Enhanced Investments - Financial Portal

Published: 2020-07-24

	CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

	(Stated in thousands of Canadian dol ars)	June 30, 2020 December 31, 2019
	ASSETS
	Current assets:
	Cash	$		175,125 $	74,701
	Accounts receivable			192,645	310,204
	Inventory			31,502	31,718
	Income tax recoverable			1,194	1,142
	Total current assets			400,466	417,765
	Non-current assets:
	Deferred tax assets			6,011	4,724
	Right of use assets			63,412	66,142
	Property, plant and equipment		2,704,377		2,749,463
	Intangibles			29,967	31,746
	Total non-current assets		2,803,767		2,852,075
	Total assets	$	3,204,233 $		3,269,840

	LIABILITIES AND EQUITY
	Current liabilities:
	Accounts payable and accrued liabilities	$		148,139 $	199,478
	Income taxes payable			4,285	4,142
	Current portion of lease obligation			10,175	12,449
	Total current liabilities			162,599	216,069

	Non-current liabilities:
	Share-based compensation (Note 9)			4,785	8,830
	Provisions and other			9,655	9,959
	Lease obligation			55,727	54,980
	Long-term debt (Note 7)		1,450,900		1,427,181
	Deferred tax liabilities			26,152	25,389
	Total non-current liabilities		1,547,219		1,526,339
	Shareholders’ equity:
	Shareholders’ capital (Note 10)		2,291,796		2,296,378
	Contributed surplus			70,503	66,255
	Deficit		(1,023,600 )		(969,456 )
	Accumulated other comprehensive income (Note 12)			155,716	134,255
	Total shareholders’ equity		1,494,415		1,527,432
	Total liabilities and shareholders’ equity	$	3,204,233 $		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 June 30,		Six Months Ended June 30,
	(Stated in thousands of Canadian dol ars, except per share amounts)				2020	2019			2020	2019


	Revenue (Note 3)		$			189,759 $		359,424	$	569,243 $				793,467
	Expenses:
	Operating (Note 6)					106,552		252,049		354,779				540,657
	General and administrative (Note 6)					18,449		26,338		37,984				57,368
	Restructuring (Note 6)					6,293	—	16,111				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					58,465		81,037		160,369				189,004
	Depreciation and amortization					81,124		83,327		164,038				170,080
	Gain on asset disposals					(3,470 )		(7,859 )		(7,079 )				(42,909 )
	Impairment reversal					—	—			—		(5,810 )
	Foreign exchange					(928 )		(3,763 )		1,763				(5,886 )
	Finance charges (Note 8)					28,083		30,385		55,663				61,688
	Gain on repurchase of unsecured senior notes					(1,121 )		(1,085 )		(1,971 )				(1,398 )
	Earnings (loss) before income taxes					(45,223 )		(19,968 )		(52,045 )				13,239
	Income taxes:
	Current					2,116		1,403		3,175				3,013
	Deferred					1,528		(7,570 )		(1,076 )	(987 )
						3,644		(6,167 )		2,099				2,026
	Net earnings (loss)		$			(48,867 ) $		(13,801 )	$	(54,144 ) $				11,213
	Net earnings (loss) per share: (Note 11)
	Basic		$			(0.18 ) $		(0.05 )	$	(0.20 ) $	0.04
	Diluted		$			(0.18 ) $		(0.05 )	$	(0.20 ) $	0.04


	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 dol ars)				2020	2019				2020	2019
	Net earnings (loss)		$			(48,867 ) $		(13,801 )	$	(54,144 ) $				11,213
	Unrealized gain (loss) on translation of assets and
	liabilities of operations denominated in foreign currency				(71,311 )		(42,846 )		85,697				(91,364 )
	Foreign exchange gain (loss) on net investment hedge
	with U.S. denominated debt, net of tax					53,920		29,859		(64,236 )				68,873
	Comprehensive loss		$			(66,258 ) $		(26,788 )	$	(32,683 ) $				(11,278 )

