EXHIBIT 99.1
Precision Drilling Corporation Announces 2022 Fourth Quarter and Year-End Unaudited Financial Results
CALGARY, Alberta, Feb. 09, 2023 (GLOBE NEWSWIRE) -- This news release contains “forward-looking information and statements” within the meaning of applicable securities laws. For a full disclosure of the forward-looking information and statements and the risks to which they are subject, see the “Cautionary Statement Regarding Forward-Looking Information and Statements” later in this news release. This news release contains references to certain Financial Measures and Ratios, including Adjusted EBITDA (earnings before income taxes, gain (loss) on investments and other assets, loss on redemption and repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization), Funds Provided by (Used in) Operations, Net Capital Spending and Working Capital. These terms do not have standardized meanings prescribed under International Financial Reporting Standards (IFRS) and may not be comparable to similar measures used by other companies, see “Financial Measures and Ratios” later in this news release.
Precision Drilling announces 2022 fourth quarter and year-end financial results:
Precision’s President and CEO, Kevin Neveu, stated:
“Precision’s strong fourth quarter revenue and better than expected cash generated from operations are a result of the high level of focus the entire organization placed on our strategic objectives, not only in the quarter but over the full year. I am very proud of the results our people achieved to maximize our operating leverage, expand margins, scale our Alpha digital technologies and EverGreen suite of environmental solutions and improve our capital structure. These efforts have resulted in enhanced returns to our shareholders.
“During the year, we maximized our operating leverage and improved revenue efficiency, growing our daily operating margins 41% in the U.S. and 36% in Canada, bolstering cash flow and allowing us to exceed our $75 million debt reduction target and return $10 million to shareholders through share repurchases. In the second half of 2022, Precision returned to profitability, generating positive net earnings for the first time since 2019.
“Our fourth quarter revenue and Adjusted EBITDA increased an impressive 73% and 43%, respectively, compared to 2021 as our North American drilling activity and day rates continued to improve. Customers remained committed to their drilling plans and our fourth quarter drilling rig utilization days increased 31% in the U.S. and 26% in Canada compared with 2021. For five consecutive quarters our day rates have continued to climb and in the fourth quarter reached highs of US$31,242 in the U.S. and $29,886 in Canada. With robust demand for our services, increased customer recognition of the value we provide, tight super specification rig supply and an intense focus on cost control, we expect to continue to push day rates higher and expand margins toward 50% in 2023.
“In the U.S., we have 61 rigs active today, a 17% increase from this time last year. We expect weak natural gas prices could modestly impact industry rig demand over the coming weeks, but expect oil related activity to remain firm as customers continue to look to replace lower performing rigs and work to balance depleted drilled but uncompleted well inventories.
“In Canada, we have 78 rigs active today, representing an 18% increase over the same time last year. We expect demand to remain at high levels through the first part of March and are already observing better than expected bookings through spring breakup and into the second half of the year. Natural gas liquids production, recent northeastern British Columbia access resolution, and LNG related activity will continue to drive Super Triple demand in Canada, of which Precision’s fleet is 100% utilized today.
“Internationally, we have 5 rigs active, increasing to eight by the middle of the year after successful contracting in Kuwait and the Kingdom of Saudi Arabia. We continue to explore opportunities to deploy our remaining idle rigs in the region.
“Demand for our Alpha digital technologies continues to gain momentum as fourth quarter revenue increased over 50% as compared with 2021. Year-over-year, we increased our Super Triple rigs equipped with Alpha by 49%. Interest in our EverGreenTM suite of environmental solutions continues to gain the attention of our customers as they seek meaningful solutions to achieve their emission reduction targets and improve their well economics. These service offerings will continue to enhance our margins in the future.
“Precision's Completion and Production Services segment had its best annual performance since 2014, generating $38 million of Adjusted EBITDA in 2022 and increasing our service rig activity 34% year-over-year. Our acquisition of High Arctic’s well servicing business in July has been highly successful, allowing Precision to further leverage its operational scale, generate significant cash flow, and become the leading provider of high-quality and reliable services. We are on track to achieve our targeted synergies of $5 million early this year. For 2023, we expect healthy commodity prices will support improved activity levels through increased demand for our services.
“I am proud of our accomplishments in 2022. We delivered on our three strategic priorities, returned to profitability, and strengthened our return profile, all while maintaining our capital discipline. Our 2023 strategic priorities will build on these accomplishments as we focus on delivering High Performance, High Value service, maximizing free cash flow through margin expansion and revenue efficiency, and continuing to strengthen our balance sheet by reducing debt with increased debt reduction and reduced leverage targets.
“Notwithstanding near-term commodity price volatility, constructive long-term oil and gas industry fundamentals combined with well-defined capital discipline commitments from both customers and oilfield service providers support steady and modestly increasing activity levels for the foreseeable future. I am confident our High Performance, High Value strategy, exceptional field results, capital discipline and capital allocation framework will continue to support increased shareholder value,” concluded Mr. Neveu.
SELECT FINANCIAL AND OPERATING INFORMATION
Financial Highlights
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||||||||||
(Stated in thousands of Canadian dollars, except per share amounts) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||
Revenue | 510,504 | 295,202 | 72.9 | 1,617,194 | 986,847 | 63.9 | |||||||||||||||||
Adjusted EBITDA(1) | 91,090 | 63,881 | 42.6 | 311,605 | 192,772 | 61.6 | |||||||||||||||||
Net earnings (loss) | 3,483 | (27,336 | ) | (112.7 | ) | (34,293 | ) | (177,386 | ) | (80.7 | ) | ||||||||||||
Cash provided by (used in) operations | 159,082 | 59,713 | 166.4 | 237,104 | 139,225 | 70.3 | |||||||||||||||||
Funds provided by operations(1) | 111,339 | 62,681 | 77.6 | 282,994 | 152,243 | 85.9 | |||||||||||||||||
Cash used in investing activities | 45,579 | 19,025 | 139.6 | 144,415 | 56,613 | 155.1 | |||||||||||||||||
Capital spending by spend category(1) | |||||||||||||||||||||||
Expansion and upgrade | 12,699 | 3,125 | 306.4 | 63,305 | 19,006 | 233.1 | |||||||||||||||||
Maintenance and infrastructure | 44,610 | 24,625 | 81.2 | 120,945 | 56,935 | 112.4 | |||||||||||||||||
Proceeds on sale | (5,165 | ) | (2,696 | ) | 91.6 | (37,198 | ) | (13,086 | ) | 184.3 | |||||||||||||
Net capital spending(1) | 52,144 | 25,054 | 108.1 | 147,052 | 62,855 | 134.0 | |||||||||||||||||
Net earnings (loss) per share: | |||||||||||||||||||||||
Basic | 0.27 | (2.05 | ) | (113.0 | ) | (2.53 | ) | (13.32 | ) | (81.0 | ) | ||||||||||||
Diluted | 0.27 | (2.05 | ) | (113.0 | ) | (2.53 | ) | (13.32 | ) | (81.0 | ) |
(1) See “FINANCIAL MEASURES AND RATIOS.”
