(Canadian dollars except as indicated)
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.
Effective January 1, 2011, Precision Drilling Corporation (TSX:
PD) (NYSE: PDS) ("Precision" or the "Corporation") began reporting
its financial results in accordance with International Financial
Reporting Standards ("IFRS"). Prior year comparative amounts have
been changed to reflect results as if Precision had always prepared
its financial results using IFRS.
Precision Drilling Corporation reported net earnings of $16
million or $0.06 per diluted share for the three months ended June
30, 2011 compared to a net loss of $69 million or $0.25 per diluted
share for the second quarter of 2010. Financing costs were $16
million this quarter compared with $52 million for the comparable
period of 2010 while Precision recorded a foreign exchange gain for
the current quarter of $1 million compared with a $26 million loss
in the comparable quarter of 2010.
Revenue for the second quarter of 2011 was $345 million and
earnings before finance charges, income taxes, depreciation,
amortization and foreign exchange ("EBITDA") totalled $93 million
compared to $262 million and $60 million, respectively, during the
comparable period in 2010. Second quarter 2011 revenue and EBITDA
were lower than the first quarter of 2011 due to the seasonality of
oilfield service activity in Canada known as "spring break-up".
This is a time in Canada where heavy equipment cannot change
locations due to road bans and normally occurs in March to June of
each year. Spring break-up was extended this year due to
significant rainfall.
In the Contract Drilling Services segment, average drilling rig
revenue per day increased by US$3,347 to US$22,080 in Precision's
United States operations and by $2,199 to $18,461 in the Canadian
operations in the second quarter of 2011 over the comparable
quarter in 2010. Average revenue per day in the second quarter of
2011 also increased over the first quarter with increases of
US$1,216 and $641 in the U.S. and Canadian operations,
respectively.
For the six months ended June 30, 2011, Precision reported net
earnings of $82 million or $0.28 per diluted share compared to net
loss of $13 million or $0.05 per diluted share for the same period
of 2010. Revenue for the first half of 2011 was $871 million
compared to $635 million for the corresponding period of 2010.
EBITDA totalled $279 million for the first half of 2011 compared to
$178 million in the first half of 2010. Higher activity levels and
improved pricing in the Contract Drilling Services and Completion
and Production Services segments has led to the year-over-year
improvement. Activity for Precision, as measured by drilling
utilization days, increased 14% in Canada and 16% in the United
States for the first six months of the year compared with the same
period in 2010.
Kevin Neveu, Precision's President and Chief Executive Officer,
stated: "While Precision's Canadian activity was frustrated by an
exceptionally wet spring, our U.S. operations continued to deliver
strong results during the second quarter. Indications from our
customers are highly encouraging; demand for Precision's services
in Canada and the United States will continue the upward trend of
the last several quarters as oil and gas liquids drilling and well
servicing activity continues to grow. The customer drilling
programs delayed by the wet Canadian spring have served to further
enhance demand for the second half of the year as the weather
improves. Precision's High Performance Tier 1 and Tier 2 rigs
remain in solid demand as evidenced by increasing dayrates and
interest in new build Super Series rigs. Of the 21 rigs booked
during the second quarter, 18 of those are now fully contracted and
a further two new builds contracted in the first three weeks of
July increasing our 2011 new build program to 30. Of the 30 new
build rigs, 16 are scheduled to be deployed in the Canadian market
and 14 in the United States over the next 12 months."
"Average revenue per day improvements for Precision's Contract
Drilling segment in the second quarter 2011 in both Canada and the
U.S. reflect increased utilization and higher rates. In Canada,
second quarter 2011 average revenue per day increased 14% over the
comparable period in 2010 and 4% over the first quarter 2011. In
the U.S., second quarter 2011 average revenue per day increased 18%
over the comparable period in 2010 and 6% over the first quarter in
2011. As contracted rigs roll off into a stronger spot market
pricing environment and our new build and upgrade rigs enter the
markets, we expect to see continued improvements in our average
revenue per day throughout the year. We are also encouraged by the
continued improvements in daily operating margins, particularly in
the U.S. where the benefits of vertical integration and operational
improvements are positively influencing our financial results."
"Precision continues to see strong customer demand in Canada and
the United States for additional Tier 1 rigs and expects this
interest could result in additional new build rig contracts as the
year progresses. We have delivered all nine rigs from our 2010 new
build program and two rigs from our 2011 new build program. By the
end of the year we expect to have delivered 18 out of 30 rigs
announced in 2011. The 39 new build Tier 1 Super Series rigs
announced over the past 12 months confirms our customers'
confidence in the long-term sustainability and growth of oil and
natural gas liquids rich drilling in North America."
"Precision's average active rig count in the United States for
the second quarter of 2011 was up two rigs over the first quarter
of 2011 and 16% over the same period in 2010. Precision's active
rig count in the United States is currently 106 and we expect it to
modestly increase over the coming months as Precision's new build
and upgraded rigs enter the market."
"Precision's current active rig count in Canada of 98, compares
to 77 at this time last year. In Canada, Precision averaged 46 rigs
operating during the second quarter of 2011, up from 40 rigs during
the second quarter of 2010. Precision expects to have over 130 rigs
working once the ground dries sufficiently to facilitate the
movement of rigs."
"The high activity levels expected later this year and next
winter in Canada will likely create labour challenges for the
oilfield services industry. We believe Precision is uniquely
positioned to meet the challenge of the imminent labour shortage
with well staffed field operations supported by employee retention,
recruiting, training and leadership development programs."
"Precision also continues to see strong demand for services and
equipment provided by the Completion and Production Services
segment. Due to spring break-up, Precision's service rig fleet
worked 52% fewer hours during the second quarter of 2011 as
compared to the first quarter of 2011, and was 12% lower than the
second quarter of 2010. Oil related work is where the vast majority
of the service rig hours were achieved during the second quarter of
2011. The segment generated EBITDA of $8 million during the second
quarter of 2011, up 59% from last year. This improvement was driven
by an increase in average hourly servicing rates as well as strong
results from the rentals and camp and catering divisions. Precision
expects the activity levels and financial performance of the
Completion and Production Services segment to continue to improve
throughout the year and end the year meaningfully above 2010
performance."
"Precision remains excited about the opportunity to grow in the
directional drilling services market and is encouraged by the early
stages of integrating the first quarter acquisitions of Drake
Directional Drilling and Drake MWD Services. The benefits of
balance sheet restructuring and increased financial flexibility
began to show during the second quarter of 2011 as demonstrated by
Precision's ability to increase the capital budget and in the
reduced interest expense, which was $14 million versus $19 million
in the comparable quarter in 2010. Precision remains in a strong
position to continue to seize opportunities to deploy capital at
attractive rates of return and to expand its drilling, directional
drilling and international presence during 2011", concluded Mr.
