Enhanced Investments - Financial Portal

Published: 2020-10-23

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
	(Stated in thousands of Canadian dollars)		September 30, 2020 December 31, 2019
	ASSETS
	Current assets:
	Cash	$		177,785 $	74,701
	Accounts receivable			175,243	310,204
	Inventory			29,137	31,718
	Income tax recoverable		—		1,142
	Total current assets			382,165	417,765
	Non-current assets:
	Deferred tax assets			5,179	4,724
	Right of use assets			59,571	66,142
	Property, plant and equipment			2,597,577	2,749,463
	Intangibles			28,832	31,746
	Total non-current assets			2,691,159	2,852,075
	Total assets	$		3,073,324 $	3,269,840

	LIABILITIES AND EQUITY
	Current liabilities:
	Accounts payable and accrued liabilities	$		145,726 $	199,478
	Income taxes payable			5,079	4,142
	Current portion of lease obligation			11,187	12,449
	Total current liabilities			161,992	216,069

	Non-current liabilities:
	Share-based compensation (Note 9)			5,261	8,830
	Provisions and other			9,434	9,959
	Lease obligation			52,267	54,980
	Long-term debt (Note 7)			1,359,800	1,427,181
	Deferred tax liabilities			23,017	25,389
	Total non-current liabilities			1,449,779	1,526,339
	Shareholders’ equity:
	Shareholders’ capital (Note 10)			2,291,796	2,296,378
	Contributed surplus			73,097	66,255
	Deficit			(1,052,076 )	(969,456 )
	Accumulated other comprehensive income (Note 12)			148,736	134,255
	Total shareholders’ equity			1,461,553	1,527,432
	Total liabilities and shareholders’ equity	$		3,073,324 $	3,269,840

	See accompanying notes to condensed interim consolidated financial statements.
1

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS) (UNAUDITED)
		Three Months Ended September 30, Nine Months Ended September 30,
	(Stated in thousands of Canadian dollars, except per share amounts)		2020	2019	2020	2019


	Revenue (Note 3)	$	164,822 $	375,552 $	734,065 $ 1,169,019
	Expenses:
	Operating (Note 6)		103,147	256,593	457,926	797,250
	General and administrative (Note 6)		11,954	21,064	49,938	78,432
	Restructuring (Note 6)		1,950	—	18,061	6,438
	Earnings before income taxes, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, impairment reversal, gain on asset disposals and depreciation and amortization
			47,771	97,895	208,140	286,899
	Depreciation and amortization		77,588	82,604	241,626	252,684
	Gain on asset disposals		(3,032 )	(3,944 )	(10,111 )	(46,853 )
	Impairment reversal		—	—	—	(5,810 )
	Foreign exchange		1,161	1,470	2,924	(4,416 )
	Finance charges (Note 8)		27,613	28,490	83,276	90,178
	Gain on repurchase of unsecured senior notes		(27,971 )	(2,239 )	(29,942 )	(3,637 )
	Earnings (loss) before income taxes		(27,588 )	(8,486 )	(79,633 )	4,753
	Income taxes:
	Current		2,946	1,540	6,121	4,553
	Deferred		(2,058 )	(6,492 )	(3,134 )	(7,479 )
			888	(4,952 )	2,987	(2,926 )
	Net earnings (loss)	$	(28,476 ) $	(3,534 ) $	(82,620 ) $	7,679
	Net earnings (loss) per share: (Note 11)
	Basic	$	(0.10 ) $	(0.01 ) $	(0.30 ) $	0.03
	Diluted	$	(0.10 ) $	(0.01 ) $	(0.30 ) $	0.03