Operating Highlights
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||||||||||
2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||
Contract drilling rig fleet | 225 | 227 | (0.9 | ) | 225 | 227 | (0.9 | ) | |||||||||||||||
Drilling rig utilization days: | |||||||||||||||||||||||
U.S. | 5,482 | 4,179 | 31.2 | 20,396 | 14,494 | 40.7 | |||||||||||||||||
Canada | 6,058 | 4,819 | 25.7 | 20,519 | 15,782 | 30.0 | |||||||||||||||||
International | 552 | 552 | - | 2,190 | 2,190 | - | |||||||||||||||||
Revenue per utilization day: | |||||||||||||||||||||||
U.S.(US$) | 31,242 | 21,976 | 42.2 | 27,309 | 21,213 | 28.7 | |||||||||||||||||
Canada(Cdn$) | 29,886 | 22,948 | 30.2 | 27,037 | 21,105 | 28.1 | |||||||||||||||||
International(US$) | 49,918 | 52,069 | (4.1 | ) | 51,242 | 52,837 | (3.0 | ) | |||||||||||||||
Operating cost per utilization day: | |||||||||||||||||||||||
U.S.(US$) | 19,253 | 16,056 | 19.9 | 18,635 | 15,048 | 23.8 | |||||||||||||||||
Canada(Cdn$) | 17,538 | 14,935 | 17.4 | 17,007 | 13,734 | 23.8 | |||||||||||||||||
Service rig fleet | 135 | 123 | 9.8 | 135 | 123 | 9.8 | |||||||||||||||||
Service rig operating hours | 49,368 | 33,063 | 49.3 | 170,362 | 126,840 | 34.3 |
Financial Position
(Stated in thousands of Canadian dollars, except ratios) | December 31, 2022 | December 31, 2021 | |||||
Working capital(1) | 60,641 | 81,637 | |||||
Cash | 21,587 | 40,588 | |||||
Long-term debt | 1,085,970 | 1,106,794 | |||||
Total long-term financial liabilities | 1,206,619 | 1,185,858 | |||||
Total assets | 2,876,123 | 2,661,752 | |||||
Long-term debt to long-term debt plus equity ratio (1) | 0.47 | 0.47 |
(1) See “FINANCIAL MEASURES AND RATIOS.”
Summary for the three months ended December 31, 2022:
Summary for the twelve months ended December 31, 2022:
STRATEGY
Precision’s vision is to be globally recognized as the High Performance, High Value provider of land drilling services. We work toward this vision by defining and measuring our results against strategic priorities we establish at the beginning of every year.
Below we summarize the results of our 2022 strategic priorities:
2023 Strategic Priorities
Precision’s strategic priorities for 2023 are focused on service delivery, maximizing free cash flow through margin expansion and revenue efficiency, and continuing to strengthen our balance sheet. Precision’s strategic priorities for 2023 are as follows:
OUTLOOK
The rebound of global energy demand and the impact of a multi-year period of underinvestment in upstream oil and natural gas has resulted in reduced inventories of oil and natural gas and higher commodity prices, providing a supportive outlook for the oilfield services industry. The war in Ukraine and sanctions on Russian hydrocarbons have exacerbated the challenged supply situation and many importing countries are looking toward North America and the Middle East to fill the supply gap from exports of crude oil and natural gas through the global Liquified Natural Gas (LNG) market. Constrained natural gas production levels and low natural gas storage volumes have resulted in North American natural gas prices strengthening in the last year. With U.S. LNG exports growing as countries look to displace Russian natural gas and various Canadian LNG projects expected to come online by 2025, we anticipate a sustained period of elevated natural gas drilling activity.
A significant shift by the oil and gas exploration and development industry prioritizing shareholder returns over reinvestment for growth has taken hold and is core to the strategy of most industry participants. As a result, the reinvestment criteria for exploration and production companies are generally set at lower commodity prices, ensuring sustainable free cash flows that can be used to strengthen balance sheets and deliver direct returns to shareholders while maintaining or modestly growing production levels. Despite commodity price volatility, producer development programs and drilling rig demand have remained relatively stable and in the absence of a commodity price collapse we expect this stability will remain.
A strict focus on capital discipline extends through the oilfield service value chain and is evident in the land drilling sector, where despite strong customer demand and high utilization of pad drilling rigs, drilling companies remain reluctant to reinvest cash flows to build new rigs. This shift is a critically important change in the oilfield service supply fundamentals, driving a sustainable and predictable operating environment that generates better industry and investor returns.
At current commodity fundamentals, we anticipate higher demand for our services and improved fleet utilization as customers seek to maintain production levels and replenish inventories, as drilled but uncompleted wells have been depleted over the past several years. However, broad economic concerns exist with respect to recession risk, rising interest rates and geopolitical instability. Notwithstanding current economic uncertainty and commodity price volatility, we expect North American industry activity to further increase in 2023 but at a more modest pace and anticipate near full utilization in the high specification rig market with customers seeking term contracts to secure rigs and ensure fulfilment of their development programs. Accordingly, the tightening of available high specification rigs is expected to drive higher day rates and necessitate customer funded rig upgrades.
In Canada, industry activity is supported by imminent hydrocarbon export capacity increases with the Trans Mountain oil pipeline and LNG Canada that are expected to start-up in 2024 and 2025, respectively. Northwestern Alberta and northeastern British Columbia natural gas liquids and natural gas developments are prime beneficiaries of the LNG Canada project. Recent agreements reached in British Columbia with certain First Nations groups are expected to facilitate drilling license approvals and increased activity in that region. Additionally, large pad drilling programs are ideally suited for Super Triple drilling rigs that have strong customer interest indicated for the next several years. On the oil side, the Clearwater heavy oil play is being developed as a long-term conventional heavy oil development that is well suited for Precision’s Super Single rigs. Utilization of Precision’s Super Single and Super Triple rigs has reached record levels not seen in the last several years and customers are seeking multi-year rig contracts to ensure access to these rigs.
In the United States while customer demand flattened out late in 2022, there is continued interest to high grade rigs to the latest pad drilling, AlphaAutomationTM equipped rigs as these rigs deliver the best drilling cost efficiency available in the industry. In 2023, we expect a modest increase in demand as lower performing rigs are displaced and rig counts modestly increase to balance with completion activity. Tight supply and firm demand are expected to continue to support drilling rig day rates migrating to leading edge rates.
Interest in our EverGreenTM suite of environmental solutions continues to gain momentum as customers seek meaningful solutions to achieve their emission reduction targets and improve their well economics. We expect our growing AlphaTM technologies offering, paired with our EverGreenTM suite of environmental solutions, to be key competitive differentiators as our predictable and repeatable drilling results deliver exceptional value to our customers by reducing risks, well construction costs and carbon footprint.
The outlook for our Precision Well Servicing business remains positive with strong commodity prices supporting maintenance and completion activity. We successfully acquired and integrated High Arctic’s well servicing assets and associated rental business. By leveraging our existing platform and continuing our strict focus on cost control, we have realized annual run-rate cost synergies of approximately $4 million and expect to achieve our $5 million target early in 2023.
