility to extend the facility’s maturity date and extend and amend certain financial covenants during the Covenant Relief Period. The maturity date of the Senior Credit Facility was extended to June 18, 2025, however, US$53 million of the US$500 million will expire on November 21, 2023.
	The lenders agreed to extend the Covenant Relief Period to September 30, 2022 and amended the consolidated Covenant EBITDA to consolidated interest coverage ratio for the most recent four consecutive quarters to be greater than or equal to 1.75:1 for the period ended September 30, 2021, 2.0:1, for the periods ending December 31, 2021 and March 31, 2022, 2.25:1 for the periods ending June 30, 2022 and September 30, 2022 and 2.5:1 for periods ending thereafter.
	During the Covenant Relief Period, Precision’s distributions in the form of dividends, distributions and share repurchases are restricted to a maximum of US$25 million in each of 2021 and 2022, subject to a pro forma senior net leverage ratio (as defined in the credit agreement) of less than or equal to 1.75:1.
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	During 2021, the North American and acceptable secured foreign assets must directly account for at least 65% of consolidated Covenant EBITDA calculated quarterly on a rolling twelve-month basis, increasing to 70% thereafter. Precision also has the option to voluntarily terminate the Covenant Relief Period prior to September 30, 2022.
	The Senior Credit Facility limits the redemption and repurchase of junior debt subject to a pro forma senior net leverage covenant test of less than or equal to 1.75:1.
	The Senior Credit Facility contains certain covenants that place restrictions on Precision’s ability to incur or assume additional indebtedness; dispose of assets; 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.
	Unsecured Senior Notes
	On June 15, 2021, Precision issued US$400 million of 6.875% unsecured senior notes due in 2029 in a private offering. These unsecured senior notes were issued at a price equal to 99.253% of the face value, resulting in a US$3 million original issue discount. The original issue discount will be amortized over the life of the notes using the effective interest rate method.
	The net proceeds from the issuance along with amounts drawn on the Senior Credit Facility were used to redeem in full US$286 million aggregate principal amount of the 7.750% unsecured senior notes due 2023 and redeem in full US$263 million aggregate principal amount of the 5.250% unsecured senior notes due 2024 for US$557 million plus accrued and unpaid interest resulting in a loss on redemption of US$8 million. The redemption of the unsecured senior notes occurred on June 16, 2021 and interest ceased to accrue on the notes on that date.
		6.875% Unsecured Senior Notes due in 2029
		These unsecured senior notes bear interest at a fixed rate of 6.875% per annum and mature on January 15, 2029. Interest is payable semi-annually on January 15 and July 15 of each year, commencing January 15, 2022.
		These notes are unsecured, ranking equally with existing and future senior unsecured indebtedness, and have been guaranteed by current and future U.S. and Canadian subsidiaries that guarantee the Senior Credit Facility. These notes contain certain covenants that limit Precision’s ability and the ability of certain subsidiaries to incur additional indebtedness and issue preferred stock; create liens; make restricted payments; create or permit to restrict the ability of Precision or certain subsidiaries to make certain payments and distributions; engage in amalgamations, mergers or consolidations; make certain dispositions and transfers of assets; and engage in transactions with affiliates. If the notes receive an investment grade rating by Standard & Poor’s Financial Services, Moody’s Investors Service or Fitch Ratings and Precision and its subsidiaries are not in default under the indenture governing the notes, then Precision will not be required to comply with particular covenants contained in the indenture.
		Prior to June 15, 2024, Precision may redeem up to 35% of the 6.875% unsecured senior notes due 2029 with the net proceeds of certain equity offerings at a redemption price equal to 106.875% of the principal amount plus accrued interest. Prior to January 15, 2025, Precision may redeem these notes in whole or in part at 100.0% of their principal amount, plus accrued interest and the greater of 1.0% of the principal amount of the note to be redeemed and the excess, if any, of the present value of the January 15, 2025 redemption price plus required interest payments through January 15, 2025 (calculated using the U.S. Treasury rate plus 50 basis points) over the principal amount of the note. As well, Precision may redeem these notes in whole or in part at any time on or after January 15, 2025 and before January 15, 2027, at redemption prices ranging between 103.438% and 101.719% of their principal amount plus accrued interest. Any time on or after January 15, 2027, these notes can be redeemed for their principal amount plus accrued interest. Upon specified change of control events, each holder of a note will have the right to sell to Precision all or a portion of its notes at a purchase price in cash equal to 101% of the principal amount, plus accrued interest to the date of purchase.
	Canadian Real Estate Credit Facility
	In March 2021, Precision established a Canadian Real Estate Credit Facility in the amount of $20 million. The facility matures in March 2026 and is secured by real properties in Alberta, Canada. Principal plus interest payments are due quarterly, based on 15-year straight-line amortization with any unpaid principal and accrued interest due at maturity. Interest is calculated using a CDOR rate plus margin.
	The Canadian Real Estate Credit Facility contains certain affirmative and negative covenants and events of default, customary for this type of transactions. Under the terms of the Canadian Real Estate Credit Facility, Precision must maintain
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	a consolidated interest coverage ratio in accordance with the Senior Credit Facility, described above, as of the last day of each period of four consecutive fiscal quarters. In the event the Senior Credit Facility expires, is cancelled or is terminated, the consolidated interest coverage ratios in effect at that time shall remain in place for the remaining duration of the Canadian Real Estate Credit Facility.
	NOTE 8. FINANCE CHARGES
			Three Months Ended September 30, Nine Months Ended September 30,
			2021	2020	2021	2020
	Interest:
	Long-term debt	$	19,138 $	24,708 $	59,893 $	76,594
	Lease obligations		681	736	2,060	2,452
	Other		1	—	6	107
	Income		(22 )	(235 )	(178 )	(547 )
	Amortization of debt issue costs, loan commitment fees and original issue discount		841	2,404	9,002	4,670