	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 dol ars)				2020	2019				2020	2019
	Cash provided by (used in):
	Operations:
	Net earnings (loss)	$	(48,867 ) $					(13,801 )	$	(54,144 ) $			11,213
	Adjustments for:
	Long-term compensation plans		6,324					3,612		5,621			10,924
	Depreciation and amortization		81,124					83,327		164,038			170,080
	Gain on asset disposals		(3,470 )					(7,859 )		(7,079 )			(42,909 )
	Impairment reversal					—	—			—		(5,810 )
	Foreign exchange		(1,718 )					(3,880 )		1,154			(6,118 )
	Finance charges		28,083					30,385		55,663			61,688
	Income taxes		3,644					(6,167 )		2,099			2,026
	Other					(823 )	(281 )				(763 )	(159 )
	Gain on repurchase of unsecured senior notes		(1,121 )					(1,085 )		(1,971 )			(1,398 )
	Income taxes paid		(3,128 )					(3,550 )		(3,948 )			(3,887 )
	Income taxes recovered					—	—			—		1,071
	Interest paid		(33,548 )					(40,263 )		(53,043 )			(60,496 )
	Interest received					139	512				329	718
	Funds provided by operations		26,639					40,950		107,956			136,943
	Changes in non-cash working capital balances		77,839					65,085		71,475			9,679
			104,478					106,035		179,431			146,622
	Investments:
	Purchase of property, plant and equipment		(23,927 )					(43,469 )		(35,412 ) (114,431 )
	Purchase of intangibles					—	(26 )				(57 )	(464 )
	Proceeds on sale of property, plant and
	equipment		5,021					24,575		10,711			82,452
	Changes in non-cash working capital balances		(1,880 )					2,536		(5,406 )	(727 )
			(20,786 )					(16,384 )		(30,164 )			(33,170 )
	Financing:
	Proceeds from senior credit facility		5,030	—	5,030	—
	Repurchase of unsecured senior notes		(4,911 ) (107,161 )		(45,465 ) (123,833 )
	Share repurchase					(15 )	—	(5,259 )	—
	Lease payments		(1,897 )					(1,685 )		(3,625 )			(3,357 )
	Debt amendment fees					(647 )	—			(668 )	—
			(2,440 )					(108,846 )		(49,987 ) (127,190 )
	Effect of exchange rate changes on cash		(3,129 )					(1,255 )		1,144			(2,308 )
	Increase in cash		78,123					(20,450 )		100,424			(16,046 )
	Cash, beginning of period		97,002					101,030		74,701			96,626
	Cash, end of period	$ 175,125 $						80,580	$ 175,125 $				80,580


	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 dol ars)		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		—						—	—	(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
	(Note 9)		—						(1,498 )	—	—	(1,498 )
	Share-based compensation expense (Note 9)		—						6,248	—	—	6,248
	Balance at June 30, 2020	$ 2,291,796 $							70,503 $	155,716 $ (1,023,600 ) $ 1,494,415


					Accumulated
						Other
		Shareholders’		Contributed	Comprehensive	Total
	(Stated in thousands of Canadian dol ars)		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		—						—	— 11,213		11,213
	Other comprehensive loss for the period		—						—	(22,491 )	— (22,491 )
	Share-based compensation expense		—						6,633	—	—	6,633
	Balance at June 30, 2019	$ 2,322,280 $							58,965 $	139,523 $ (964,861 ) $ 1,555,907


	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 dol ars except share numbers and per share amounts)
	NOTE 1. DESCRIPTION OF BUSINESS Precision Dril ing Corporation (“Precision” or the “Corporation”) is incorporated under the laws of the Province of Alberta,
	Canada and is a provider of contract dril ing 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 al 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 July 22, 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 global y 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
	chal enging 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
	quarter 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 fol owing 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	Segment
	Three Months Ended June 30, 2020		Services	Services		and Other		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
	Shortfal payments/idle but contracted		22,026		—					—	—		22,026
	Turnkey dril ing 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-
			Dril ing	Production		Corporate	Segment
	Three Months Ended June 30, 2019		Services	Services		and Other		Eliminations	Total
	United States	$	229,076 $		3,950 $					— $	(69 ) $ 232,957
	Canada		55,197	22,195						—	(1,127 )		76,265
	International		50,202		—					—	—		50,202
		$	334,475 $	26,145 $						— $	(1,196 ) $ 359,424

	Day rate/hourly services	$ 319,169 $		26,145 $						— $	(224 ) $ 345,090
	Shortfal payments/idle but contracted		2,187		—					—	—		2,187
	Directional services		10,658		—					—	—		10,658
	Other		2,461		—					—	(972 )		1,489
		$ 334,475 $		26,145 $						— $	(1,196 ) $ 359,424

6


				Completion
			Contract		and		Inter-
			Drilling	Production		Corporate	Segment
	Six Months Ended June 30, 2020		Services	Services		and Other		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
	Shortfal payments/idle but contracted		28,819		—					—	—		28,819
	Turnkey dril ing 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