Commodity Prices
During the fourth quarter of 2022, average West Texas Intermediate and Western Canadian Select oil prices were higher by 7% and 5%, respectively, from the comparative quarter. While average Henry Hub and AECO natural gas prices improved by 26% and 11%, respectively from 2021.
For the three months ended December 31, | Year ended December 31, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||
Average oil and natural gas prices | ||||||||||||||
Oil | ||||||||||||||
West Texas Intermediate (per barrel) (US$) | 82.77 | 77.10 | 94.23 | 67.91 | ||||||||||
Western Canadian Select (per barrel) (US$) | 65.87 | 62.45 | 78.15 | 54.84 | ||||||||||
Natural gas | ||||||||||||||
United States | ||||||||||||||
Henry Hub (per MMBtu) (US$) | 6.10 | 4.84 | 6.51 | 3.72 | ||||||||||
Canada | ||||||||||||||
AECO (per MMBtu) (CDN$) | 5.24 | 4.73 | 5.43 | 3.64 |
Contracts
Since the start of 2022, we have signed 80 term contracts. The following chart outlines the average number of drilling rigs under term contract by quarter as of February 8, 2023. For those quarters ending after December 31, 2022, this chart represents the minimum number of term contracts from which we will earn revenue. We expect the actual number of contracted rigs to vary in future periods as we sign additional term contracts.
Average for the quarter ended 2022 | Average for the quarter ended 2023 | |||||||||||||||||||||||||||||||
Mar. 31 | June 30 | Sept. 30 | Dec. 31 | Mar. 31 | June 30 | Sept. 30 | Dec. 31 | |||||||||||||||||||||||||
Average rigs under term contract as of February 8, 2023: | ||||||||||||||||||||||||||||||||
U.S. | 27 | 29 | 31 | 35 | 35 | 30 | 19 | 14 | ||||||||||||||||||||||||
Canada | 6 | 8 | 10 | 16 | 19 | 19 | 17 | 14 | ||||||||||||||||||||||||
International | 6 | 6 | 6 | 6 | 4 | 6 | 8 | 8 | ||||||||||||||||||||||||
Total | 39 | 43 | 47 | 57 | 58 | 55 | 44 | 36 |
The following chart outlines the average number of drilling rigs that we had under term contract for 2022 and the average number of rigs we have under term contract as of February 8, 2023.
Average for the year ended | ||||||||||
2022 | 2023 | |||||||||
Average rigs under term contract as of February 8, 2023: | ||||||||||
U.S. | 31 | 25 | ||||||||
Canada | 10 | 17 | ||||||||
International | 6 | 7 | ||||||||
Total | 47 | 49 |
In Canada, term contracted rigs normally generate 250 utilization days per year because of the seasonal nature of well site access. In most regions in the U.S. and internationally, term contracts normally generate 365 utilization days per year. Internationally, we expect to have eight rigs under long term contract beginning in the second half of 2023.
Drilling Activity
The following chart outlines the average number of drilling rigs that we had working or moving by quarter for the periods noted.
Average for the quarter ended 2021 | Average for the quarter ended 2022 | ||||||||||||||||||||||||||||||
Mar. 31 | June 30 | Sept. 30 | Dec. 31 | Mar. 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||||||||||||||||
Average Precision active rig count: | |||||||||||||||||||||||||||||||
U.S. | 33 | 39 | 41 | 45 | 51 | 55 | 57 | 60 | |||||||||||||||||||||||
Canada | 42 | 27 | 51 | 52 | 63 | 37 | 59 | 66 | |||||||||||||||||||||||
International | 6 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | |||||||||||||||||||||||
Total | 81 | 72 | 98 | 103 | 120 | 98 | 122 | 132 |
According to industry sources, as of February 8, 2023, the U.S. active land drilling rig count has increased 25% from the same point last year while the Canadian active land drilling rig count has increased 14%. To date in 2023, approximately 79% of the U.S. industry’s active rigs and 63% of the Canadian industry’s active rigs were drilling for oil targets, compared with 81% for the U.S. and 62% for Canada at the same time last year.
Capital Spending and Free Cash Flow Allocation
We remain committed to disciplined cash flow management, capital spending and returning capital to shareholders. Capital spending in 2023 is expected to be $235 million and by spend category includes $163 million for sustaining, infrastructure and intangibles and $72 million for expansion and upgrades. We expect that the $235 million will be split $223 million in the Contract Drilling Services segment, $11 million in the Completion and Production Services segment and $1 million to the Corporate segment. At December 31, 2022, Precision had capital commitments of $184 million with payments expected through 2026.
We remain committed to our debt reduction plans and in 2023 expect to reduce debt by at least $150 million and allocate 10% to 20% of free cash flow before debt repayments for share repurchases. We have increased our long-term debt reduction target from the beginning of 2022 through to the end of 2025 to $500 million and decreased our target Net Debt to Adjusted EBITDA leverage ratio from below 1.5 times to 1.0 times, while continuing to allocate 10% to 20% of free cash flow before debt principal payments to shareholders.
SEGMENTED FINANCIAL RESULTS
Precision’s operations are reported in two segments: Contract Drilling Services, which includes our drilling rig, oilfield supply and manufacturing divisions; and Completion and Production Services, which includes our service rig, rental and camp and catering divisions.
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||||||||||
(Stated in thousands of Canadian dollars) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||
Revenue: | |||||||||||||||||||||||
Contract Drilling Services | 453,225 | 264,911 | 71.1 | 1,436,134 | 877,943 | 63.6 | |||||||||||||||||
Completion and Production Services | 59,250 | 32,134 | 84.4 | 187,171 | 113,488 | 64.9 | |||||||||||||||||
Inter-segment eliminations | (1,971 | ) | (1,843 | ) | 6.9 | (6,111 | ) | (4,584 | ) | 33.3 | |||||||||||||
510,504 | 295,202 | 72.9 | 1,617,194 | 986,847 | 63.9 | ||||||||||||||||||
Adjusted EBITDA:(1) | |||||||||||||||||||||||
Contract Drilling Services | 137,551 | 68,414 | 101.1 | 397,753 | 231,532 | 71.8 | |||||||||||||||||
Completion and Production Services | 11,981 | 6,274 | 91.0 | 38,147 | 23,807 | 60.2 | |||||||||||||||||
Corporate and Other | (58,442 | ) | (10,807 | ) | 440.8 | (124,295 | ) | (62,567 | ) | 98.7 | |||||||||||||
91,090 | 63,881 | 42.6 | 311,605 | 192,772 | 61.6 |
(1) See “FINANCIAL MEASURES AND RATIOS.”
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||||||||||
(Stated in thousands of Canadian dollars, except where noted) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||
Revenue | 453,225 | 264,911 | 71.1 | 1,436,134 | 877,943 | 63.6 | |||||||||||||||||
Expenses: | |||||||||||||||||||||||
Operating | 296,716 | 189,291 | 56.8 | 988,885 | 618,327 | 59.9 | |||||||||||||||||
General and administrative | 18,958 | 7,206 | 163.1 | 49,496 | 28,084 | 76.2 | |||||||||||||||||
Adjusted EBITDA(1) | 137,551 | 68,414 | 101.1 | 397,753 | 231,532 | 71.8 | |||||||||||||||||
Adjusted EBITDA as a percentage of revenue(1) | 30.3 | % | 25.8 | % | 27.7 | % | 26.4 | % |
(1) See “FINANCIAL MEASURES AND RATIOS.”