	See accompanying notes to condensed interim consolidated financial statements.
	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
		Three Months Ended September 30, Nine Months Ended September 30,
	(Stated in thousands of Canadian dollars)		2020	2019	2020	2019
	Net earnings (loss)	$	(28,476 ) $	(3,534 ) $	(82,620 ) $	7,679
	Unrealized gain (loss) on translation of assets and liabilities of operations denominated in foreign currency
			(36,384 )	26,432	49,313	(64,932 )
	Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt, net of tax
			29,404	(18,792 )	(34,832 )	50,081
	Comprehensive income (loss)	$	(35,456 ) $	4,106 $	(68,139 ) $	(7,172 )
	See accompanying notes to condensed interim consolidated financial statements.
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	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
			Three Months Ended September 30, Nine Months Ended September 30,
	(Stated in thousands of Canadian dollars)		2020	2019	2020	2019
	Cash provided by (used in):
	Operations:
	Net earnings (loss)	$	(28,476 ) $	(3,534 ) $	(82,620 ) $	7,679
	Adjustments for:
	Long-term compensation plans		3,106				2,461	8,727	13,385
	Depreciation and amortization		77,588				82,604	241,626	252,684
	Gain on asset disposals		(3,032 )				(3,944 )	(10,111 )	(46,853 )
	Impairment reversal		—				—	—	(5,810 )
	Foreign exchange		1,293				1,796	2,447	(4,322 )
	Finance charges		27,613				28,490	83,276	90,178
	Income taxes		888				(4,952 )	2,987	(2,926 )
	Other		(142 )				(39 )	(905 )	(198 )
	Gain on repurchase of unsecured senior notes		(27,971 )				(2,239 )	(29,942 )	(3,637 )
	Income taxes paid		(2,137 )				(857 )	(6,085 )	(4,744 )
	Income taxes recovered		1,228				71	1,228	1,142
	Interest paid		(22,644 )				(20,240 )	(75,687 )	(80,736 )
	Interest received		175				313	504	1,031
	Funds provided by operations		27,489	79,930	135,445	216,873
	Changes in non-cash working capital balances		14,461	(13,374 )	85,936	(3,695 )
			41,950	66,556	221,381	213,178
	Investments:
	Purchase of property, plant and equipment		(3,211 )				(23,914 )	(38,623 )	(138,345 )
	Purchase of intangibles		—				(12 )	(57 )	(476 )
	Proceeds on sale of property, plant and equipment
			5,705				3,385	16,416	85,837
	Changes in non-cash working capital balances		(1,367 )	(4,456 )	(6,773 )	(5,183 )
			1,127	(24,997 )	(29,037 )	(58,167 )
	Financing:
	Proceeds from Senior Credit Facility		123,029				—	128,059	—
	Repurchase of unsecured senior notes		(158,921 )				(18,742 )	(204,386 )	(142,575 )
	Share repurchase		—				(8,183 )	(5,259 )	(8,183 )
	Lease payments		(1,987 )				(1,767 )	(5,612 )	(5,124 )
	Debt amendment fees		(22 )	—	(690 )	—
			(37,901 )	(28,692 )	(87,888 )	(155,882 )
	Effect of exchange rate changes on cash		(2,516 )	314	(1,372 )	(1,994 )
	Increase (decrease) in cash		2,660	13,181	103,084	(2,865 )
	Cash, beginning of period		175,125	80,580	74,701	96,626
	Cash, end of period	$	177,785 $	93,761 $	177,785 $	93,761

	See accompanying notes to condensed interim consolidated financial statements.
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	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, 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 (Note 9)
			—						(1,498 )	—	—	(1,498 )
	Share-based compensation expense (Note 9)		—						8,842	—	—	8,842
	Balance at September 30, 2020	$ 2,291,796 $							73,097 $	148,736 $ (1,052,076 ) $ 1,461,553


					Accumulated
						Other
		Shareholders’		Contributed	Comprehensive	Total
	(Stated in thousands of Canadian dollars)		Capital	Surplus		Income	Deficit	Equity
	Balance at January 1, 2019	$ 2,322,280 $							52,332 $	162,014 $ (978,874 ) $ 1,557,752
	Lease transition adjustment		—						—	—	2,800	2,800
	Net earnings for the period		—						—	—	7,679	7,679
	Other comprehensive loss for the period		—						—	(14,851 )	— (14,851 )
	Share repurchases		(8,183 )						—	—	—	(8,183 )
	Share-based compensation expense		—						10,250	—	—	10,250
	Balance at September 30, 2019	$ 2,314,097 $							62,582 $	147,163 $ (968,395 ) $ 1,555,447