Neveu.
SELECT FINANCIAL AND OPERATING INFORMATION
(Stated in thousands of Canadian Three months ended June 30,
dollars, except per share amounts) 2011 2010 % Change
----------------------------------------------------------------------------
Revenue $ 345,325 $ 261,828 31.9
EBITDA(1) 92,566 60,125 54.0
Net earnings (loss) 16,403 (69,418) n/m
Cash provided by operations 176,312 143,001 23.3
Capital spending:
Upgrade capital expenditures 51,951 14,595 256.0
Expansion capital expenditures 61,943 7,089 773.8
Proceeds on sale (3,349) (6,146) (45.5)
--------------------------------------
Net capital spending 110,545 15,538 611.4
Net earnings (loss) per share:
Basic 0.06 (0.25) n/m
Diluted 0.06 (0.25) n/m
Contract drilling rig fleet 360 351 2.6
Drilling rig utilization days:
Canada 4,200 3,684 14.0
United States 9,316 8,030 16.0
International 173 160 8.1
Service rig fleet 220 220 -
Service rig operating hours 46,533 52,637 (11.6)
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
n/m - calculation not meaningful
(Stated in thousands of Canadian Six months ended June 30,
dollars, except per share amounts) 2011 2010 % change
----------------------------------------------------------------------------
Revenue $ 870,675 $ 634,964 37.1
EBITDA(1) 278,977 177,783 56.9
Net earnings (loss) 81,963 (12,501) n/m
Cash provided by operations 293,634 163,625 79.5
Capital spending:
Upgrade capital expenditures 81,178 21,391 279.5
Expansion capital expenditures 97,516 7,776 1154.1
Proceeds on sale (4,084) (7,299) (44.0)
--------------------------------------
Net capital spending 174,610 21,868 698.5
Net earnings (loss) per share:
Basic 0.30 (0.05) n/m
Diluted 0.28 (0.05) n/m
Contract drilling rig fleet 360 351 2.6
Drilling rig utilization days:
Canada 16,742 13,889 20.5
United States 18,337 15,023 22.1
International 353 335 5.4
Service rig fleet 220 220 -
Service rig operating hours 142,681 134,806 5.8
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
n/m - calculation not meaningful
FINANCIAL POSITION AND RATIOS
(Stated in thousands of June 30, December 31,
Canadian dollars, except ratios) 2011 2010
----------------------------------------------------------------------------
Working capital $ 377,056 $ 458,003
Long-term debt(1) $ 806,416 $ 804,494
Total long-term financial liabilities $ 831,055 $ 834,813
Total assets $3,637,755 $3,564,540
Long-term debt to long-term debt plus
equity ratio(1) 0.29 0.29
----------------------------------------------------------------------------
(1) Net of unamortized debt issue costs.
Revenue in the second quarter of 2011 was $83 million higher
than the prior year period. The increase was mainly due to a
year-over-year increase in rates and drilling utilization days in
both Canada and the United States. Revenue in Precision's Contract
Drilling Services segment increased by 33% while revenue increased
19% in the Completion and Production Services segment in the second
quarter of 2011 compared to the prior year.
EBITDA margin (EBITDA as a percentage of revenue) was 27% for
the second quarter of 2011 compared to 23% for the same period in
2010. The increase in EBITDA margin was primarily attributable to
higher utilizations and higher average dayrates in both Canada and
the United States in the second quarter of 2011 versus the prior
year period. Precision's term contract position with customers, a
highly variable operating cost structure and economies achieved
through vertical integration of the supply chain continue to
support EBITDA margins.
To align with the management of the operating divisions,
Precision now considers the camp and catering division to be within
the Completion and Production Services segment. Prior period
numbers have been restated to reflect this change. In the Contract
Drilling Services segment, Precision currently owns 362 contract
drilling rigs, including 203 in Canada, 156 in the United States
and three rigs in international locations. Precision's Completion
and Production Services segment includes 200 service rigs, 20
snubbing units, 84 wastewater treatment units, 82 drilling and base
camps and a broad mix of rental equipment.
During the quarter, an average of 46 drilling rigs worked in
Canada and 104 worked in the United States and Mexico totalling an
average of 150 rigs. This compares with an average of 130 rigs in
the second quarter a year ago.
Precision's 2011 priorities are threefold:
1. Deliver the High Performance, High Value level of reliable
and repeatable services that customers require to drill the
technically challenging wells of today's unconventional resource
play exploitation.
2. Focus on North American organic growth. Precision's 2010 new
build rig program included nine rigs. All of these rigs are
complete and working. Precision's 2011 new build rig program
currently stands at 30 rigs, all of which are expected to be
contracted and delivered by mid-2012.
3. Improve financial flexibility, which provides the financial
liquidity to be able to continue to seize opportunities to grow the
Corporation. In addition to North American organic growth,
Precision plans on pursuing both organic growth and acquisition
opportunities in the directional drilling and international
drilling arena during 2011. During the first quarter of 2011,
Precision repaid its $175 million 10% senior unsecured notes and
issued $200 million of senior unsecured notes with an eight year
term, bearing interest at 6.5% annually. Also, late in the first
quarter, Precision completed the acquisition of two directional
drilling companies in the United States. These companies typically
operate 10 to 14 directional drilling jobs, on a continuing basis
bringing Precision's total job capacity in North America to
approximately 25 jobs.
As previously disclosed in the 2010 Management's Discussion and
Analysis and in Note 25 to the December 31, 2010 financial
statements, certain Canadian tax authorities have reviewed prior
period transactions and on February 9, 2011, the Corporation
received a notice of reassessment from Canada Revenue Agency for
$216 million relating to a transaction that occurred in the 2005
tax year. As a result of the reassessment, Precision was required
to pay $108 million of the reassessed balance. Precision has
appealed this reassessment as it vigorously defends what it
believes to be a correct filing position related to this
transaction. This appeal process could be lengthy and the ultimate
outcome of the process is unknown.
Oil prices were higher and natural gas prices were essentially
flat during the second quarter of 2011 compared with the year ago
period. For the second quarter of 2011, West Texas Intermediate
crude oil averaged US$102.55 per barrel, 32% higher when compared
to US$77.88 per barrel in the same period in 2010. AECO natural gas
spot prices averaged $3.88 per MMBtu, 1% lower than the second
quarter 2010 average of $3.90 per MMBtu. In the United States,
Henry Hub natural gas spot prices averaged US$4.35 per MMBtu in the
second quarter of 2011, an increase of 1% over the second quarter
2010 average of US$4.31 per MMBtu.