United States onshore drilling statistics:(1) | 2022 | 2021 | |||||||||||||
Precision | Industry(2) | Precision | Industry(2) | ||||||||||||
Average number of active land rigs for quarters ended: | |||||||||||||||
March 31 | 51 | 603 | 33 | 378 | |||||||||||
June 30 | 55 | 687 | 39 | 437 | |||||||||||
September 30 | 57 | 746 | 41 | 485 | |||||||||||
December 31 | 60 | 761 | 45 | 545 | |||||||||||
Year to date average | 56 | 699 | 40 | 461 |
(1) United States lower 48 operations only.
(2) Baker Hughes rig counts.
Canadian onshore drilling statistics:(1) | 2022 | 2021 | |||||||||||||
Precision | Industry(2) | Precision | Industry(2) | ||||||||||||
Average number of active land rigs for quarters ended: | |||||||||||||||
March 31 | 63 | 205 | 42 | 145 | |||||||||||
June 30 | 37 | 113 | 27 | 72 | |||||||||||
September 30 | 59 | 199 | 51 | 151 | |||||||||||
December 31 | 66 | 187 | 52 | 160 | |||||||||||
Year to date average | 56 | 176 | 43 | 132 |
(1) Canadian operations only.
(2) Baker Hughes rig counts.
Revenue from Contract Drilling Services was $453 million this quarter, 71% higher than 2021, while Adjusted EBITDA increased 101% to $138 million. The increase in revenue and Adjusted EBITDA was primarily due to higher North American activity and day rates.
Drilling rig utilization days (drilling days plus move days) in the U.S. were 5,482, 31% higher than 2021. Drilling rig utilization days in Canada were 6,058, 26% higher than 2021. The increase in utilization days in both the U.S. and Canada was consistent with higher industry activity. Drilling rig utilization days in our international business were 552, consistent with 2021.
Our fourth quarter revenue per utilization day in the U.S. increased 42% from the comparable quarter. The increase was primarily the result of improved pricing, partially offset by lower turnkey revenue. During the fourth quarter, we recognized revenue from turnkey projects of US$4 million compared with US$6 million in 2021. Compared with the same quarter in 2021, drilling rig revenue per utilization day in Canada increased 30% due to higher day rates and increased labor and cost recoveries, partially offset by rig mix. Our international revenue per utilization day for the quarter was slightly lower than 2021 primarily due to the expiration of drilling contracts.
In the U.S., 59% of utilization days were generated from rigs under term contract as compared with 51% in 2021. In Canada, 20% of our utilization days were generated from rigs under term contract, compared with 13% in 2021.
In the U.S., operating costs per utilization day for the quarter were higher by 20% compared with 2021 primarily due to higher repairs and maintenance, field wages and larger crew sizes. Our U.S. daily operating costs during the quarter, excluding turnkey, was US$18,655 compared with US$14,916 the prior year. Our Canadian operating costs on a per utilization day increased 17% as compared with 2021 due to higher field wages, larger crew sizes and higher repairs and maintenance expenses.
Our general and administrative expenses increased $12 million as compared with the fourth quarter of 2021. The higher expense for the quarter pertains to higher share-based compensation charges from our increasing share price and performance multiplier. In the fourth quarter, we recognized $8 million of share-based compensation charges as compared with $1 million in 2021.
SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||||||||||
(Stated in thousands of Canadian dollars, except where noted) | 2022 | 2021 | % Change | 2022 | 2021 | ||||||||||||||||||
Revenue | 59,250 | 32,134 | 84.4 | 187,171 | 113,488 | 64.9 | |||||||||||||||||
Expenses: | |||||||||||||||||||||||
Operating | 45,462 | 24,698 | 84.1 | 141,827 | 84,401 | 68.0 | |||||||||||||||||
General and administrative | 1,807 | 1,162 | 55.5 | 7,197 | 5,280 | 36.3 | |||||||||||||||||
Adjusted EBITDA(1) | 11,981 | 6,274 | 91.0 | 38,147 | 23,807 | 60.2 | |||||||||||||||||
Adjusted EBITDA as a percentage of revenue(1) | 20.2 | % | 19.5 | % | 20.4 | % | 21.0 | % | |||||||||||||||
Well servicing statistics: | |||||||||||||||||||||||
Number of service rigs (end of period) | 135 | 123 | 9.8 | 135 | 123 | 9.8 | |||||||||||||||||
Service rig operating hours | 49,368 | 33,063 | 49.3 | 170,362 | 126,840 | 34.3 | |||||||||||||||||
Service rig operating hour utilization | 40 | % | 29 | % | 42 | % | 28 | % |
(1) See “FINANCIAL MEASURES AND RATIOS.”
Completion and Production Services revenue for the fourth quarter of 2022 increased to $59 million as compared with $32 million in 2021. The higher revenue was primarily due to increased average service rates and activity. Our fourth quarter service rig operating hours increased 49% from 2021.
During the quarter, Completion and Production Services generated 9% of its revenue from U.S. operations compared with 11% in the comparative period.
Operating costs as a percentage of revenue were 77%, consistent with 2021. As compared to 2021, our fourth quarter general and administrative expenses increased 56%. The higher expense for the quarter is primarily due to incremental costs resulting from our well servicing acquisition in the third quarter of 2022.
Our fourth quarter Adjusted EBITDA increased to $12 million as compared with $6 million in 2021, primarily due to increased average service rates and activity, partially offset by higher share-based compensation expense.
Subsequent to December 31, 2022, we made our remaining payment of $28 million to complete our acquisition of High Arctic’s well servicing business and associated rental assets.
SEGMENT REVIEW OF CORPORATE AND OTHER
Our Corporate and Other segment provides support functions to our operating segments. The Corporate and Other segment had negative Adjusted EBITDA of $58 million as compared with $11 million in the fourth quarter of 2021. Our current quarter Adjusted EBITDA was impacted by higher share-based compensation costs from our increased share price and the impact of the increased performance multiplier.
OTHER ITEMS
Share-based Incentive Compensation Plans
We have several cash and equity-settled share-based incentive plans for non-management directors, officers, and other eligible employees. Our accounting policies for each share-based incentive plan can be found in our 2021 Annual Report.
