Enhanced Investments - Financial Portal

Published: 2021-07-23

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
	(Stated in thousands of Canadian dollars)		June 30, 2021 December 31, 2020
	ASSETS
	Current assets:
	Cash	$			63,437 $	108,772
	Accounts receivable				207,743	207,209
	Inventory				24,761	26,282
	Total current assets				295,941	342,263
	Non-current assets:
	Deferred tax assets				1,098	1,098
	Right-of-use assets				51,869	55,168
	Property, plant and equipment		2,321,160			2,472,683
	Intangibles				26,241	27,666
	Total non-current assets		2,400,368			2,556,615
	Total assets	$	2,696,309 $			2,898,878

	LIABILITIES AND SHAREHOLDERS’ EQUITY
	Current liabilities:
	Accounts payable and accrued liabilities	$			166,300 $	150,957
	Income taxes payable			885		3,702
	Current portion of lease obligations				11,043	11,285
	Current portion of long-term debt (Note 7)				2,206	896
	Total current liabilities				180,434	166,840

	Non-current liabilities:
	Share-based compensation (Note 9)				19,605	11,507
	Provisions and other				6,787	7,563
	Lease obligations				45,953	48,882
	Long-term debt (Note 7)		1,145,317			1,236,210
	Deferred tax liabilities				16,557	21,236
	Total non-current liabilities		1,234,219			1,325,398
	Shareholders’ equity:
	Shareholders’ capital (Note 10)		2,281,444			2,285,738
	Contributed surplus				75,250	72,915
	Deficit		(1,201,612 )			(1,089,594 )
	Accumulated other comprehensive income (Note 12)				126,574	137,581
	Total shareholders’ equity		1,281,656			1,406,640
	Total liabilities and shareholders’ equity	$	2,696,309 $			2,898,878

	See accompanying notes to condensed interim consolidated financial statements.
1

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


	Revenue (Note 3)	$		201,359 $		189,759 $	437,832 $				569,243
	Expenses:
	Operating (Note 6)			140,955		106,552	301,576				354,779
	General and administrative (Note 6)			31,460		18,449	52,773				37,984
	Restructuring (Note 6)			—		6,293	—		16,111
	Earnings before income taxes, loss (gain) on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization			28,944		58,465	83,483				160,369

	Depreciation and amortization			69,704		81,124	141,717				164,038
	Gain on asset disposals			(904 )		(3,470 )	(2,963 )				(7,079 )
	Foreign exchange			(296 )	(928 )	(360 )				1,763
	Finance charges (Note 8)			27,698		28,083	50,144				55,663
	Loss (gain) on repurchase of unsecured senior notes			9,520		(1,121 )	9,520				(1,971 )
	Loss before income taxes			(76,778 )		(45,223 )	(114,575 )				(52,045 )
	Income taxes:
	Current			788		2,116	1,572				3,175
	Deferred			(1,654 )		1,528	(4,129 )				(1,076 )
				(866 )		3,644	(2,557 )				2,099
	Net loss	$		(75,912 ) $		(48,867 ) $	(112,018 ) $				(54,144 )
	Net loss per share: (Note 11)
	Basic	$		(5.71 ) $		(3.56 ) $	(8.41 ) $				(3.94 )
	Diluted	$		(5.71 ) $		(3.56 ) $	(8.41 ) $				(3.94 )
	See accompanying notes to condensed interim consolidated financial statements.
	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
			Three Months Ended June 30,	Six Months Ended June 30,
	(Stated in thousands of Canadian dollars)			2021	2020			2021	2020
	Net loss	$		(75,912 ) $		(48,867 ) $	(112,018 ) $				(54,144 )
	Unrealized gain (loss) on translation of assets and liabilities of operations denominated in foreign currency			(21,548 )		(71,311 )	(42,546 )				85,697
	Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt			15,630		53,920	31,539				(64,236 )

	Tax expense related to net investment hedge of long- term debt			(285 )	—			—	—

	Comprehensive loss	$		(82,115 ) $		(66,258 ) $	(123,025 ) $				(32,683 )
	See accompanying notes to condensed interim consolidated financial statements.
2