Summary for the three months ended June 30, 2011:
- Operating earnings were $40 million and 12% of revenue,
compared to $15 million and 6% of revenue in the second quarter of
2010. Operating earnings were positively impacted by the increase
in activity and rates in all of Precision's drilling operations
while well servicing experienced a slight decrease in activity due
to unusually wet weather in the western Canada sedimentary
basin.
- General and administrative expenses were $30 million, an
increase of $7 million from the second quarter of 2010, primarily
because incentive compensation costs tied to the price of
Precision's common share increased $4 million over the comparable
quarter and incremental costs associated with increased
activity.
- Finance charges were $16 million, a decrease of $36 million
from the second quarter of 2010 due to the lower overall interest
rate on Precision's debt and the second quarter of 2010 included
finance charges of $25 million relating to the credit agreement
amendment and higher amortization of debt issue costs of $8
million.
- In November 2010, Precision designated its U.S. dollar
denominated long-term debt as a hedge against its net investment in
its United States operations. As a result, in the first half of
2011 the gain on translation of the U.S. denominated long-term debt
is recognized in comprehensive income while in the comparative
period it was recognized as an expense in the period. During the
second quarter, the Canadian dollar weakened slightly in relation
to the U.S. dollar giving rise to a foreign exchange gain of $1
million on the net U.S. dollar denominated monetary position held
in the Canadian based operations.
- Capital expenditures for the purchase of property, plant and
equipment were $114 million in the second quarter, an increase of
$92 million over the same period in 2010. Capital spending for the
second quarter of 2011 included $62 million for expansion capital
and $52 million for the maintenance and upgrade of existing
assets.
- Average revenue per utilization day for contract drilling rigs
increased in the second quarter of 2011 to US$22,080 from the prior
year second quarter of US$18,733 in the United States and increased
in Canada to $18,461 in the second quarter of 2011 from $16,262 for
the second quarter of 2010. The increase in revenue rates for the
second quarter in Canada and the United States reflects a greater
proportion of Tier 1 and Tier 2 rigs working and the pricing
leverage of higher overall industry utilization compared to the
prior year quarter. In the United States, for the second quarter of
2011, 80% of Precision's working rigs were working under term
contracts compared to 51% in the 2010 comparative period. Turnkey
revenue for the second quarter of 2011 was US$22 million compared
with US$20 million in 2010. Within Precision's Completion and
Production Services segment, average hourly rates for service rigs
were $643 in the second quarter of 2011 compared to $604 in the
second quarter of 2010.
- Average operating costs per utilization day for drilling rigs
increased in the second quarter of 2011 to US$13,110 from the prior
year second quarter of US$12,626 in the United States and increased
from $10,200 in 2010 to $11,897 in Canada. The cost increase in the
United States was primarily due to a labour rate increase that
became effective in December 2010. The cost increase in Canada was
primarily due to a labour rate increase that became effective in
the fourth quarter of 2010 and higher repairs and maintenance costs
in preparation for an expected busy second half of the year. Within
Precision's Completion and Production Services segment, average
hourly operating costs for service rigs increased to $559 in the
second quarter of 2011 as compared to $505 in the second quarter of
2010 primarily due to a labour rate increase and higher repairs and
maintenance costs. Typically labour rate increases are recovered in
dayrate increases.
Summary for the six months ended June 30, 2011:
- Revenue for the first half of 2011 was $871 million an
increase of 37% from the 2010 period.
- Operating earnings were $163 million, an increase of $83
million or 103% from 2010. Operating earnings were 19% of revenue
in 2011 compared to 13% in 2010.
- Capital expenditures for the purchase of property, plant and
equipment were $179 million in the first half of 2011, an increase
of $150 million over the same period in 2010. Capital spending for
2011 to date included $98 million for expansion capital and $81
million for the maintenance and upgrade of existing assets.
- Finance charges were $59 million, a decrease of $22 million
from the first half of 2010 due to lower interest costs and lower
amortization of debt issue costs. During 2011 Precision refinanced
a portion of long-term debt which resulted in a charge of $27
million for the make-whole premium under the previously outstanding
$175 million 10% senior unsecured notes while 2010 includes a loss
on settlement resulting from credit amendments.
- General and administrative costs were $65 million an increase
of $16 million over the first half of 2010 primarily because of the
increased accruals for stock-based compensation in 2011.
OUTLOOK
Precision has a strong portfolio of long-term customer contracts
that provides a base level of activity and revenue. Precision
expects to have an average of approximately 124 rigs committed
under term contracts in North America in the third quarter of 2011,
an average of 110 rigs contracted for the fourth quarter of 2011
and 87 for the first quarter of 2012. In Canada, term contracted
rigs normally generate 250 utilization days per rig year due to the
seasonal nature of well access, whereas in the United States they
generate about 365 utilization days per rig year in most
regions.
For 2011, based on current drilling rig contracts, Precision has
an average of 39 rigs in Canada under term contract, 75 in the
United States and 2 in Mexico. For 2012, Precision currently has
term contracts in place for an average of 67 rigs, with 38 in
Canada and 29 in the United States and Mexico. Since the first
quarter 2011 earnings release in April 2011, Precision has added
term contracts that increased the average for 2011 from 99 rigs to
116 rigs working under term contract and from 44 to 67 rigs under
term contract for 2012.
Capital expenditures are expected to be approximately $841
million for 2011, of which $179 million was expended during the
first half of 2011. The 2011 total includes $141 million for
sustaining and infrastructure expenditures and is based upon
currently anticipated activity levels for 2011. Additionally, $484
million is slated for expansion capital and includes the cost to
complete the drilling rigs from the 2010 new build rig program and
the new build rigs for 2011. The total capital expenditures also
include an estimated $216 million to upgrade 15 to 20 rigs in 2011
and to purchase long lead time items for the Corporation's capital
inventory. These long lead time items include top drives, masts and
engines, that can be used for North American or international new
build rig opportunities and rig tier upgrades. Precision expects
that the $841 million will be split $755 million for the Contract
Drilling segment and $86 million for the Completion and Production
Services segment. An additional $183 million of capital
expenditures is expected to carry forward to 2012 to complete the
2011 new build rig program.
Demand remains very strong for additional Tier 1 Super Series
rigs for both Canada and the United States. Precision believes that
customer demand, specifically for customers operating in the
Bakken, Eagle Ford and Permian Basin, will result in additional new
build rig opportunities throughout 2011. Oil plays in Canada, such
as the Cardium, Viking and heavy oil, will provide the additional
opportunities for new build rigs during the year. Precision
continues to see attractive opportunities to upgrade lower tier
rigs.