A summary of amounts expensed under these plans during the reporting periods are as follows:
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||
(Stated in thousands of Canadian dollars) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Cash settled share-based incentive plans | 75,438 | 2,055 | 133,240 | 48,592 | |||||||||||
Equity settled share-based incentive plans: | |||||||||||||||
Executive PSU | — | 4,282 | 407 | 7,921 | |||||||||||
Share option plan | — | 33 | 20 | 232 | |||||||||||
Total share-based incentive compensation plan expense | 75,438 | 6,370 | 133,667 | 56,745 | |||||||||||
Allocated: | |||||||||||||||
Operating | 18,913 | 1,551 | 33,607 | 12,988 | |||||||||||
General and Administrative | 56,525 | 4,819 | 100,060 | 43,757 | |||||||||||
75,438 | 6,370 | 133,667 | 56,745 |
We recognize a financial liability associated with our cash settled share-based incentive plans. The financial liability is remeasured each reporting period with the resultant change in fair value, caused primarily by movements in our share price and incremental vesting of units, recognized as share-based compensation expense in net earnings. As units vest, cash payments reduce the outstanding financial liability. In addition, our PSU plans incorporate performance criteria, established at the date of grant, that adjust the available number of PSUs for settlement from zero to two times the amount originally granted.
Cash settled share-based compensation expense for the quarter was $75 million as compared with $2 million in 2021. The higher expense in 2022 was primarily due to our increasing share price and the impact of a higher performance multiplier. Our closing fourth quarter share price increased 48% from the end of the third quarter. Calculated in accordance with our omnibus equity incentive plan, we increased the performance multiplier applied to vesting PSUs that were granted in the first quarter of 2020. The impact from our increased share price and PSU multiplier resulted in higher share-based compensation charges upon remeasurement at the end of the fourth quarter.
Our equity settled share-based compensation expense for the fourth quarter of 2022 was nil as our Executive PSUs and share options fully vested in the first quarter of 2022.
For the year, share-based compensation expense was $134 million as compared with $57 million in 2021 due primarily to our increased share price, which increased 132% from the start of the year, and the impact of the higher performance multiplier.
As at December 31, 2022, the majority of our share-based compensation plans were classified as cash-settled and will be impacted by changes in our share price. Although accounted for as cash-settled, Precision retains the ability to settle certain vested units in common shares at its discretion.
Finance Charges
Fourth quarter net finance charges were $24 million as compared with $21 million in 2021. The increased finance charges were primarily due to higher variable interest rates on our Senior Credit Facility and the impact of the weaker Canadian dollar on our U.S. dollar denominated long-term debt. Interest charges on our U.S. dollar denominated long-term debt in the fourth quarter were US$15 million ($21 million) as compared with US$15 million ($19 million) in 2021.
Income Tax
Income tax expense for the quarter was $9 million as compared with $1 million in 2021. During the fourth quarter, we did not recognize deferred tax assets on certain Canadian and international operating losses.
LIQUIDITY AND CAPITAL RESOURCES
The oilfield services business is inherently cyclical in nature. To manage this, we focus on maintaining a strong balance sheet, so we have the financial flexibility to manage our growth and cash flow regardless of where we are in the business cycle. We maintain a variable operating cost structure so we can be responsive to changes in demand.
Our maintenance capital expenditures are tightly governed and highly responsive to activity levels with additional cost savings leverage provided through our internal manufacturing and supply divisions. Term contracts on expansion capital for new-build and upgrade rig programs provide more certainty of future revenues and return on our capital investments.
Liquidity
Amount | Availability | Used for | Maturity | |||
Senior credit facility (secured) | ||||||
US$500 million(1) (extendible, revolving term credit facility with US$300 million accordion feature) | US$44 million drawn and US$56 million in outstanding letters of credit | General corporate purposes | June 18, 2025(1) | |||
Real estate credit facilities (secured) | ||||||
US$9 million | Fully drawn | General corporate purposes | November 19, 2025 | |||
$18 million | Fully drawn | General corporate purposes | March 16, 2026 | |||
Operating facilities (secured) | ||||||
$40 million | Undrawn, except $28 million in outstanding letters of credit | Letters of credit and general corporate purposes | ||||
US$15 million | Undrawn | Short-term working capital requirements | ||||
Demand letter of credit facility (secured) | ||||||
US$40 million | Undrawn, except US$31 million in outstanding letters of credit | Letters of credit | ||||
Unsecured senior notes (unsecured) | ||||||
US$348 million – 7.125% | Fully drawn | Debt redemption and repurchases | January 15, 2026 | |||
US$400 million – 6.875% | Fully drawn | Debt redemption and repurchases | January 15, 2029 |
(1) US$53 million expires on November 21, 2023.
At December 31, 2022, we had $1,103 million outstanding under our Senior Credit Facility, Real Estate Credit Facilities and unsecured senior notes as compared with $1,126 million at December 31, 2021. The current blended cash interest cost of our debt is approximately 7.1%.
During the quarter, we increased the capacity of our secured demand letter of credit facility to US$40 million to allow us to issue additional letters of credit after securing certain international drilling contracts.
Senior Credit Facility
The Senior Credit Facility requires we comply with certain covenants including a leverage ratio of consolidated senior debt to consolidated Covenant EBITDA of less than 2.5:1. For purposes of calculating the leverage ratio, consolidated senior debt only includes secured indebtedness.
On June 18, 2021, we agreed with the lenders of our Senior Credit Facility to extend the facility’s maturity date and extend and amend certain financial covenants during the Covenant Relief Period. The Covenant Relief Period ended on September 30, 2022. 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 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.
Unsecured Senior Notes
The unsecured senior notes require that we comply with certain restrictive and financial covenants including an incurrence based consolidated interest coverage ratio test of consolidated cash flow, as defined in the senior note agreements, to consolidated interest expense of greater than 2.0:1 for the most recent four consecutive fiscal quarters. In the event our consolidated interest coverage ratio is less than 2.0:1 for the most recent four consecutive fiscal quarters, the unsecured senior notes restrict our ability to incur additional indebtedness.
For further information, please see the unsecured senior note indentures which are available on SEDAR and EDGAR.
Covenants
At December 31, 2022, we were in compliance with the covenants of our Senior Credit Facility and Real Estate Credit Facilities.
Covenant | At December 31, 2022 | ||||
Senior Credit Facility | |||||
Consolidated senior debt to consolidated covenant EBITDA(1) | < 2.50 | 0.22 | |||
Consolidated covenant EBITDA to consolidated interest expense | > 2.50 | 4.80 | |||
Real Estate Credit Facilities | |||||
Consolidated covenant EBITDA to consolidated interest expense | > 2.50 | 4.80 |
(1) For purposes of calculating the leverage ratio consolidated senior debt only includes secured indebtedness.
Impact of foreign exchange rates
The following table summarizes the average and closing Canada-U.S. foreign exchanges rates.
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Canada-U.S. foreign exchange rates | |||||||||||||||
Average | 1.36 | 1.26 | 1.30 | 1.25 | |||||||||||
Closing | 1.36 | 1.26 | 1.36 | 1.26 |
Hedge of investments in foreign operations
We utilize foreign currency long-term debt to hedge our exposure to changes in the carrying values of our net investment in certain foreign operations as a result of changes in foreign exchange rates.
We have designated our U.S. dollar denominated long-term debt as a net investment hedge in our U.S. operations and other foreign operations that have a U.S. dollar functional currency. To be accounted for as a hedge, the foreign currency denominated long-term debt must be designated and documented as such and must be effective at inception and on an ongoing basis. We recognize the effective amount of this hedge (net of tax) in other comprehensive income. We recognize ineffective amounts (if any) in net earnings (loss).