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
			Three Months Ended June 30,		Six Months Ended June 30,
	(Stated in thousands of Canadian dollars)					2021	2020			2021	2020
	Cash provided by (used in):
	Operations:
	Net loss	$	(75,912 ) $					(48,867 ) $	(112,018 ) $				(54,144 )
	Adjustments for:
	Long-term compensation plans		13,653					6,324	20,801				5,621
	Depreciation and amortization		69,704					81,124	141,717				164,038
	Gain on asset disposals					(904 )		(3,470 )	(2,963 )				(7,079 )
	Foreign exchange					464		(1,718 )	1,022				1,154
	Finance charges		27,698					28,083	50,144				55,663
	Income taxes					(866 )		3,644	(2,557 )				2,099
	Other					(567 )	(823 )	(564 )	(763 )
	Loss (gain) on repurchase of unsecured senior notes		9,520					(1,121 )	9,520				(1,971 )
	Income taxes paid		(3,905 )					(3,128 )	(4,066 )				(3,948 )
	Income taxes recovered					3	—			3	—
	Interest paid		(26,412 )					(33,548 )	(45,178 )				(53,043 )
	Interest received					131	139			176	329
	Funds provided by operations		12,607					26,639	56,037				107,956
	Changes in non-cash working capital balances		29,612					77,839	1,604				71,475
			42,219					104,478	57,641				179,431
	Investments:
	Purchase of property, plant and equipment		(20,255 )					(23,927 )	(28,691 )				(35,412 )
	Purchase of intangibles					—	—			—	(57 )
	Proceeds on sale of property, plant and equipment		2,590					5,021	5,914				10,711
	Changes in non-cash working capital balances		7,515					(1,880 )	2,713				(5,406 )
			(10,150 )					(20,786 )	(20,064 )				(30,164 )
	Financing:
	Issuance of long-term debt		676,341					5,030	696,341				5,030
	Repayments of long-term debt		(712,034 )					(4,911 )	(761,459 )				(45,465 )
	Repurchase of share capital					—	(15 )	(4,294 )				(5,259 )
	Debt issuance costs		(9,550 )	—	(9,794 )	—
	Debt amendment fees					(910 )	(647 )	(910 )	(668 )
	Lease payments		(1,709 )					(1,897 )	(3,330 )				(3,625 )
	Changes in non-cash working capital balances		1,829	—	1,829	—
			(46,033 )					(2,440 )	(81,617 )				(49,987 )
	Effect of exchange rate changes on cash					(430 )		(3,129 )	(1,295 )				1,144
	Increase (decrease) in cash		(14,394 )					78,123	(45,335 )				100,424
	Cash, beginning of period		77,831					97,002	108,772				74,701
	Cash, end of period	$	63,437 $					175,125 $	63,437 $				175,125

	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		—						—	— (112,018 ) (112,018 )
	Other comprehensive loss for the period		—						—	(11,007 )	— (11,007 )
	Share repurchases		(4,294 )						—	—	—	(4,294 )
	Share-based compensation reclassification		—						(1,958 )	—	—	(1,958 )
	Share-based compensation expense		—						4,293	—	—	4,293
	Balance at June 30, 2021	$ 2,281,444 $							75,250 $	126,574 $ (1,201,612 ) $ 1,281,656


					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		—						—	—	(54,144 )	(54,144 )
	Other comprehensive income for the period		—						—	21,461	—	21,461
	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		—						6,248	—	—	6,248
	Balance at June 30, 2020	$ 2,291,796 $		70,503 $	155,716 $ (1,023,600 ) $ 1,494,415

	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 July 21, 2021.
	(b) Use of Estimates and Judgements
	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 judgements 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 judgements 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 June 30, 2021		Services	Services				Eliminations	Total
	United States		$	90,128 $		2,540 $					— $	(1 ) $		92,667
	Canada		54,707		18,127					—	(563 )		72,271
	International		36,421		—					—	—		36,421
		$	181,256 $		20,667 $					— $	(564 ) $		201,359

	Day rate/hourly services	$	174,266 $		20,667 $					— $	(52 ) $		194,881
	Shortfall payments/idle but contracted											119	—		—	—	119
	Turnkey drilling services		3,684		—					—	—		3,684
	Directional services		2,064		—					—	—		2,064
	Other		1,123		—					—	(512 )	611
		$	181,256 $		20,667 $					— $	(564 ) $		201,359