To date in 2011, there has been substantially higher drilling
activity in Canada and the United States than in the prior year.
Precision believes that oil directed drilling demand will continue
to lead rig counts higher in North America. There is also increased
liquidity in the capital markets as well as higher oil commodity
prices which are providing some of Precision's customers with the
cash flow to increase drilling programs. According to industry
sources, as at July 15, 2011, the United States active land
drilling rig count was up about 20% from the same point in the
prior year while the Canadian drilling rig count had increased
about 8%. With the year-over-year improvements in rig utilization,
there have been recent improvements in spot market dayrates charged
to customers in both Canada and in the United States. The
improvements in dayrates in Canada and the United States are
expected to hold, and possibly improve, for the remainder of
2011.
Natural gas production in the United States has remained strong
despite reduced drilling activity over the last two years. The
United States natural gas storage levels as at July 15, 2011 were
2% below the five-year average and 7% below storage levels of a
year ago. This also strongly influences Canadian activity since
Canada exports a significant portion of its natural gas production
to the United States. The increase in oil and liquids rich natural
gas drilling in areas like the Permian Basin, Bakken and Eagle Ford
have been strong and the United States oil rig count as at July 15,
2011 was 73% higher than it was a year ago. Precision has more
equipment working in oil related plays than at any time in the last
20 years, while approximately 35% of Precision's active rig count
is drilling for natural gas targets.
With high storage levels, consistent production and the view
that North America has an oversupply of natural gas, gas prices
have remained at relatively low levels. To date, customer changes
in natural gas drilling plans are reflected in a decline in the rig
count targeting dry gas plays. If low natural gas prices continue,
Precision and the North American drilling industry could see a
further reduction in demand for natural gas drilling. With the
current demand for oil and liquids rich natural gas drilling,
Precision believes further reductions in natural gas directed
drilling would continue to be mostly offset by increases in oil and
liquids rich natural gas drilling.
Precision is encouraged by the recent strong activity levels in
our business and is excited about the second half of the year,
which we believe represents an opportunity to demonstrate our value
to customers by providing High Performance, High Value services
that deliver low customer well costs and strong margins to
Precision.
SEGMENTED FINANCIAL RESULTS
To align with the management of the operating divisions,
Precision now considers the camp and catering division to be within
the Completion and Production Services segment. Precision views its
corporate segment as a support function that provides assistance to
more than one segment. Beginning with the first quarter of 2011
Precision has included United States based corporate costs,
previously included in Contract Drilling Services, in the Corporate
and Other segment. Prior period numbers have been restated to
reflect these changes. Precision's operations are reported in two
segments; the Contract Drilling Services segment includes the
drilling rig, directional drilling, oilfield supply and
manufacturing divisions; and the Completion and Production Services
segment includes the service rig, snubbing, rental, camp and
catering and wastewater treatment divisions.
Three months ended Six months ended
June 30, June 30,
(Stated in thousands of % %
Canadian dollars) 2011 2010 Change 2011 2010 Change
----------------------------------------------------------------------------
Revenue:
Contract Drilling
Services $ 298,482 $ 223,770 33.4 $ 724,509 $ 528,590 37.1
Completion and
Production
Services 47,578 40,027 18.9 151,807 113,179 34.1
Inter-segment
eliminations (735) (1,969) (62.7) (5,641) (6,805) (17.1)
----------------------------------------------------------------------------
$ 345,325 $ 261,828 31.9 $ 870,675 $ 634,964 37.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
EBITDA(1)
Contract Drilling
Services $ 104,169 $ 68,711 51.6 $ 276,719 $ 181,567 52.4
Completion and
Production
Services 8,233 5,168 59.3 42,684 24,613 73.4
Corporate and other (19,836) (13,754) 44.2 (40,426) (28,397) 42.4
----------------------------------------------------------------------------
$ 92,566 $ 60,125 54.0 $ 278,977 $ 177,783 56.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
Three months ended Six months ended
(Stated in thousands of June 30, June 30,
Canadian dollars, except % %
where noted) 2011 2010 Change 2011 2010 Change
----------------------------------------------------------------------------
Revenue $ 298,482 $ 223,770 33.4 $ 724,509 $ 528,590 37.1
Expenses:
Operating 187,379 148,138 26.5 431,078 331,470 30.1
General and
administrative 6,934 6,921 0.2 16,712 15,553 7.5
----------------------------------------------------------------------------
EBITDA (1) 104,169 68,711 51.6 276,719 181,567 52.4
Depreciation 45,946 38,363 19.8 100,473 81,968 22.6
----------------------------------------------------------------------------
Operating earnings
(1) $ 58,223 $ 30,348 91.9 $ 176,246 $ 99,599 77.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings as a
percentage of revenue 19.5% 13.6% 24.3% 18.8%
----------------------------------------------------------------------------
Drilling rig revenue
per utilization day
in Canada $ 18,461 $ 16,262 13.5 $ 17,981 $ 15,678 14.7
----------------------------------------------------------------------------
Drilling rig revenue
per utilization day
in the United
States(2) US$ 22,080 US$18,733 17.9 US$ 21,451 US$18,721 14.6
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
(2) Includes revenue from idle but contracted rig days and lump sum payouts.
Canadian onshore Three months ended June 30,
drilling statistics:(1) 2011 2010
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling rigs
(end of period) 202 800 200 806
Drilling rig operating days
(spud to release) 3,780 15,884 3,388 14,918
Drilling rig operating day
utilization 21% 22% 18% 20%
Number of wells drilled 396 1,426 317 1,160
Average days per well 9.5 11.1 10.7 12.9
Number of metres drilled (000s) 622 2,754 645 2,461
Average metres per well 1,570 1,931 2,035 2,122
Average metres per day 165 173 190 165
----------------------------------------------------------------------------
Canadian onshore Six months ended June 30,
drilling statistics:(1) 2011 2010
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling rigs
(end of period) 202 800 200 806
Drilling rig operating days
(spud to release) 14,906 63,345 12,499 53,314
Drilling rig operating day
utilization 41% 44% 34% 37%
Number of wells drilled 1,487 5,033 1,257 4,724
Average days per well 10.0 12.6 9.9 11.3
Number of metres drilled (000s) 2,342 9,265 2,169 8,334
Average metres per well 1,575 1,841 1,726 1,764
Average metres per day 157 146 174 156
----------------------------------------------------------------------------
(1) Canadian operations only.
(2) Canadian Association of Oilwell Drilling Contractors ("CAODC") and
Precision - excludes non-CAODC rigs and non-reporting CAODC members.