Average shares outstanding
The following table reconciles the weighted average shares outstanding used in computing basic and diluted net loss per share:
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||
(Stated in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Weighted average shares outstanding – basic | 13,538 | 13,304 | 13,546 | 13,315 | |||||||||||
Effect of stock options and other equity compensation plans | 4 | — | — | — | |||||||||||
Weighted average shares outstanding – diluted | 13,542 | 13,304 | 13,546 | 13,315 |
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per share amounts) | 2022 | |||||||||||||||
Quarters ended | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Revenue | 351,339 | 326,016 | 429,335 | 510,504 | ||||||||||||
Adjusted EBITDA(1) | 36,855 | 64,099 | 119,561 | 91,090 | ||||||||||||
Net earnings (loss) | (43,844 | ) | (24,611 | ) | 30,679 | 3,483 | ||||||||||
Net earnings (loss) per basic share | (3.25 | ) | (1.81 | ) | 2.26 | 0.27 | ||||||||||
Net earnings (loss) per diluted share | (3.25 | ) | (1.81 | ) | 2.03 | 0.27 | ||||||||||
Funds provided by operations(1) | 29,955 | 60,373 | 81,327 | 111,339 | ||||||||||||
Cash provided by (used in) operations | (65,294 | ) | 135,174 | 8,142 | 159,082 |
(Stated in thousands of Canadian dollars, except per share amounts) | 2021 | |||||||||||||||
Quarters ended | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Revenue | 236,473 | 201,359 | 253,813 | 295,202 | ||||||||||||
Adjusted EBITDA(1) | 54,539 | 28,944 | 45,408 | 63,881 | ||||||||||||
Net loss | (36,106 | ) | (75,912 | ) | (38,032 | ) | (27,336 | ) | ||||||||
Net loss per basic share | (2.70 | ) | (5.71 | ) | (2.86 | ) | (2.05 | ) | ||||||||
Net loss per diluted share | (2.70 | ) | (5.71 | ) | (2.86 | ) | (2.05 | ) | ||||||||
Funds provided by operations(1) | 43,430 | 12,607 | 33,525 | 62,681 | ||||||||||||
Cash provided by operations | 15,422 | 42,219 | 21,871 | 59,713 |
(1) See “FINANCIAL MEASURES AND RATIOS.”
FINANCIAL MEASURES AND RATIOS
Non-GAAP Financial Measures | ||
We reference certain additional Non-Generally Accepted Accounting Principles (Non-GAAP) measures that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors. | ||
Adjusted EBITDA | We believe Adjusted EBITDA (earnings before income taxes, gain (loss) on investments and other assets, loss on redemption and repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization), as reported in our Consolidated Statements of Net Earnings (Loss) and our reportable operating segment disclosures, is a useful measure, because it gives an indication of the results from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and depreciation and amortization charges. The most directly comparable financial measure is net earnings (loss). |
For the three months ended December 31, | For the year ended December 31, | ||||||||||||||
(Stated in thousands of Canadian dollars) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Adjusted EBITDA by segment: | |||||||||||||||
Contract Drilling Services | 137,551 | 68,414 | 397,753 | 231,532 | |||||||||||
Completion and Production Services | 11,981 | 6,274 | 38,147 | 23,807 | |||||||||||
Corporate and Other | (58,442 | ) | (10,807 | ) | (124,295 | ) | (62,567 | ) | |||||||
Adjusted EBITDA | 91,090 | 63,881 | 311,605 | 192,772 | |||||||||||
Depreciation and amortization | 71,373 | 71,178 | 279,035 | 282,326 | |||||||||||
Gain on asset disposals | (7,774 | ) | (2,292 | ) | (29,926 | ) | (8,516 | ) | |||||||
Foreign exchange | (84 | ) | 289 | 1,278 | 393 | ||||||||||
Finance charges | 23,519 | 20,648 | 87,813 | 91,431 | |||||||||||
Loss on redemption and repurchase of unsecured notes | — | — | — | 9,520 | |||||||||||
Loss (gain) on investments and other assets | (8,714 | ) | 727 | (12,452 | ) | 400 | |||||||||
Incomes taxes | 9,287 | 667 | 20,150 | (5,396 | ) | ||||||||||
Net earnings (loss) | 3,483 | (27,336 | ) | (34,293 | ) | (177,386 | ) |
Funds Provided by (Used in) Operations | We believe funds provided by (used in) operations, as reported in our Consolidated Statements of Cash Flows, is a useful measure because it provides an indication of the funds our principal business activities generate prior to consideration of working capital changes, which is primarily made up of highly liquid balances. The most directly comparable financial measure is cash provided by (used in) operations. | |
Net Capital Spending | We believe net capital spending is a useful measure as it provides an indication of our primary investment activities. The most directly comparable financial measure is cash provided by (used in) investing activities. Net capital spending is calculated as follows: |
For the three months ended December 31, | For the year ended December 31, | |||||||||||||||
(Stated in thousands of Canadian dollars) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Capital spending by spend category | ||||||||||||||||
Expansion and upgrade | 12,699 | 3,125 | 63,305 | 19,006 | ||||||||||||
Maintenance and infrastructure | 44,610 | 24,625 | 120,945 | 56,935 | ||||||||||||
57,309 | 27,750 | 184,250 | 75,941 | |||||||||||||
Proceeds on sale of property, plant and equipment | (5,165 | ) | (2,696 | ) | (37,198 | ) | (13,086 | ) | ||||||||
Net capital spending | 52,144 | 25,054 | 147,052 | 62,855 | ||||||||||||
Business acquisitions | — | — | 10,200 | — | ||||||||||||
Purchase of investments and other assets | 8 | 500 | 617 | 3,500 | ||||||||||||
Changes in non-cash working capital balances | (6,573 | ) | (6,529 | ) | (13,454 | ) | (9,742 | ) | ||||||||
Cash used in investing activities | 45,579 | 19,025 | 144,415 | 56,613 |
Working Capital | We define working capital as current assets less current liabilities, as reported in our Consolidated Statements of Financial Position. Working capital is calculated as follows: |
At December 31, | At December 31, | ||||||
(Stated in thousands of Canadian dollars) | 2022 | 2021 | |||||
Current assets | 470,670 | 319,757 | |||||
Current liabilities | 410,029 | 238,120 | |||||
Working capital | 60,641 | 81,637 |
Non-GAAP Ratios | ||
We reference certain additional Non-GAAP ratios that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors. | ||
Adjusted EBITDA % of Revenue | We believe Adjusted EBITDA as a percentage of consolidated revenue, as reported in our Consolidated Statements of Net Earnings (Loss), provides an indication of our profitability from our principal business activities prior to consideration of how our activities are financed and the impact of foreign exchange, taxation and depreciation and amortization charges. | |
Long-term debt to long-term debt plus equity | We believe that long-term debt (as reported in our Consolidated Statements of Financial Position) to long-term debt plus equity (total shareholders’ equity as reported in our Condensed Interim Consolidated Statements of Financial Position) provides an indication to our debt leverage. | |
Net Debt to Adjusted EBITDA | We believe that the Net Debt (long-term debt less cash, as reported in our Consolidated Statements of Financial Position) to Adjusted EBITDA ratio provides an indication to the number of years it would take for us to repay our debt obligations. | |
Supplementary Financial Measures | ||
We reference certain supplementary financial measures that are not defined terms under IFRS to assess performance because we believe they provide useful supplemental information to investors. | ||
Capital Spending by Spend Category | We provide additional disclosure to better depict the nature of our capital spending. Our capital spending is categorized as expansion and upgrade, maintenance and infrastructure, or intangibles. |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements contained in this release, including statements that contain words such as "could", "should", "can", "anticipate", "estimate", "intend", "plan", "expect", "believe", "will", "may", "continue", "project", "potential" and similar expressions and statements relating to matters that are not historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking information and statements").