				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Three Months Ended June 30, 2020		Services	Services				Eliminations	Total
	United States		$	111,670 $		1,416 $					— $	(10 ) $		113,076
	Canada			20,845		4,109					—	(494 )		24,460
	International		52,223		—					—	—		52,223
		$	184,738 $		5,525 $					— $	(504 ) $		189,759

	Day rate/hourly services	$	157,352 $		5,525 $					— $	(21 ) $		162,856
	Shortfall payments/idle but contracted		22,026		—					—	—		22,026
	Turnkey drilling services		3,534		—					—	—		3,534
	Directional services											472	—		—	—	472
	Other		1,354		—					—	(483 )	871
		$	184,738 $		5,525 $					— $	(504 ) $		189,759



				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Six Months Ended June 30, 2021		Services	Services				Eliminations	Total
	United States		$	172,802 $		5,848 $					— $	(1 ) $		178,649
	Canada			140,790		47,363					—	(1,453 )		186,700
	International			72,483		—					—	—		72,483
			$	386,075 $		53,211 $					— $	(1,454 ) $		437,832

	Day rate/hourly services	$	367,615 $		53,211 $					— $	(160 ) $		420,666
	Shortfall payments/idle but contracted											235	—		—	—	235
	Turnkey drilling services		9,630		—					—	—		9,630
	Directional services		5,843		—					—	—		5,843
	Other		2,752		—					—	(1,294 )		1,458
		$	386,075 $		53,211 $					— $	(1,454 ) $		437,832



6

				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Six Months Ended June 30, 2020		Services	Services				Eliminations	Total
	United States		$	273,624 $		9,043 $					— $	(10 ) $		282,657
	Canada		152,389	30,145						—	(1,222 )		181,312
	International		105,274		—					—	—		105,274
		$	531,287 $	39,188 $						— $	(1,232 ) $		569,243

	Day rate/hourly services	$	486,462 $	39,188 $						— $	(247 ) $		525,403
	Shortfall payments/idle but contracted		28,819		—					—	—		28,819
	Turnkey drilling services		4,602		—					—	—		4,602
	Directional services		7,599		—					—	—		7,599
	Other		3,805		—					—	(985 )		2,820
		$	531,287 $	39,188 $						— $	(1,232 ) $		569,243

	(b) Seasonality
	Precision has operations that are carried on in Canada which represent approximately 43% (2020 - 32%) of consolidated revenue for the six months ended June 30, 2021 and 36% (2020 - 34%) of consolidated total assets as at June 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, directional drilling, 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 June 30, 2021			Services	Services		Eliminations		Total
	Revenue		$ 181,256 $		20,667 $			— $	(564 ) $ 201,359
	Operating earnings (loss)			(14,803 )		611 (25,664 )					— (39,856 )
	Depreciation and amortization			63,101	3,854					2,749	—	69,704
	Gain on asset disposals			(595 )		(213 )		(96 )			—	(904 )
	Total assets		2,420,314		123,403 152,592						— 2,696,309
	Capital expenditures			19,685		506		64			—	20,255

7


				Completion
		Contract			and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Three Months Ended June 30, 2020		Services		Services				Eliminations	Total
	Revenue	$ 184,738 $			5,525 $			— $	(504 ) $ 189,759
	Operating earnings (loss)		3,642		(5,077 ) (17,754 )		— (19,189 )
	Depreciation and amortization		74,062		4,119	2,943	—		81,124
	Gain on asset disposals		(3,091 )		(262 )					(117 )	—	(3,470 )
	Total assets	2,824,762		127,823 251,648			— 3,204,233
	Capital expenditures		23,340		464					123	—	23,927