United States onshore
drilling statistics:(1) 2011 2010
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Average number of active
land rigs for quarters
ended:
March 31 100 1,695 78 1,297
June 30 102 1,803 88 1,464
----------------------------------------------------------------------------
Year to date average 101 1,749 83 1,380
----------------------------------------------------------------------------
(1) United States lower 48 operations only.
(2) Baker Hughes rig counts.
Contract Drilling Services segment revenue for the second
quarter of 2011 increased by 33% to $298 million and EBITDA
increased by 52% to $104 million compared to the same period in
2010. The increase in revenue and EBITDA was due to the higher
drilling rig activity and higher average rates per day for both
Canada and the United States.
Activity in North America was impacted by increased customer
demand for oil related drilling activity as a result of higher
global oil prices. In the second quarter, drilling rig revenue per
utilization day in Canada was up 14% over the prior year as a
result of increased rates for rigs working on well-to-well
contracts. During the quarter, 33% of Precision's utilization days
in Canada were generated from rigs under term contract compared
with 36% in 2010 while in the United States 80% of utilization days
were generated from rigs under term contract as compared to 51% in
the prior year period. At the end of the quarter, Precision had 79
drilling rigs working under term contracts in the United States and
36 in Canada.
Drilling rig utilization days in Canada (drilling days plus move
days) during the second quarter of 2011 were 4,200, an increase of
14% compared to 3,684 in 2010. Drilling rig utilization days for
Precision in the United States were 16% higher than the same
quarter of 2010 due to increased customer demand with the majority
of the additional activity coming from oil and liquids rich natural
gas related plays. On average, Precision had two rigs working in
Mexico during the second quarter of 2011 the same as the
corresponding quarter of 2010.
Contract Drilling Services segment operating costs were 63% of
revenue for the quarter which is three percentage points lower than
the prior year period. On a per day basis, operating costs for the
drilling rig division in Canada were above the prior year because
of an increase in crew wage expense effective October 2010.
Operating costs for the quarter in the United States on a per day
basis were up from the comparable period in 2010 due to a crew wage
increase effective December 2010 and higher repair and maintenance
costs.
Quarterly depreciation in the Contract Drilling Services segment
increased 20% from the prior year due to the increase in activity
in both Canada and the United States and $2 million of depreciation
in 2011 recorded on idle contract drilling assets. Both the United
States and Canadian contract drilling operations use the unit of
production method of calculating depreciation.
SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES
Three months ended Six months ended
(Stated in thousands of June 30, June 30,
Canadian dollars, except % %
where noted) 2011 2010 Change 2011 2010 Change
----------------------------------------------------------------------------
Revenue $ 47,578 $ 40,027 18.9 $ 151,807 $ 113,179 34.1
Expenses:
Operating 35,930 32,578 10.3 101,462 83,754 21.1
General and
administrative 3,415 2,281 49.7 7,661 4,812 59.2
----------------------------------------------------------------------------
EBITDA(1) 8,233 5,168 59.3 42,684 24,613 73.4
Depreciation 5,083 4,758 6.8 12,154 11,435 6.3
----------------------------------------------------------------------------
Operating
earnings(1) $ 3,150 $ 410 668.3 $ 30,530 $ 13,178 131.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings as a
percentage of revenue 6.6% 1.0% 20.1% 11.6%
----------------------------------------------------------------------------
Well servicing
statistics:(2)
Number of service rigs
(end of period) 220 220 - 220 220 -
Service rig operating
hours 46,533 52,637 (11.6) 142,681 134,806 5.8
Service rig operating
hour utilization 23% 26% 36% 34%
Service rig revenue
per operating hour $ 643 $ 604 6.5 $ 695 $ 626 11.0
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
(2) Now includes snubbing services. Comparative numbers have been restated
to reflect this change.
Completion and Production Services segment revenue for the
second quarter increased by 19% from the second quarter of 2010 to
$48 million and EBITDA increased by 59% to $8 million. The increase
in revenue and EBITDA is attributed primarily to the increase in
rental equipment activity as customers increased spending in
response to higher oil and natural gas liquids commodity prices and
from the camp and catering division.
Well servicing and snubbing activity decreased 12% from the
prior year period, with the fleet generating 46,533 operating hours
in the second quarter of 2011 compared with 52,637 hours in the
prior year quarter for utilization of 23% and 26%, respectively.
The decrease was a result of lower service rig activity due to a
prolonged spring break-up and flooding conditions, primarily in
southeast Saskatchewan and Manitoba that severely limited service
rig mobility and wellsite access. Approximately 96% of the second
quarter service rig activity was oil related. New well completions
were 54% lower than the prior year quarter and accounted for 6% of
service rig operating hours in the second quarter compared to 12%
in the same quarter in 2010. Precision's camp and catering division
benefited from a 500-man base camp in Canada that was contracted
until the end of the second quarter of 2011 and a 175-man base camp
in Canada that is contracted to the end of 2011.
Average service rig revenue increased $39 per operating hour to
$643 from the prior year period due to labour rate increases passed
through to the customer.
Operating costs as a percentage of revenue decreased to 76% in
the second quarter of 2011 from 81% in the same period of 2010.
Higher repair and maintenance costs were incurred in the current
period to prepare service rigs for higher activity that is
anticipated to occur over the remainder of the year. Along with
higher repair and maintenance costs, operating costs per service
rig operating hour increased over the comparable period in 2010 due
primarily to higher wages and higher fuel prices.
Depreciation in the Completion and Production Services segment
in the second quarter of 2011 was 7% higher than the prior year due
to a gain on disposal of assets in the camp and catering division
in 2010. The well servicing division uses the unit of production
method of calculating depreciation while the other operating
divisions within the Completion and Production Services segment use
the straight-line method.
SEGMENT REVIEW OF CORPORATE AND OTHER
Precision views its corporate segment as support functions that
provide assistance to more than one segment. Beginning with the
first quarter of 2011 Precision has included United States based
corporate costs, which were previously in the Contract Drilling
Services segment, in the corporate segment and restated prior
period comparatives. The Corporate and other segment had an EBITDA
loss of $20 million for the second quarter of 2011, $6 million
higher than the prior year comparative period due to increased
costs associated with share based performance incentive plans and
incremental costs associated with increasing activity.
OTHER ITEMS
Net financial charges for the quarter were $16 million, a
decrease of $36 million from the second quarter of 2010 due to the
2010 amendment of the terms of a then existing debt facility and
the repayment of non-consenting holders which required the
Corporation to record a charge of $25 million of debt issue costs,
higher debt amortization costs in 2010 and a $4 million reduction
in long-term debt interest expense.