In particular, forward looking information and statements include, but are not limited to, the following:
These forward-looking information and statements are based on certain assumptions and analysis made by Precision in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. These include, among other things:
Undue reliance should not be placed on forward-looking information and statements. Whether actual results, performance or achievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from our expectations. Such risks and uncertainties include, but are not limited to:
Readers are cautioned that the forgoing list of risk factors is not exhaustive. Additional information on these and other factors that could affect our business, operations or financial results are included in reports on file with applicable securities regulatory authorities, including but not limited to Precision’s Annual Information Form for the year ended December 31, 2021, which may be accessed on Precision’s SEDAR profile at www.sedar.com or under Precision’s EDGAR profile at www.sec.gov. The forward-looking information and statements contained in this release are made as of the date hereof and Precision undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by law.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(Stated in thousands of Canadian dollars) | December 31, 2022 | December 31, 2021 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 21,587 | $ | 40,588 | ||||
Accounts receivable | 413,925 | 255,740 | ||||||
Inventory | 35,158 | 23,429 | ||||||
Total current assets | 470,670 | 319,757 | ||||||
Non-current assets: | ||||||||
Income tax recoverable | 1,602 | — | ||||||
Deferred tax assets | 455 | 867 | ||||||
Right-of-use assets | 60,032 | 51,440 | ||||||
Property, plant and equipment | 2,303,338 | 2,258,391 | ||||||
Intangibles | 19,575 | 23,915 | ||||||
Investments and other assets | 20,451 | 7,382 | ||||||
Total non-current assets | 2,405,453 | 2,341,995 | ||||||
Total assets | $ | 2,876,123 | $ | 2,661,752 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 392,053 | $ | 224,123 | ||||
Income taxes payable | 2,991 | 839 | ||||||
Current portion of lease obligations | 12,698 | 10,935 | ||||||
Current portion of long-term debt | 2,287 | 2,223 | ||||||
Total current liabilities | 410,029 | 238,120 | ||||||
Non-current liabilities: | ||||||||
Share-based compensation | 60,133 | 26,728 | ||||||
Provisions and other | 7,538 | 6,513 | ||||||
Lease obligations | 52,978 | 45,823 | ||||||
Long-term debt | 1,085,970 | 1,106,794 | ||||||
Deferred tax liabilities | 28,946 | 12,219 | ||||||
Total non-current liabilities | 1,235,565 | 1,198,077 | ||||||
Shareholders’ equity: | ||||||||
Shareholders’ capital | 2,299,533 | 2,281,444 | ||||||
Contributed surplus | 72,555 | 76,311 | ||||||
Deficit | (1,301,273 | ) | (1,266,980 | ) | ||||
Accumulated other comprehensive income | 159,714 | 134,780 | ||||||
Total shareholders’ equity | 1,230,529 | 1,225,555 | ||||||
Total liabilities and shareholders’ equity | $ | 2,876,123 | $ | 2,661,752 |
CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS) (UNAUDITED)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
(Stated in thousands of Canadian dollars, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Revenue | $ | 510,504 | $ | 295,202 | $ | 1,617,194 | $ | 986,847 | ||||||||
Expenses: | ||||||||||||||||
Operating | 340,207 | 212,146 | 1,124,601 | 698,144 | ||||||||||||
General and administrative | 79,207 | 19,175 | 180,988 | 95,931 | ||||||||||||
Earnings before income taxes, loss (gain) on investments and other assets, loss on redemption and repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization | 91,090 | 63,881 | 311,605 | 192,772 | ||||||||||||
Depreciation and amortization | 71,373 | 71,178 | 279,035 | 282,326 | ||||||||||||
Gain on asset disposals | (7,774 | ) | (2,292 | ) | (29,926 | ) | (8,516 | ) | ||||||||
Foreign exchange | (84 | ) | 289 | 1,278 | 393 | |||||||||||
Finance charges | 23,519 | 20,648 | 87,813 | 91,431 | ||||||||||||
Loss on redemption and repurchase of unsecured senior notes | — | — | — | 9,520 | ||||||||||||
Loss (gain) on investments and other assets | (8,714 | ) | 727 | (12,452 | ) | 400 | ||||||||||
Earnings (loss) before income taxes | 12,770 | (26,669 | ) | (14,143 | ) | (182,782 | ) | |||||||||
Income taxes: | ||||||||||||||||
Current | 1,799 | 741 | 4,362 | 3,203 | ||||||||||||
Deferred | 7,488 | (74 | ) | 15,788 | (8,599 | ) | ||||||||||
9,287 | 667 | 20,150 | (5,396 | ) | ||||||||||||
Net earnings (loss) | $ | 3,483 | $ | (27,336 | ) | $ | (34,293 | ) | $ | (177,386 | ) | |||||
Net earnings (loss) per share: | ||||||||||||||||
Basic | $ | 0.27 | $ | (2.05 | ) | $ | (2.53 | ) | $ | (13.32 | ) | |||||
Diluted | $ | 0.27 | $ | (2.05 | ) | $ | (2.53 | ) | $ | (13.32 | ) |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
(Stated in thousands of Canadian dollars) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net earnings (loss) | $ | 3,483 | $ | (27,336 | ) | $ | (34,293 | ) | $ | (177,386 | ) | |||||
Unrealized gain (loss) on translation of assets and liabilities of operations denominated in foreign currency | (32,809 | ) | (2,074 | ) | 106,669 | (11,256 | ) | |||||||||
Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt | 23,388 | 1,460 | (81,735 | ) | 8,455 | |||||||||||
Comprehensive loss | $ | (5,938 | ) | $ | (27,950 | ) | $ | (9,359 | ) | $ | (180,187 | ) |
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
(Stated in thousands of Canadian dollars) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Cash provided by (used in): | ||||||||||||||||
Operations: | ||||||||||||||||
Net earnings (loss) | $ | 3,483 | $ | (27,336 | ) | $ | (34,293 | ) | $ | (177,386 | ) | |||||
Adjustments for: | ||||||||||||||||
Long-term compensation plans | 25,247 | 3,264 | 60,094 | 31,952 | ||||||||||||
Depreciation and amortization | 71,373 | 71,178 | 279,035 | 282,326 | ||||||||||||