				Completion
			Contract		and		Inter-
			Dril ing	Production		Corporate	Segment
	Six Months Ended June 30, 2019		Services	Services		and Other		Eliminations	Total
	United States	$	454,624 $		8,366 $					— $	(129 ) $ 462,861
	Canada		161,116		73,598					—	(2,107 )		232,607
	International		97,999		—					—	—		97,999
		$	713,739 $		81,964 $					— $	(2,236 ) $ 793,467

	Day rate/hourly services	$ 681,865 $			81,964 $					— $	(343 ) $ 763,486
	Shortfal payments/idle but contracted		6,366		—					—	—		6,366
	Turnkey dril ing services											305	—		—	—	305
	Directional services		20,304		—					—	—		20,304
	Other		4,899		—					—	(1,893 )		3,006
		$ 713,739 $			81,964 $					— $	(2,236 ) $ 793,467

	(b)
	Seasonality
	Precision has operations that are carried on in Canada which represent approximately 32% (2019 - 29%) of consolidated
	revenue for the six months ended June 30, 2020 and 34% (2019 - 34%) of consolidated total assets as at June 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
	traditional y Precision’s slowest time in this region.
7

	NOTE 4. SEGMENTED INFORMATION The Corporation has two reportable operating segments; Contract Dril ing Services and Completion and Production
	Services. Contract Dril ing Services includes dril ing rigs, directional dril ing, procurement and distribution of oilfield supplies,
	and manufacture, sale and repair of dril ing 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	Segment
	Three Months Ended June 30, 2020		Services		Services		and Other		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-
			Dril ing	Production		Corporate	Segment
	Three Months Ended June 30, 2019		Services		Services		and Other		Eliminations	Total
	Revenue	$ 334,475 $ 26,145 $						— $	(1,196 ) $ 359,424
	Operating earnings (loss)		22,411		1,986 (18,828 )		—		5,569
	Depreciation and amortization		75,155		4,341	3,831	—		83,327
	Gain on asset disposals		(4,271 )		(3,546 )					(42 )	—		(7,859 )
	Total assets	3,127,153 152,678 160,517					— 3,440,348
	Capital expenditures		41,851		1,572			72	—		43,495


				Completion
		Contract			and		Inter-
			Drilling	Production		Corporate	Segment
	Six Months Ended June 30, 2020		Services		Services		and Other		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


				Completion
		Contract			and		Inter-
			Dril ing	Production		Corporate	Segment
	Six Months Ended June 30, 2019		Services		Services		and Other		Eliminations	Total
	Revenue	$ 713,739 $ 81,964 $						— $	(2,236 ) $ 793,467
	Operating earnings (loss)	103,678			7,611 (43,646 )		—		67,643
	Depreciation and amortization	153,154			9,290	7,636	— 170,080
	Gain on asset disposals		(39,272 )			(3,602 )					(35 )	— (42,909 )
	Impairment reversal		(5,810 )		—			—	—		(5,810 )
	Total assets	3,127,153 152,678 160,517					— 3,440,348
	Capital expenditures	112,236			2,234					425	— 114,895


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



			Three Months Ended June 30,		Six Months Ended June 30,
						2020	2019	2020	2019
	Total segment operating earnings (loss)		$	(19,189 ) $				5,569	$	3,410 $		67,643
	Add (deduct):
	Foreign exchange						(928 )	(3,763 )	1,763		(5,886 )
	Finance charges			28,083				30,385	55,663		61,688
	Gain on repurchase of unsecured senior notes			(1,121 )				(1,085 )	(1,971 )		(1,398 )
	Earnings (loss) before taxes		$	(45,223 ) $ (19,968 ) $		(52,045 ) $			13,239

	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. At June 30, 2020, Precision reviewed each of its cash-generating units (CGU) 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 stability to the
	energy sector. The outcome of future impairment tests cannot be predicted with any certainty and wil be impacted by the
	assumptions and estimates based on market conditions at that time.
	NOTE 6. RESTRUCTURING AND OTHER For the three and six months ended June 30, 2020, Precision incurred restructuring charges of $6 mil ion (2019 - nil) and
	$16 mil ion (2019 - $6 mil ion), 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 dril ing 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 first half of 2020, the Government of Canada introduced the Canadian Emergency
	Wage Subsidy program. For the three and six months ended June 30, 2020, Precision recognized $9 mil ion of salary and
	wage subsidies. These subsidies were presented as operating and general and administrative expense reductions of $6
	mil ion and $3 mil ion, respectively.
	NOTE 7. LONG-TERM DEBT