Finance charges for the three and six month periods ended June
30, 2011 and 2010 are as follows:
Three months ended Six months ended
(Stated in thousands of June 30, June 30,
Canadian dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Interest:
Long-term debt $ 14,452 $ 18,642 $ 29,473 $ 37,360
Other 15 13 46 32
Income (231) (134) (418) (197)
Amortization of debt
issue costs 810 8,691 1,531 17,760
Debt amendment fees 1,134 - 1,134 -
Loss on settlement of
debt facilities - 25,030 26,942 25,030
Accelerated amortization
of debt issue costs
from voluntary debt repayments - - - 986
----------------------------------------------------------------------------
Finance charges $ 16,180 $ 52,242 $ 58,708 $ 80,971
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Corporation had a foreign exchange gain of $1 million during
the second quarter of 2011 due to the strengthening of the Canadian
dollar versus the U.S. dollar and the impact thereof on the net
U.S. dollar denominated monetary position in the Canadian dollar
based companies.
Precision's effective tax rate on earnings before income taxes
for the first half 2011 was 19%.
LIQUIDITY AND CAPITAL RESOURCES
The oilfield services business is inherently cyclical in nature.
Precision employs a disciplined approach to minimize costs through
operational management practices and a variable cost structure, and
to maximize revenues through term contract positions with a focus
of maintaining a strong balance sheet. This operational discipline
provides Precision with the financial flexibility to capitalize on
strategic acquisitions and internal growth opportunities at all
points in the business cycle.
Operating within a highly variable cost structure, Precision's
maintenance capital expenditures are tightly governed by and highly
responsive to activity levels with additional cost savings leverage
provided through Precision's internal manufacturing and supply
divisions. Expansion capital for new build rig programs require two
to five year term contracts in order to mitigate capital recovery
risk.
Liquidity remains sufficient as Precision had a cash balance of
$207 million and the US$550 million senior secured revolver
("Secured Facility") remains undrawn except for US$23 million in
outstanding letters of credit as at June 30, 2011. In addition to
the Secured Facility, Precision has available $40 million in
operating facilities which are used for working capital
management.
During June 2011, Precision entered into an amendment to its
existing revolving credit facility which: (i) reduced the margins
and rates applicable to interest rates and fees payable under the
revolving credit facility; (ii) extended the maturity date of the
revolving credit facility to November 17, 2015; (iii) increased the
amount of unsecured indebtedness permitted to be incurred under the
revolving credit facility: (iv) increased the consolidated senior
debt to EBITDA ratio from 2.5:1 to 3:1 and (v) increased the
consolidated total debt to EBITDA ratio from 3.5:1 to 4:1.
During March 2011, Precision issued $200 million aggregate
principal amount of 6.5% senior unsecured notes due 2019 in a
private placement. The net proceeds and cash on hand were in effect
used to repay the $175 million 10% senior unsecured notes. The
total repayment of approximately $204 million included the $175
million in principal, accrued interest and a make-whole premium.
The make-whole premium of $27 million was a charge to earnings in
the first quarter of 2011.
During November 2010, Precision closed an offering of US$650
million aggregate principal amount of 6.625% senior unsecured notes
due 2020 (the "Unsecured Notes") in a private placement. Net
proceeds from the Unsecured Notes offering were used to repay in
full the outstanding indebtedness under the Corporation's then
existing term loan A and term loan B credit facilities. At that
time, the outstanding balance under the term loan A credit facility
was approximately US$263 million and the outstanding balance under
the term loan B credit facility was approximately US$318 million.
In conjunction with the closing of the Unsecured Notes offering,
Precision terminated its existing secured credit facilities and
entered into US$550 million Secured Facility which expires in 2013.
Subject to certain conditions, the new Secured Facility may be
increased by an additional US$100 million.
As at June 30, 2011 and December 31, 2010 Precision had the
following long-term debt balances:
June 30, December 31,
(Stated in thousands of Canadian dollars) 2011 2010
----------------------------------------------------------------------------
Senior secured revolving credit facility $ - $ -
Unsecured senior notes:
6.625% senior notes (US$650 million) 626,795 646,490
6.5% senior notes 200,000 -
10.0% senior notes - 175,000
----------------------------------------------------------------------------
826,795 821,490
Less net unamortized debt issue costs (20,379) (16,996)
----------------------------------------------------------------------------
$ 806,416 $ 804,494
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at June 30, 2011, the Corporation was in compliance with the
covenants under the Secured Facility and expects to remain in
compliance with such covenants and have complete access to credit
lines during the remainder of 2011.
The current blended cash interest cost of Precision's debt is
approximately 6.6% compared to 7.3% as at December 31, 2010.
In November 2010 Precision designated its U.S. dollar
denominated long-term debt as a hedge of its investment in its
United States operations. 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.
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars,
except per share amounts)
2010 (IFRS) 2011 (IFRS)
----------------------------------------------------------------------------
Quarters ended September 30 December 31 March 31 June 30
----------------------------------------------------------------------------
Revenue $ 359,152 $ 435,537 $ 525,350 $ 345,325
EBITDA(1) 112,607 144,518 186,411 92,566
Net earnings (loss): 56,286 (250) 65,560 16,403
Per basic share 0.21 - 0.24 0.06
Per diluted share 0.20 - 0.23 0.06
Funds provided by
operations(1) 126,811 133,903 192,337 70,766
Cash provided by operations 67,575 75,064 117,322 176,312
----------------------------------------------------------------------------
2009 (CGAAP)(2) 2010 (IFRS)
----------------------------------------------------------------------------
Quarters ended September 30 December 31 March 31 June 30
----------------------------------------------------------------------------
Revenue $ 253,337 $ 286,067 $ 373,136 $ 261,828
EBITDA(1) 85,739 92,615 117,658 60,125
Net earnings (loss): 71,696 (24,885) 56,917 (69,418)
Per basic share 0.26 (0.09) 0.21 (0.25)
Per diluted share 0.25 (0.09) 0.20 (0.25)
Funds provided by
operations(1) 59,134 123,728 102,759 40,692
Cash provided by operations 19,948 70,631 20,624 143,001
----------------------------------------------------------------------------
(1) See "ADDITIONAL GAAP MEASURES".
(2) Financial information prepared under Canadian Generally Accepted
Accounting Principles (CGAAP) applicable at that time.
ADDITIONAL GAAP MEASURES
Precision uses certain additional GAAP measures that are not
defined terms under IFRS to assess performance and believes these
measures provide useful supplemental information to investors. The
following are the measures Precision uses in assessing
performance.