Gain on asset disposals | (7,774 | ) | (2,292 | ) | (29,926 | ) | (8,516 | ) | ||||||||
Foreign exchange | (286 | ) | 296 | 638 | 1,733 | |||||||||||
Finance charges | 23,519 | 20,648 | 87,813 | 91,431 | ||||||||||||
Income taxes | 9,287 | 667 | 20,150 | (5,396 | ) | |||||||||||
Other | 269 | (410 | ) | 542 | (972 | ) | ||||||||||
Loss (gain) on investments and other assets | (8,714 | ) | 727 | (12,452 | ) | 400 | ||||||||||
Loss on redemption and repurchase of unsecured senior notes | — | — | — | 9,520 | ||||||||||||
Income taxes paid | (240 | ) | (799 | ) | (3,263 | ) | (5,999 | ) | ||||||||
Income taxes recovered | 14 | 1 | 24 | 48 | ||||||||||||
Interest paid | (4,972 | ) | (3,276 | ) | (85,678 | ) | (67,258 | ) | ||||||||
Interest received | 133 | 13 | 310 | 360 | ||||||||||||
Funds provided by operations | 111,339 | 62,681 | 282,994 | 152,243 | ||||||||||||
Changes in non-cash working capital balances | 47,743 | (2,968 | ) | (45,890 | ) | (13,018 | ) | |||||||||
159,082 | 59,713 | 237,104 | 139,225 | |||||||||||||
Investments: | ||||||||||||||||
Purchase of property, plant and equipment | (57,309 | ) | (27,750 | ) | (184,250 | ) | (75,941 | ) | ||||||||
Proceeds on sale of property, plant and equipment | 5,165 | 2,696 | 37,198 | 13,086 | ||||||||||||
Business acquisitions | — | — | (10,200 | ) | — | |||||||||||
Purchase of investments and other assets | (8 | ) | (500 | ) | (617 | ) | (3,500 | ) | ||||||||
Changes in non-cash working capital balances | 6,573 | 6,529 | 13,454 | 9,742 | ||||||||||||
(45,579 | ) | (19,025 | ) | (144,415 | ) | (56,613 | ) | |||||||||
Financing: | ||||||||||||||||
Issuance of long-term debt | — | — | 144,889 | 696,341 | ||||||||||||
Repayments of long-term debt | (132,163 | ) | (55,203 | ) | (250,749 | ) | (824,871 | ) | ||||||||
Repurchase of share capital | — | — | (10,010 | ) | (4,294 | ) | ||||||||||
Issuance of common shares on the exercise of options | 3,671 | — | 9,833 | — | ||||||||||||
Debt issuance costs | — | — | — | (9,450 | ) | |||||||||||
Debt amendment fees | — | — | — | (913 | ) | |||||||||||
Lease payments | (1,948 | ) | (1,763 | ) | (7,134 | ) | (6,726 | ) | ||||||||
(130,440 | ) | (56,966 | ) | (113,171 | ) | (149,913 | ) | |||||||||
Effect of exchange rate changes on cash | (1,524 | ) | (230 | ) | 1,481 | (883 | ) | |||||||||
Decrease in cash | (18,461 | ) | (16,508 | ) | (19,001 | ) | (68,184 | ) | ||||||||
Cash, beginning of period | 40,048 | 57,096 | 40,588 | 108,772 | ||||||||||||
Cash, end of period | $ | 21,587 | $ | 40,588 | $ | 21,587 | $ | 40,588 |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Stated in thousands of Canadian dollars) | Shareholders’ Capital | Contributed Surplus | Accumulated Other Comprehensive Income | Deficit | Total Equity | |||||||||||||||
Balance at January 1, 2022 | $ | 2,281,444 | $ | 76,311 | $ | 134,780 | $ | (1,266,980 | ) | $ | 1,225,555 | |||||||||
Net loss | — | — | — | (34,293 | ) | (34,293 | ) | |||||||||||||
Other comprehensive income | — | — | 24,934 | — | 24,934 | |||||||||||||||
Share options exercised | 14,016 | (4,183 | ) | — | — | 9,833 | ||||||||||||||
Share repurchases | (10,010 | ) | — | — | — | (10,010 | ) | |||||||||||||
Share-based compensation reclassification | 14,083 | (219 | ) | — | — | 13,864 | ||||||||||||||
Share-based compensation expense | — | 646 | — | — | 646 | |||||||||||||||
Balance at December 31, 2022 | $ | 2,299,533 | $ | 72,555 | $ | 159,714 | $ | (1,301,273 | ) | $ | 1,230,529 |
(Stated in thousands of Canadian dollars) | Shareholders’ Capital | Contributed Surplus | Accumulated Other Comprehensive Income | Deficit | Total Equity | |||||||||||||||
Balance at January 1, 2021 | $ | 2,285,738 | $ | 72,915 | $ | 137,581 | $ | (1,089,594 | ) | $ | 1,406,640 | |||||||||
Net loss | — | — | — | (177,386 | ) | (177,386 | ) | |||||||||||||
Other comprehensive loss | — | — | (2,801 | ) | — | (2,801 | ) | |||||||||||||
Share repurchases | (4,294 | ) | — | — | — | (4,294 | ) | |||||||||||||
Share-based compensation reclassification | — | (4,757 | ) | — | — | (4,757 | ) | |||||||||||||
Share-based compensation expense | — | 8,153 | — | — | 8,153 | |||||||||||||||
Balance at December 31, 2021 | $ | 2,281,444 | $ | 76,311 | $ | 134,780 | $ | (1,266,980 | ) | $ | 1,225,555 |
FOURTH QUARTER AND YEAR-END RESULTS CONFERENCE CALL AND WEBCAST
Precision Drilling Corporation has scheduled a conference call and webcast to begin promptly at 12:00 noon MT (2:00 p.m. ET) on Thursday, February 9, 2023.
To participate in the conference call please register at the URL link below. Once registered, you will receive a dial-in number and a unique PIN, which will allow you to ask questions.
https://register.vevent.com/register/BI0b15f60ffe674cc3958132c6f826d195
The call will also be webcast and can be accessed through the link below. A replay of the webcast call will be available on Precision’s website for 12 months.
https://edge.media-server.com/mmc/p/8gn8uxsa
About Precision
Precision is a leading provider of safe and environmentally responsible High Performance, High Value services to the energy industry, offering customers access to an extensive fleet of Super Series drilling rigs. Precision has commercialized an industry-leading digital technology portfolio known as “Alpha” that utilizes advanced automation software and analytics to generate efficient, predictable, and repeatable results for energy customers. Additionally, Precision offers well service rigs, camps and rental equipment all backed by a comprehensive mix of technical support services and skilled, experienced personnel.
Precision is headquartered in Calgary, Alberta, Canada and is listed on the Toronto Stock Exchange under the trading symbol “PD” and on the New York Stock Exchange under the trading symbol “PDS.”
For further information, please contact:
Lavonne Zdunich, CPA, CA
Director, Investor Relations
403.716.4500
800, 525 - 8th Avenue S.W.
Calgary, Alberta, Canada T2P 1G1
Website: www.precisiondrilling.com