	Finance charges		$	20,639 $	27,613 $	70,783 $	83,276

	NOTE 9. SHARE-BASED COMPENSATION PLANS
	Liability Classified Plans
				Executive	Non-
		Restricted	Performance	Performance			Management
		Share	Share	Share	Directors’
			Units (a)	Units (a)	Units(b)	DSUs (c)	Total
	December 31, 2020	$	6,624 $	4,751 $	6,833 $	1,609 $ 19,817
	Expensed during period		15,843	16,317	14,582	3,434	50,176
	Reclassified to contributed surplus							—	—	(3,639 )		—	(3,639 )
	Payments and redemptions		(5,747 )	(1,866 )	(4,808 )						— (12,421 )
	September 30, 2021	$ 16,720 $	19,202 $	12,968 $	5,043 $ 53,933

	Current	$ 10,657 $	4,878 $	12,968 $						— $ 28,503
	Long-term		6,063	14,324				—	5,043	25,430
		$ 16,720 $	19,202 $	12,968 $	5,043 $ 53,933

	(a) Restricted Share Units and Performance Share Units
	A summary of the activity under the Restricted Share Unit (RSU) and the Performance Share Unit (PSU) plans are presented below:

							RSUs	PSUs
					Outstanding						Outstanding
	December 31, 2020						484,782	565,379
	Granted						354,710	487,190
	Redeemed						(216,820 )	(40,515 )
	Forfeited						(21,673 )	(24,539 )
	September 30, 2021						600,999	987,515

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	(b) Executive Performance Share Units
	A summary of the activity under Executive Performance Share Unit (Executive PSU) share-based incentive plan is presented below:

			Executive PSUs
			Outstanding
	December 31, 2020			288,707
	Redeemed			(96,355 )
	Forfeited			(2,388 )
	September 30, 2021			189,964

	Precision grants Executive PSUs to certain senior executives. On December 31, 2020, Precision changed its settlement intentions and anticipates settling vested Executive PSUs in cash. Included in net loss for the three and nine months ended September 30, 2021 is an expense of $3 million (2020 - $2 million) and $15 million (2020 - $8 million), respectively.
	(c) Non-Management Directors – Deferred Share Unit Plan
	A summary of the activity under the non-management director Deferred Share Unit (DSU) plan is presented below:
DSUs
			Outstanding
	December 31, 2020			77,574
	Granted			20,927
	September 30, 2021			98,501

	Equity Settled Plans
	(d) Option Plan
	A summary of the activity under the option plan is presented below:

		Weighted
						Range of	Average
	Canadian share options					Outstanding	Exercise Price		Exercise Price Exercisable
	December 31, 2020					148,665 $ 87.00 — 286.20 $	138.86		141,156
	Forfeited					(33,060 ) 89.20 — 286.20	193.10
	September 30, 2021					115,605 $ 87.00 — 146.40 $	123.35		115,605


		Weighted
						Range of	Average
						Exercise Price	Exercise Price
	U.S. share options				Outstanding	(US$)		(US$) Exercisable
	December 31, 2020					283,793 $ 51.20 — 183.60 $	86.23		239,521
	Forfeited					(15,950 ) 183.60 — 183.60	183.60
	September 30, 2021					267,843 $ 51.20 — 115.80 $	80.43		257,854

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	(e) Non-Management Directors – Deferred Share Unit Plan
	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:
DSUs
		Outstanding
	December 31, 2020 and September 30, 2021	1,470

	NOTE 10. SHAREHOLDERS’ CAPITAL Common shares
			Number	Amount
	Balance December 31, 2020		13,459,593 $	2,285,738
	Share repurchase		(155,168 )	(4,294 )
	Balance September 30, 2021		13,304,425 $	2,281,444