EBITDA
Management believes that in addition to net earnings (loss),
earnings before finance charges, income taxes, depreciation,
amortization and foreign exchange ("EBITDA"), as derived from
information reported in the Consolidated Statements of Earnings
(Loss), is a useful supplemental measure as it provides an
indication of the results generated by Precision's principal
business activities prior to consideration of how those activities
are financed, the impact of foreign exchange, how the results are
taxed or how depreciation and amortization charges affect
results.
Operating Earnings
Management believes that in addition to net earnings (loss),
operating earnings as reported in the Consolidated Statements of
Earnings (Loss) is a useful supplemental measure as it provides an
indication of the results generated by Precision's principal
business activities prior to consideration of how those activities
are financed, the impact of foreign exchange or how the results are
taxed.
Funds Provided by Operations
Management believes that in addition to cash provided by
operations, funds provided by operations, as reported in the
Consolidated Statements of Cash Flow is a useful supplemental
measure as it provides an indication of the funds generated by
Precision's principal business activities prior to consideration of
working capital, which is primarily made up of highly liquid
balances.
The following table provides a reconciliation of funds provided
by operations to cash provided by operations.
Three months ended Six months ended
(Stated in thousands June 30, June 30,
of Canadian dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Funds provided by
operations $ 70,766 $ 40,692 $ 263,103 $ 143,451
Add:
Changes in non-cash
working capital
balances 105,546 102,309 30,531 20,174
----------------------------------------------------------------------------
Cash provided by
operations $ 176,312 $ 143,001 $ 293,634 $ 163,625
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS)
Precision is reporting its financial results in accordance with
IFRS from January 1, 2011, the changeover date set by the Canadian
Accounting Standards Board (AcSB). IFRS compliant comparative
financial information for one year from the effective date is
required.
For the three and six months ended June 30, 2010 Precision has
restated the operating results as if it had always prepared
financial results in accordance with IFRS. As a result of
componentization of capital assets and applying different
depreciation rates to the different components under IFRS,
partially offset by the write-down of certain assets to fair market
value, depreciation expense for the second quarter of 2010 has
increased by $6 million over the amount previously reported and for
the six month period ended June 30, 2010 increased by $12 million.
In addition, Precision has a cash settled share appreciation rights
plan which was previously recorded based on the intrinsic value
method whereas IFRS requires the use of an option pricing model.
The difference in method resulted in a decrease to the stock based
compensation expense reported in the second quarter of 2010 of $1
million and $0.4 million for the six month period ended June 30,
2010. Together these adjustments had a net tax impact of reducing
the deferred tax expense in the second quarter of 2010 by $2
million and $4 million for the six month period ended June 30,
2010.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND
STATEMENTS
Certain statements contained in this report, including
statements that contain words such as "could", "should", "can",
"anticipate", "estimate", "propose", "plan", "expect", "believe",
"will", "may", "continue", "project", "appears", "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: Precision's rig
fleet driving activity levels higher in Canada during the second
half of the year; that all rigs in the 2011 new build program will
have signed contracts by the end of the third quarter of 2011 and
the timing and deployment of those rigs; that Precision's average
revenue per day will continue to improve throughout the year; that
Precision's active rig count in the United Sates will increase in
the coming months as new build and upgraded rigs enter the market;
the prolonged spring break-up is a temporary delay in planned
drilling and spending by Precision's customers and will serve to
further increase demand and pricing for Precision's services in the
second half of 2011; active rig counts following spring break-up;
that high activity levels will lead to labour challenges in the
oilfield services industry and that Precision is uniquely
positioned to meet those challenges; the activity levels and
financial performance of the Completion and Production Services
segment will improve throughout the year and end the year
meaningfully above 2010 performance; that Precision will expand its
drilling, directional drilling and international presence during
2011; Precision's pursuit of organic growth and acquisition
opportunities in the directional drilling and international
drilling arena during 2011; the outcome of the tax reassessment and
appeal process; the number of rigs committed to terms contracts in
North America in the third quarter of 2011, fourth quarter of 2011
and first quarter of 2012; amount, timing, and allocation of
capital expenditures; customer demand in the United States
resulting in additional opportunities for new build rigs and
upgraded rigs in 2011; oil plays in Canada will provide additional
opportunities for new build rigs during 2011; oil directed drilling
demand will lead rig counts higher in North America; increased
liquidity in capital markets and higher oil commodity prices
provide liquidity for customers to increase drilling programs;
dayrates in Canada and the United States holding, and possibly
improving, for the remainder of 2011; the potential for a further
reduction in demand for natural gas drilling; that a reduction in
gas directed drilling would be mostly offset by increases in oil
and liquids rich natural gas drilling; Precision's financial
flexibility and ability to capitalize on acquisitions and growth
opportunities; and Precision's continued compliance with its
financial covenants and ability to access its credit lines.
These forward-looking information and statements are based on
certain assumptions and analysis made by the Corporation in light
of its experience and its perception of historical trends, current
conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However,
whether actual results, performance or achievements will conform to
the Corporation's expectations and predictions is subject to a
number of known and unknown risks and uncertainties which could
cause actual results to differ materially from the Corporation's
expectations. Such risks and uncertainties include, but are not
limited to: fluctuations in the price and demand for oil and
natural gas; fluctuations in the level of oil and natural gas
exploration and development activities; fluctuations in the demand
for contract drilling, well servicing and ancillary oilfield
services; capital market liquidity available to fund customer
drilling programs; availability of cash flow, debt and/or equity
sources to fund the Corporation's capital and operating
requirements, as needed; the effects of seasonal and weather
conditions on operations and facilities; the existence of
competitive operating risks inherent in contract drilling, well
servicing and ancillary oilfield services; general economic, market
or business conditions; changes in laws or regulations;
interpretation of tax filing position for prior period
transactions; the availability of qualified personnel, management
or other key inputs; currency exchange fluctuations; and other
unforeseen conditions which could impact the use of services
supplied by Precision.