				Completion
		Contract			and		Inter-
		Drilling		Production		Corporate and Other	Segment
	Six Months Ended June 30, 2021		Services		Services				Eliminations	Total
	Revenue	$ 386,075 $		53,211 $				— $	(1,454 ) $ 437,832
	Operating earnings (loss)		(18,279 )			4,655 (41,647 )		— (55,271 )
	Depreciation and amortization	128,333			7,855	5,529	— 141,717
	Gain on asset disposals		(2,320 )		(456 )					(187 )	—	(2,963 )
	Total assets	2,420,314		123,403 152,592			— 2,696,309
	Capital expenditures		27,123		1,410					158	—	28,691


				Completion
		Contract			and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Six Months Ended June 30, 2020		Services		Services				Eliminations	Total
	Revenue	$ 531,287 $		39,188 $				— $	(1,232 ) $ 569,243
	Operating earnings (loss)		41,493		(5,386 ) (32,697 )		—		3,410
	Depreciation and amortization	149,786			8,402	5,850	— 164,038
	Gain on asset disposals		(5,933 )		(1,001 )					(145 )	—	(7,079 )
	Total assets	2,824,762		127,823 251,648			— 3,204,233
	Capital expenditures		33,355		1,879					235	—	35,469

	A reconciliation of total segment operating earnings (loss) to loss before taxes is as follows:
			Three Months Ended June 30,								Six Months Ended June 30,
				2021		2020	2021	2020
	Total segment operating earnings (loss)		$	(39,856 ) $	(19,189 ) $		(55,271 ) $		3,410
	Deduct:
	Foreign exchange			(296 )		(928 )	(360 )		1,763
	Finance charges			27,698		28,083	50,144		55,663
	Loss (gain) on repurchase of unsecured senior notes			9,520		(1,121 )	9,520		(1,971 )
	Loss before income taxes		$	(76,778 ) $	(45,223 ) $			(114,575 ) $	(52,045 )
	NOTE 5. IMPAIRMENT
	At June 30, 2021, Precision reviewed each of its Cash-Generating Units (CGU) and did not any identify indications of impairment and therefore, did not test its CGUs for impairment.
	NOTE 6. RESTRUCTURING AND OTHER
	In response to the economic slowdown caused by COVID-19, governments enacted various employer assistance and economic stimulus programs. In the second quarter of 2020, the Government of Canada introduced the Canadian
8

	Emergency Wage Subsidy program. For the three and six months ended June 30, 2021, Precision recognized $9 million (2020 - $9 million) and $18 million (2020 - $9 million) of salary and wage subsidies, respectively. For the six months ended June 30, 2021, these subsidies were presented as reductions of operating and general and administrative expense of $15 million (2020 - $6 million) and $3 million (2020 - $3 million), respectively.
	NOTE 7. LONG-TERM DEBT
					Canadian Facilities and
			U.S. Denominated Facilities		Translated U.S. Facilities

			June 30, December 31,	June 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	873	896
										US $						704 US $	704 $	2,206 $	896

	Long-Term Debt
	Senior Credit Facility	US $ 167,000 US $					74,650 $ 207,013 $			95,041
	Canadian Real Estate Credit Facility							—	—	18,334	—
	U.S. Real Estate Credit Facility		9,445				9,797	11,708						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	431,089				442,757
									6.875% senior notes due 2029		400,000	— 495,840	—
		US $ 924,210 US $					981,151 1,163,984	1,249,153
	Less net unamortized debt issue costs and original issue discount						(18,667 )						(12,943 )
						$ 1,145,317 $ 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									(84,629 )			—	—						—	—		(84,629 )
	Repayment of Real Estate Credit Facility	—	(333 )	(439 )						—	—	(772 )
	Payment of debt issue costs									—			—	—						—	(9,794 )			(9,794 )
										204,689	19,667	12,931		947,644	(22,737 ) 1,162,194
	Loss on repurchase of unsecured senior notes									—			—	—						9,520	—	9,520
	Amortization of debt issue costs									—			—	—						—	7,674	7,674
	Original issue discount									—			—	—						3,628	(3,612 )	16
	Foreign exchange adjustment									2,324			—	(350 )		(33,863 )		8				(31,881 )
	Balance at June 30, 2021								$ 207,013 $	19,667 $	12,581 $ 926,929 $ (18,667 ) $ 1,147,523