	See accompanying notes to condensed interim consolidated financial statements.
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	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, 2019.
	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, 2019.
	These condensed interim consolidated financial statements were approved by the Board of Directors on October 21, 2020.
	(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, 2019. As described in Note 2(c), 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.
	(c) Impact of COVID-19
	In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Governments worldwide, including those countries in which Precision operates, have enacted emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused a material disruption to businesses globally resulting in an economic slowdown and decreased demand for oil. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions; however, the long-term success of these interventions is not yet determinable. The current challenging economic climate has had a significant adverse impact on the Corporation including, but not limited to, substantial reductions in revenue and cash flows, increased risk of non-payment of accounts receivable and risk of future impairments of property, plant and equipment and intangible assets.
5

	As a result of the decrease in demand, worldwide inventories of oil have increased significantly. However, in the second and third quarters of 2020, voluntary production restraint from national oil companies and governments of oil-producing nations along with curtailments in the U.S. and Canada have shifted global oil markets from a position of over supply to inventory draws. The situation remains dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Corporation remains unknown at this time. Estimates and judgements made by management in the preparation of these financial statements are increasingly difficult and subject to a higher degree of measurement uncertainty during this volatile period.
	NOTE 3. REVENUE
	(a) Disaggregation of revenue
	The following table includes a reconciliation of disaggregated revenue by reportable segment (Note 4). Revenue has been disaggregated by primary geographical market and type of service provided.
				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
	Three Months Ended September 30, 2019		Services	Services				Eliminations	Total
	United States	$	209,506 $		4,531 $					— $	(88 ) $		213,949
	Canada		81,000	26,349						—	(1,683 )		105,666
	International		55,937		—					—	—		55,937
			346,443 $	30,880 $						— $	(1,771 ) $		375,552
		$

	Day rate/hourly services	$	331,193 $	30,880 $						— $	(455 ) $		361,618
	Directional services		12,523		—					—	—		12,523
	Other		2,727		—					—	(1,316 )		1,411
		$	346,443 $	30,880 $						— $	(1,771 ) $		375,552


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


				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Nine Months Ended September 30, 2019		Services	Services				Eliminations	Total
	United States		$	664,130 $		12,897 $					— $	(217 ) $		676,810
	Canada			242,116		99,947					—	(3,790 )		338,273
	International			153,936		—					—	—		153,936
			$ 1,060,182 $		112,844 $						— $	(4,007 ) $ 1,169,019

	Day rate/hourly services	$ 1,013,058 $		112,844 $						— $	(798 ) $ 1,125,104
	Shortfall payments/idle but contracted		6,366		—					—	—		6,366
	Turnkey drilling services											305	—		—	—	305
	Directional services		32,827		—					—	—		32,827
	Other		7,626		—					—	(3,209 )		4,417
		$ 1,060,182 $		112,844 $						— $	(4,007 ) $ 1,169,019


	(b) Seasonality
	Precision has operations that are carried on in Canada which represent approximately 31% (2019 - 29%) of consolidated revenue for the nine months ended September 30, 2020 and 36% (2019 - 34%) of consolidated total assets as at September 30, 2020. 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.
7

	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 rentals 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, 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
	Three Months Ended September 30, 2019		Services		Services				Eliminations	Total
	Revenue	$ 346,443 $			30,880 $			— $	(1,771 ) $ 375,552
	Operating earnings (loss)		34,591		279 (15,635 )		—		19,235
	Depreciation and amortization		74,532		4,282	3,790	—		82,604
	Loss (gain) on asset disposals		(3,956 )		36					(24 )	—		(3,944 )
	Total assets	3,134,866		151,895 158,973			— 3,445,734
	Capital expenditures		22,443		1,341					142	—		23,926


				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


				Completion
		Contract			and		Inter-
			Drilling	Production		Corporate and Other	Segment
	Nine Months Ended September 30, 2019		Services		Services				Eliminations	Total
	Revenue	$ 1,060,182 $ 112,844 $						— $	(4,007 ) $ 1,169,019
	Operating earnings (loss)	138,269			7,890 (59,281 )		—		86,878
	Depreciation and amortization	227,686			13,572	11,426	— 252,684
	Gain on asset disposals		(43,228 )			(3,566 )					(59 )	— (46,853 )
	Impairment reversal		(5,810 )		—			—	—		(5,810 )
	Total assets	3,134,866		151,895 158,973			— 3,445,734
	Capital expenditures	134,679			3,575					567	— 138,821