	(a) Share Consolidation
	On November 12, 2020, Precision Drilling Corporation completed a 20:1 consolidation of its common shares. Comparative period share-based compensation award units, share option quantities, share option exercise prices and basic and diluted weighted average shares outstanding have been retrospectively adjusted to reflect the share consolidation.
	(b) Normal Course Issuer Bid
	During the third quarter of 2021, the Toronto Stock Exchange approved Precision’s application to renew its Normal Course Issuer Bid (NCIB). Under the terms of the NCIB, Precision may purchase and cancel up to a maximum of 1,317,158 common shares, representing 10% of the public float of common shares as of August 13, 2021. The NCIB will terminate no later than August 26, 2022.
	NOTE 11. PER SHARE AMOUNTS
	The following tables reconcile the net loss and weighted average shares outstanding used in computing basic and diluted net loss per share:
					Three Months Ended September 30, Nine Months Ended September 30,
						2021	2020	2021	2020
	Net loss - basic and diluted				$	(38,032 ) $	(28,476 ) $	(150,050 ) $	(82,620 )

					Three Months Ended September 30, Nine Months Ended September 30,
	(Stated in thousands)					2021	2020	2021	2020
	Weighted average shares outstanding – basic					13,304	13,725	13,319		13,736
	Effect of share options and other equity compensation					—	—	—	—
	plans
	Weighted average shares outstanding – diluted					13,304	13,725	13,319		13,736

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	NOTE 12. ACCUMULATED OTHER COMPREHENSIVE INCOME
					Tax Benefit
		Unrealized		Foreign	Related to
			Foreign	Exchange		Net
		Currency		Gain (Loss)	Investment		Accumulated
		Translation		on Net	Hedge	Other
			Gains	Investment	of Long-		Comprehensive
			(Losses)	Hedge	Term Debt		Income (Loss)
	December 31, 2020	$	483,657 $ (351,474 ) $				5,398 $	137,581
	Other comprehensive income (loss)		(9,182 )	6,995		—	(2,187 )
	September 30, 2021	$	474,475 $ (344,479 ) $				5,398 $	135,394

	NOTE 13. FAIR VALUES OF FINANCIAL INSTRUMENTS
	The carrying values of cash, accounts receivable, and accounts payable and accrued liabilities approximates their fair value due to the relatively short period to maturity of the instruments. At the end of each reporting period, investments and other assets are measured at their estimated fair value, with changes in fair value recognized in profit or loss. Amounts drawn on the Senior Credit Facility and the Canadian and U.S. Real Estate Credit Facilities are measured at amortized cost and approximate fair value as this indebtedness is subject to floating rates of interest. The fair value of the unsecured senior notes at September 30, 2021 was approximately $982 million (December 31, 2020 – $1,023 million).
	Financial assets and liabilities recorded or disclosed at fair value in the consolidated statement of financial position 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 the Cathedral common shares held by Precision is based on a level I input, Cathedral’s unadjusted share price. The fair value of the common share purchase warrants is estimated using a Black-Scholes option pricing model, which uses level II inputs, including estimated standard deviation, annual risk-free interest rate, share price and exercise price of the warrant.
	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.

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	SHAREHOLDER INFORMATION	CORPORATE 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.	DIRECTORS Michael R. Culbert William T. Donovan Brian J. Gibson Steven W. Krablin Susan M. MacKenzie Kevin O. Meyers Kevin A. Neveu David W. Williams
	TRANSFER AGENT AND REGISTRAR Computershare Trust Company of Canada Calgary, Alberta
	TRANSFER POINT Computershare Trust Company NA Canton, Massachusetts
		OFFICERS Kevin A. Neveu President and Chief Executive Officer
	Q3 2021 TRADING PROFILE Toronto (TSX: PD) High: $54.72 Low: $35.82 Close: $51.20 Volume Traded: 6,287,505
		Veronica H. Foley Senior Vice President, General Counsel and Chief Compliance Officer
		Carey T. Ford Senior Vice President and Chief Financial Officer Shuja U. Goraya Chief Technology Officer
	New York (NYSE: PDS) High: US$44.52 Low: US$28.00 Close: US$40.41 Volume Traded: 3,146,101
		Darren J. Ruhr Chief Administrative Officer
	ACCOUNT QUESTIONS Precision’s Transfer Agent can help you with a variety of shareholder related services, including:
		Gene C. Stahl Chief Marketing Officer
	• change of address • lost unit certificates • transfer of shares to another person • estate settlement
		AUDITORS KPMG LLP Calgary, Alberta
	Computershare Trust Company of Canada 100 University Avenue 9th Floor, North Tower Toronto, Ontario M5J 2Y1 Canada
		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
	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 and on the EDGAR website www.sec.gov

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