	Current								$	— $	1,333 $	873 $						— $	— $	2,206
	Long-term									207,013	18,334	11,708		926,929	(18,667 ) 1,145,317
									$ 207,013 $	19,667 $	12,581 $ 926,929 $ (18,667 ) $ 1,147,523

	At June 30, 2021, Precision was in compliance with the covenants of the Senior Credit Facility and Real Estate Credit Facilities.
	Long-term debt obligations at June 30, 2021 will mature as follows:
	2021						$	1,103
	2022							2,206
	2023							2,206
	2024							2,206
	Thereafter										1,158,469
							$				1,166,190

	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 periods ending June 30, 2021 and 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 commencing June 30, 2021. 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 June 30,		Six Months Ended June 30,
						2021	2020			2021	2020
	Interest:
	Long-term debt	$	19,893 $					26,276 $	40,755 $				51,886
	Lease obligations					678	786	1,379	1,716
	Other					—	107			5	107
	Income					(60 )	(164 )	(156 )	(312 )
	Amortization of debt issue costs, loan commitment fees and original issue discount					7,187		1,078	8,161	2,266

	Finance charges		$	27,698 $					28,083 $	50,144 $				55,663

	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		11,701				10,214	11,901			3,053		36,869
	Reclassified to contributed surplus		—							—	(2,171 )						—	(2,171 )
	Payments and redemptions		(5,423 )				(1,523 )	(4,808 )							— (11,754 )
	June 30, 2021	$ 12,902 $				13,442 $	11,755 $			4,662 $ 42,761

	Current	$	8,481 $				2,920 $	11,755 $							— $ 23,156
	Long-term		4,421				10,522	—			4,662		19,605
		$ 12,902 $				13,442 $	11,755 $			4,662 $ 42,761

	(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								346,360					479,610
	Redeemed								(211,713 )					(37,264 )
	Forfeited								(7,687 )				(6,690 )
	June 30, 2021								611,742					1,001,035

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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			(94,723 )
	June 30, 2021			193,984

	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 six months ended June 30, 2021 is an expense of $8 million (2020 - $3 million) and $12 million (2020 - $6 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			15,387
	June 30, 2021			92,961


	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
	June 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
	June 30, 2021					267,843 $ 51.20 — 115.80 $	80.43		256,965

	Included in net loss for the three and six months ended June 30, 2021 is an expense of $0.1 million (2020 - $0.2 million) and $0.2 million (2020 - $0.6 million), respectively. To reduce the dilution of the Corporation’s shares, Precision ceased the issuance of options in 2020.
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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 June 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 June 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
	Under the terms of Precision’s Normal Course Issuer Bid (NCIB), Precision may purchase and cancel up to a maximum of 1,199,883 common shares, representing 10% of the public float of common shares as of August 14, 2020. Purchases under the NCIB are made through the facilities of the TSX, the New York Stock Exchange and various other designated exchanges in accordance with applicable regulatory requirements at a price per common share representative of the market price at the time of acquisition. The NCIB will terminate no later than August 26, 2021.
	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 June 30,		Six Months Ended June 30,
							2021	2020	2021	2020
	Net loss - basic and diluted				$	(75,912 ) $	(48,867 ) $	(112,018 ) $	(54,144 )

						Three Months Ended June 30,		Six Months Ended June 30,
	(Stated in thousands)						2021	2020	2021	2020
	Weighted average shares outstanding – basic					13,304	13,712	13,327			13,741
	Effect of share options and other equity compensation plans						—	—	—	—

	Weighted average shares outstanding – diluted					13,304	13,712	13,327			13,741

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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)		(42,546 )	31,539		—		(11,007 )
	June 30, 2021	$	441,111 $ (319,935 ) $				5,398 $		126,574

	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. Amounts drawn on the Senior Credit Facility and the Canadian and U.S. Real Estate Credit Facilities, measured at amortized cost, approximate fair value as this indebtedness is subject to floating rates of interest. The fair value of the unsecured senior notes at June 30, 2021 was approximately $962 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 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
	Q2 2021 TRADING PROFILE Toronto (TSX: PD) High: $53.92 Low: $27.50 Close: $51.66 Volume Traded: 7,927,008
		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$43.63 Low: US$21.74 Close: US$41.70 Volume Traded: 5,384,652
		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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