	A reconciliation of operating earnings (loss) to earnings (loss) before income taxes is as follows:
8


			Three Months Ended September 30, Nine Months Ended September 30,
			2020	2019	2020	2019
	Total segment operating earnings (loss)	$	(26,785 )			$	19,235 $	(23,375 ) $		86,878
	Add (deduct):
	Foreign exchange		1,161				1,470	2,924			(4,416 )
	Finance charges		27,613				28,490	83,276			90,178
	Gain on repurchase of unsecured senior notes		(27,971 )				(2,239 )	(29,942 )			(3,637 )
	Earnings (loss) before income taxes	$	(27,588 ) $	(8,486 ) $	(79,633 ) $		4,753

	NOTE 5. IMPAIRMENT
	Precision reviews the carrying value of its long-lived assets for indications of impairment at the end of each reporting period. Due to the global economic slowdown and significant commodity price reductions in the first quarter of 2020, the Corporation identified indications of impairment in each of its cash-generating units (“CGU”) at March 31, 2020. Accordingly, the Corporation tested all CGUs for impairment as at March 31, 2020 and concluded no impairment charge was required.
	At September 30, 2020, Precision reviewed each of its cash-generating units and did not identify indications of impairment and therefore, did not test its CGUs for impairment.
	There is risk that impairment charges may be required in future periods due to the volatility and uncertainty of the economy and commodity price environment caused by COVID-19. Increasing costs of capital combined with declining activity levels could result in material asset impairments. However, the introduction of various government economic stimulus programs and continued efforts of certain oil-producing countries to restrict supply may provide a level of stability to the energy sector. The outcome of future impairment tests cannot be predicted with any certainty and will be impacted by the assumptions and estimates based on market conditions at that time.
	NOTE 6. RESTRUCTURING AND OTHER
	For the three and nine months ended September 30, 2020, Precision incurred restructuring charges of $2 million (2019 - nil) and $18 million (2019 - $6 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 directional drilling operations in the United States in the first quarter of 2020.
	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 Emergency Wage Subsidy program. For the three and nine months ended September 30, 2020, Precision recognized $8 million and $16 million of salary and wage subsidies, respectively. For the nine months ended September 30, 2020, these subsidies were presented as reductions of operating and general and administrative expense of $12 million and $4 million, respectively.
	NOTE 7. LONG-TERM DEBT
			September 30, December 31, September 30, December 31,
			2020	2019	2020	2019
	Senior Credit Facility	US $	96,650 US $	— $	128,680 $	—
	Unsecured senior notes:
	6.5% senior notes due 2021		—	90,625	—		117,678
	7.75% senior notes due 2023		306,282	344,845	407,784		447,792
	5.25% senior notes due 2024		270,975	307,690	360,776		399,545
	7.125% senior notes due 2026		357,857	369,735	476,450		480,112
		US $							1,031,764 US $ 1,112,895	1,373,690	1,445,127
	Less net unamortized debt issue costs				(13,890 )		(17,946 )
				$	1,359,800 $ 1,427,181

9



		Senior Credit				Unsecured	Debt Issue
					Facility	Senior Notes				Costs	Total
	Balance December 31, 2019	$	— $			1,445,127 $	(17,946 ) $		1,427,181
	Changes from financing cash flows:
	Proceeds from Senior Credit Facility				128,059	—	—			128,059
	Repurchase of unsecured senior notes		—			(204,386 )	—			(204,386 )
					128,059	1,240,741	(17,946 )		1,350,854
	Gain on repurchase of unsecured senior notes		—			(29,942 )	—			(29,942 )
	Amortization of debt issue costs		—	—			4,056	4,056
	Foreign exchange adjustment		621			34,211	—			34,832
	Balance at September 30, 2020	$			128,680 $	1,245,010 $	(13,890 ) $		1,359,800