			June 30, December 31,		June 30, December 31,

						2020	2019				2020	2019
	Senior Credit Facility	US $				3,650 US $	— $	4,955 $	—
	Unsecured senior notes:
	6.5% senior notes due 2021					62,576	90,625		84,958		117,678
	7.75% senior notes due 2023		343,605				344,845	466,502			447,792
	5.25% senior notes due 2024		303,022				307,690	411,404			399,545
	7.125% senior notes due 2026		367,643				369,735	499,138			480,112
		US $ 1,080,496 US $ 1,112,895 1,466,957						1,445,127
	Less net unamortized debt issue costs										(16,057 )		(17,946 )
											$ 1,450,900 $ 1,427,181


9



		Senior Credit				Unsecured	Debt
					Facility	Senior Notes					Issue Costs	Total
	Balance December 31, 2019	$	— $			1,445,127 $	(17,946 ) $	1,427,181
	Changes from financing cash flows:
	Proceeds from Senior Credit Facility				5,030	—	—	5,030
	Repurchase of unsecured senior notes		—			(45,465 )	—				(45,465 )
					5,030	1,399,662	(17,946 )	1,386,746
	Gain on repurchase of unsecured senior notes		—			(1,971 )	—				(1,971 )
	Amortization of debt issue costs		—	—					1,889	1,889
	Foreign exchange adjustment		(75 )			64,311	—				64,236
	Balance at June 30, 2020	$			4,955 $	1,462,002 $	(16,057 ) $	1,450,900

	During the first half of 2020, Precision redeemed US$25 mil ion principal amount and repurchased and cancel ed US$3
	mil ion of its 6.50% unsecured senior notes due 2021, repurchased and cancel ed US$5 mil ion of its 5.25% unsecured senior
	notes due 2024, US$2 mil ion of its 7.125% unsecured senior notes due 2026 and US$1 mil ion of its 7.75% unsecured senior
	notes due 2023 and drew US$4 mil ion under its Senior Credit Facility. At June 30, 2020, Precision was in compliance with the covenants of the Senior Credit Facility. Long-term debt obligations at June 30, 2020 wil mature as fol ows:

	2021								$	89,913
	2023									466,502
	Thereafter									910,542
									$	1,466,957

	On April 9, 2020 we agreed with the lenders of our Senior Credit Facility to reduce the consolidated Covenant EBITDA to
	consolidated interest expense coverage ratio for the most recent four consecutive quarters 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 mil ion in 2020 and US$25 mil ion 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, our North American and acceptable secured foreign assets must directly account for at least 65%
	of consolidated Covenant EBITDA calculated quarterly on a rol ing 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 our ability to incur or assume
	additional indebtedness; dispose of assets; change our primary business; incur liens on assets; engage in transactions with
	affiliates; enter into mergers, consolidations or amalgamations; and enter into speculative swap agreements.
10

	NOTE 8. FINANCE CHARGES


			Three Months Ended June 30,		Six Months Ended June 30,
						2020	2019			2020	2019
	Interest:
	Long-term debt		$	26,276 $					28,113	$	51,886 $				57,296
	Lease obligations						786	846	$	1,716 $	1,698
	Other						107	(2 )				107	108
	Income						(164 )	(500 )				(312 )	(683 )
	Amortization of debt issue costs and loan commitment
	fees			1,078					1,928		2,266	3,269
	Finance charges		$	28,083 $					30,385	$	55,663 $				61,688


	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					250	330	(1,602 )				(1,021 )
	Payments and redemptions					(3,582 )		(670 )	(175 )		(4,428 )
	June 30, 2020		$			3,986 $		2,518 $	1,559 $	8,063

	Current	$				2,700 $	578 $			— $	3,278
	Long-term					1,286		1,940	1,559	4,785
		$				3,986 $		2,518 $	1,559 $	8,063

	(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								7,218,300					10,004,400
	Redeemed								(2,358,577 )					(746,125 )
	Forfeited								(1,153,059 )					(1,116,175 )
	June 30, 2020									10,044,727					11,477,450

11

	(b) Non-Management Directors – Deferred Share Unit Plan Precision has a deferred share unit (DSU) plan for non-management directors whereby ful y 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:

			Outstanding

	December 31, 2019		1,792,254
	Redeemed		(240,786 )
	June 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 ful y
	vested deferred share units were granted quarterly based upon an election by the non-management director to receive al
	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 )
	June 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				(990,084 ) 4.35 — 10.15		8.41
	June 30, 2020					3,031,500 $ 4.35 — 14.31 $	6.92 2,881,324