	During the first nine months of 2020, Precision redeemed US$88 million principal amount and repurchased and cancelled US$3 million of its 6.50% unsecured senior notes due 2021, repurchased and cancelled US$37 million of its 5.25% unsecured senior notes due 2024, US$12 million of its 7.125% unsecured senior notes due 2026 and US$39 million of its 7.75% unsecured senior notes due 2023 and drew US$97 million under its Senior Credit Facility. We recognized a gain of $30 million on the repurchase of unsecured senior notes.
	Subsequent to September 30, 2020, Precision repurchased and cancelled US$14 million of its 7.75% unsecured senior notes due 2023, recognizing a gain on repurchase of $5 million.
	At September 30, 2020, Precision was in compliance with the covenants of the Senior Credit Facility. To the extent that the Senior Credit Facility is not renewed, amounts drawn are due on its maturity date of November 21, 2023.
	Long-term debt obligations at September 30, 2020 will mature as follows:
	2023								536,464
	2024								360,776
	Thereafter								476,450
								$	1,373,690

	On April 9, 2020, Precision agreed with the lenders of its Senior Credit Facility to reduce the consolidated Covenant EBITDA to consolidated interest expense coverage ratio for the most recent four consecutive quarters of greater than or equal to 2.5:1 to 2.0:1 for the period ending September 30, 2020, 1.75:1 for the period ending December 31, 2020, 1.25:1 for the periods ending March 31, June 30 and September 30, 2021, 1.75:1, for the period ending December 31, 2021, 2.0:1 for the period ending March 31, 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$15 million in 2020 and 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.
	In addition, during 2021, Precision’s 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 its March 31, 2022 end date.
	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.
	In addition, 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.
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	NOTE 8. FINANCE CHARGES
			Three Months Ended September 30, Nine Months Ended September 30,
			2020	2019	2020	2019
	Interest:
	Long-term debt	$	24,708			$	26,909 $	76,594 $		84,205
	Lease obligations		736				854	2,452	2,552
	Other		—				84	107	192
	Income		(235 )				(548 )	(547 )	(1,231 )
	Amortization of debt issue costs and loan commitment fees
			2,404				1,191	4,670	4,460
	Finance charges	$	27,613			$	28,490 $	83,276 $		90,178


	NOTE 9. SHARE-BASED COMPENSATION PLANS
	Liability Classified Plans
					Non-
						Performance			Management
			Restricted	Share					Directors’
								Share Units (a)	Units (a)	DSUs (b)	Total
	December 31, 2019	$	7,318 $	2,858 $	3,336 $		13,512
	Expensed during the period		817	978	(1,845 )	(50 )
	Payments and redemptions		(3,689 )	(878 )	(175 )		(4,742 )
	September 30, 2020	$	4,446 $	2,958 $	1,316 $	8,720

	Current	$	2,919 $	540 $	— $	3,459
	Long-term		1,527	2,418	1,316	5,261
		$	4,446 $	2,958 $	1,316 $	8,720


	(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	PSUs
					Outstanding						Outstanding
	December 31, 2019				6,338,063			3,335,350
	Granted				7,260,400			10,046,500
	Redeemed				(2,440,291 )			(780,558 )
	Forfeited				(1,290,385 )			(1,253,642 )
	September 30, 2020				9,867,787			11,347,650

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	(b) Non-Management Directors – Deferred Share Unit Plan
	Precision has a deferred share unit (“DSU”) plan for non-management directors whereby fully vested DSUs are granted quarterly based on an election by the non-management director to receive all or a portion of his or her compensation in DSUs. These DSUs are redeemable in cash or for an equal number of common shares upon the director’s retirement. The redemption of DSUs in cash or common shares is solely at Precision’s discretion.
	A summary of the activity under the non-management director deferred share unit plan is presented below: Deferred Share Units
			Outstanding
	December 31, 2019		1,792,254
	Redeemed		(240,786 )
	September 30, 2020		1,551,468


	During the second quarter of 2020, Precision elected to settle the redemption of DSUs in common shares.
	Equity Settled Plans
	(c) 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, 2019				93,173
	Redeemed		(63,773 )
	September 30, 2020			29,400


	(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, 2019				4,021,584 $ 4.35	— 14.31 $	7.29 3,569,069
	Forfeited				(1,028,684 ) 4.35	— 10.15	8.36
	September 30, 2020				2,992,900 $ 4.35	— 14.31 $	6.92 2,842,724


		Weighted
						Range of	Average
						Exercise Price	Exercise Price
	U.S. share options				Outstanding	(US$)		(US$) Exercisable
	December 31, 2019				6,363,050 $ 2.56	— 9.18 $	4.67 4,348,824
	Forfeited					(649,400 ) 3.21	— 9.18	7.63
	September 30, 2020				5,713,650 $ 2.56	— 9.18 $	4.33 4,828,216

	Included in net earnings (loss) for the three and nine months ended September 30, 2020 is an expense of $0.2 million (2019 - $0.5 million) and $0.7 million (2019 - $1.8 million), respectively. (e) Executive Performance Share Units
	Precision granted PSUs to certain senior executives with the intention of settling them in voting shares of the Corporation either issued from treasury or purchased in the open market. These PSUs vest over a three-year period and incorporate performance criteria established at the date of grant that can adjust the number of performance share units available for
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	settlement from zero to two times the amount originally granted. A summary of the activity under this share-based incentive plan is presented below:
			Weighted Fair
		Outstanding	Value
	December 31, 2019	7,376,900 $	4.98
	Redeemed	(1,148,837 )	5.79
	Forfeited	(448,763 )	5.22
	September 30, 2020	5,779,300 $	4.80

	During the first quarter of 2020, pursuant to the omnibus equity incentive plan, Precision elected to cash-settle vested Executive PSUs. Precision reclassified $1 million of previously expensed share-based compensation charges from contributed surplus to establish a financial liability that was subsequently settled during the first quarter of 2020.
	Included in net earnings (loss) for the three and nine months ended September 30, 2020 is an expense of $2 million (2019 - $3 million) and $8 million (2019 - $8 million), respectively.
	NOTE 10. SHAREHOLDERS’ CAPITAL Common shares
		Number		Amount
	Balance December 31, 2019	277,299,804 $	2,296,378
	Share repurchase	(3,104,127 )		(5,259 )
	Redemption of non-management directors' DSUs	304,559	677
	Balance September 30, 2020	274,500,236 $	2,291,796

	During the third quarter of 2020, the Toronto Stock Exchange (“TSX”) 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 23,997,668 common shares, representing 10% of the public float of common shares as of August 14, 2020. The NCIB will terminate no later than August 26, 2021. Purchases under the NCIB were made through the facilities of the TSX and the New York Stock Exchange and in accordance with applicable regulatory requirements at a price per common share representative of the market price at the time of acquisition.
	NOTE 11. PER SHARE AMOUNTS
	The following tables reconcile the net earnings (loss) and weighted average shares outstanding used in computing basic and diluted net earnings (loss) per share:
					Three Months Ended September 30, Nine Months Ended September 30,
						2020	2019	2020	2019
	Net earnings (loss) - basic and diluted				$	(28,476 ) $	(3,534 ) $	(82,620 ) $	7,679


					Three Months Ended September 30, Nine Months Ended September 30,
	(Stated in thousands)					2020	2019	2020	2019
	Weighted average shares outstanding – basic					274,500	292,811	274,718		293,455
	Effect of stock options and other equity compensation plans
						—	—	—	6,213
	Weighted average shares outstanding – diluted					274,500	292,811	274,718		299,668

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	NOTE 12. ACCUMULATED OTHER COMPREHENSIVE INCOME
		Unrealized		Foreign
			Foreign	Exchange	Accumulated
			Currency	Loss on Net	Other
		Translation		Investment	Comprehensive
			Gains	Hedge		Income
	December 31, 2019	$	509,582 $	(375,327 ) $	134,255
	Other comprehensive income (loss)		49,313	(34,832 )		14,481
	September 30, 2020	$	558,895 $	(410,159 ) $	148,736


	NOTE 13. 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. Amounts drawn on the Senior Credit Facility, measured at amortized cost, approximates fair value as this indebtedness is subject to floating rates of interest. The fair value of the unsecured senior notes at September 30, 2020 was approximately $866 million (December 31, 2019 – $1,428 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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