		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				(524,800 ) 3.21 — 9.18	8.24
	June 30, 2020					5,838,250 $ 2.56 — 9.18 $	4.35 4,913,165

	Included in net earnings for the three and six months ended June 30, 2020 is an expense of $0.2 mil ion (2019 - $0.5
	mil ion) and $0.6 mil ion (2019 - $1.2 mil ion), 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
12

	settlement from zero to two times the amount original y 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
	June 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 mil ion of previously expensed share-based compensation charges to establish a
	financial liability that was subsequently settled during the first quarter of 2020. Included in net earnings for the three and six months ended June 30, 2020 is an expense of $3 mil ion (2019 - $3 mil ion)
	and $6 mil ion (2019 - $5 mil ion), 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 at June 30, 2020		274,500,236 $	2,291,796

	During the third quarter of 2019, the Toronto Stock Exchange (“TSX”) approved Precision’s application to implement a
	Normal Course Issuer Bid (“NCIB”). Under the terms of the NCIB, Precision may purchase and cancel up to a maximum of
	29,170,887 common shares, representing 10% of the public float of common shares at the time the NCIB was approved.
	The NCIB commenced on August 27, 2019 and wil terminate no later than August 26, 2020. 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. A total
	of 20 mil ion common shares have been purchased and cancel ed since the inception of the NCIB.
	NOTE 11. PER SHARE AMOUNTS The fol owing 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 June 30,						Six Months Ended June 30,
							2020	2019	2020	2019
	Net earnings (loss) - basic and diluted				$	(48,867 ) $	(13,801 )		$	(54,144 ) $		11,213




					Three Months Ended June 30,						Six Months Ended June 30,
	(Stated in thousands)						2020	2019	2020	2019
	Weighted average shares outstanding – basic					274,232	293,782			274,829		293,782
	Effect of stock options and other equity compensation
	plans							—	—	—	5,959
	Weighted average shares outstanding – diluted					274,232	293,782			274,829		299,741

13


	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)		85,697	(64,236 )		21,461
	June 30, 2020		$	595,279 $	(439,563 ) $		155,716


	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. The fair value of the unsecured senior notes at June 30,
	2020 was approximately $1,030 mil ion (December 31, 2019 – $1,428 mil ion). 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 fol ows:
	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.
14


	SHAREHOLDER INFORMATION	CORPORATE INFORMATION
	STOCK EXCHANGE LISTINGS	DIRECTORS
	Shares of Precision Dril ing Corporation are listed on the	Michael R. Culbert
	Toronto Stock Exchange under the trading symbol PD and	Wil iam T. Donovan
	on the New York Stock Exchange under the trading symbol	Brian J. Gibson
	PDS.	Steven W. Krablin
		Susan M. MacKenzie
	TRANSFER AGENT AND REGISTRAR
		Kevin O. Meyers
	Computershare Trust Company of Canada
		Kevin A. Neveu
	Calgary, Alberta
		David W. Wil iams
	TRANSFER POINT
		OFFICERS
	Computershare Trust Company NA
		Kevin A. Neveu
	Canton, Massachusetts
		President and Chief Executive Officer
	Q2 2020 TRADING PROFILE
		Veronica H. Foley
	Toronto (TSX: PD)
		Senior Vice President, General Counsel and Chief
	High: $1.33
		Compliance Officer
	Low: $0.40
	Close: $1.03
		Carey T. Ford
	Volume Traded: 102,451,006 New York (NYSE: PDS)
		Senior Vice President and Chief Financial Officer

	High: US$1.01
		Shuja U. Goraya
	Low: US$0.28
		Chief Technology Officer
	Close: US$0.74
	Volume Traded: 83,883,413
		Darren J. Ruhr
		Chief Administrative Officer
	ACCOUNT QUESTIONS
	Precision’s Transfer Agent can help you with a variety of
		Gene C. Stahl
	shareholder related services, including: • change of address
		Chief Marketing Officer
	• lost share certificates	AUDITORS
	• transfer of shares to another person	KPMG LLP
	• estate settlement Computershare Trust Company of Canada	Calgary, Alberta
	100 University Avenue	HEAD OFFICE
	9th Floor, North Tower	Suite 800, 525 8th Avenue SW
	Toronto, Ontario M5J 2Y1	Calgary, Alberta, Canada T2P 1G1
	Canada 1-800-564-6253 (tol free in Canada and the United States)	Telephone: 403-716-4500
		Facsimile: 403-264-0251
		Email: info@precisiondril ing.com
	1-514-982-7555 (international direct dialing)
		www.precisiondril ing.com
	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.precisiondril ing.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

15