Consequently, all of the forward-looking information and
statements made in this report are qualified by these cautionary
statements and there can be no assurance that the actual results or
developments anticipated by the Corporation will be realized or,
even if substantially realized, that they will have the expected
consequences to, or effects on, the Corporation or its business or
operations. Readers are therefore cautioned not to place undue
reliance on such forward-looking information and statements. Except
as may be required by law, the Corporation assumes no obligation to
update publicly any such forward-looking information and
statements, whether as a result of new information, future events
or otherwise.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
June 30, December 31,
(Stated in thousands of Canadian dollars) 2011 2010
---------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 207,226 $ 256,831
Accounts receivable 379,691 414,901
Inventory 10,202 4,933
---------------------------------------------------------------------------
Total current assets 597,119 676,665
Non-current assets:
Income tax recoverable 172,755 64,579
Property, plant and equipment 2,552,166 2,532,398
Intangibles 6,150 6,366
Goodwill 309,565 284,532
---------------------------------------------------------------------------
Total non-current assets 3,040,636 2,887,875
---------------------------------------------------------------------------
Total assets $ 3,637,755 $ 3,564,540
---------------------------------------------------------------------------
---------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 219,732 $ 217,799
Income tax payable 331 863
---------------------------------------------------------------------------
Total current liabilities 220,063 218,662
Non-current liabilities:
Share based compensation 9,593 12,268
Provisions and other 15,046 18,051
Long-term debt 806,416 804,494
Deferred tax liabilities 585,968 578,239
---------------------------------------------------------------------------
Total non-current liabilities 1,417,023 1,413,052
Shareholders' equity:
Shareholders' capital 2,201,767 2,200,031
Contributed surplus 15,063 11,266
Deficit (150,288) (232,251)
Accumulated other comprehensive loss (65,873) (46,220)
---------------------------------------------------------------------------
Total shareholders' equity 2,000,669 1,932,826
---------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 3,637,755 $ 3,564,540
---------------------------------------------------------------------------
---------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED)
(stated in thousands of Three months ended Six months ended
Canadian dollars, except June 30, June 30,
share and per share amounts) 2011 2010 2011 2010
----------------------------------------------------------------------------
Revenue $ 345,325 $ 261,828 $ 870,675 $ 634,964
Expenses:
Operating 222,574 178,747 526,899 408,419
General and administrative 30,185 22,956 64,799 48,762
----------------------------------------------------------------------------
Earnings before finance
charges, income taxes,
depreciation and
amortization and
foreign exchange 92,566 60,125 278,977 177,783
Depreciation and amortization 52,593 44,978 115,912 97,285
----------------------------------------------------------------------------
Operating earnings 39,973 15,147 163,065 80,498
Other items:
Foreign exchange (527) 26,085 2,805 6,333
Finance charges 16,180 52,242 58,708 80,971
----------------------------------------------------------------------------
Earnings (loss) before
income taxes 24,320 (63,180) 101,552 (6,806)
Income taxes:
Current 1,012 2,350 2,152 4,147
Deferred 6,905 3,888 17,437 1,548
----------------------------------------------------------------------------
7,917 6,238 19,589 5,695
----------------------------------------------------------------------------
Net earnings (loss) $ 16,403 $ (69,418) $ 81,963 $ (12,501)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share:
Basic $ 0.06 $ (0.25) $ 0.30 $ (0.05)
Diluted $ 0.06 $ (0.25) $ 0.28 $ (0.05)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average shares
Outstanding (000's):
Basic 275,807 275,651 275,759 275,643
Diluted 289,285 275,651 288,570 275,643
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three months ended Six months ended
(Stated in thousands of June 30, June 30,
Canadian dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Net earnings (loss) $ 16,403 $ (69,418) $ 81,963 $ (12,501)
Unrealized gain (loss) on
translation of foreign
operations (10,044) 51,401 (36,852) 15,150
Foreign exchange gain on net
investment hedge with U.S.
denominated debt, net of tax
of $2,496 4,255 - 17,199 -
----------------------------------------------------------------------------
Comprehensive income (loss) $ 10,614 $ (18,017) $ 62,310 $ 2,649
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Six months ended June 30,
(Stated in thousands of Canadian dollars) 2011 2010
----------------------------------------------------------------------------
Cash provided by (used in):
Operations:
Net earnings (loss) $ 81,963 $ (12,501)
Adjustments for:
Long-term compensation plans 14,012 3,211
Depreciation and amortization 115,912 97,285
Foreign exchange 2,508 7,797
Finance charges 58,708 80,971
Income taxes 19,589 5,695
Other (2,420) 868
Income taxes paid (2,511) (3,701)
Income taxes recovered 246 1,089
Interest paid (25,339) (37,399)
Interest received 435 136
----------------------------------------------------------------------------
Funds provided by operations 263,103 143,451
Changes in non-cash working capital balances 30,531 20,174
----------------------------------------------------------------------------
293,634 163,625
Investments:
Business acquisitions, net of cash acquired (33,177) -
Purchase of property, plant and equipment (178,694) (29,167)
Proceeds on sale of property, plant and
equipment 4,084 7,299
Changes in income tax recoverable (108,176) -
Changes in non-cash working capital balances (16,790) 5,390
----------------------------------------------------------------------------
(332,753) (16,478)
Financing:
Repayment of long-term debt (175,000) (90,373)
Premium paid on settlement of unsecured senior
notes (26,688) -
Debt issue costs (4,358) (2,165)
Debt facility amendment costs (1,134) (997)
Re-purchase of trust units of dissenting
unitholders - (6)
Increase in long-term debt 200,000 -
Issuance of common shares on the exercise of
options 1,139 -
Changes in non-cash working capital balances (746) -
----------------------------------------------------------------------------
(6,787) (93,541)
----------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash
equivalents (3,699) 1,730
----------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (49,605) 55,336
Cash and cash equivalents, beginning of period 256,831 130,799
----------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 207,226 $ 186,135
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(Stated in thousands of Canadian dollars)
----------------------------------------------------------------------------
Accumulated
other
Shareholders' Contributed comprehensive
capital surplus income (loss)
----------------------------------------------------------------------------
Balance at January 1, 2011 $ 2,200,031 $ 11,266 $ (46,220)
Net earnings for the period - - -
Other comprehensive loss
for the period - - (19,653)
Share options exercised 1,736 (597) -
Share based compensation
expense - 4,394 -
----------------------------------------------------------------------------
Balance at June 30, 2011 $ 2,201,767 $ 15,063 $ (65,873)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
------------------------------------------------------------
Total
Deficit equity
------------------------------------------------------------
Balance at January 1, 2011 $ (232,251) $ 1,932,826
Net earnings for the period 81,963 81,963
Other comprehensive loss
for the period - (19,653)
Share options exercised - 1,139
Share based compensation
expense - 4,394
------------------------------------------------------------
Balance at June 30, 2011 $ (150,288) $ 2,000,669
------------------------------------------------------------
(Stated in thousands of Canadian dollars)
----------------------------------------------------------------------------
Accumulated
Shareholders'/ other
unitholders' Contributed comprehensive
capital surplus income (loss)
----------------------------------------------------------------------------
Balance at January 1, 2010 $ 2,198,738 $ - $ -
Net loss for the
period - - -
Other comprehensive income
for the period - - 15,150
Issued on redemption of non-
management directors DSUs 204 - -
Cancellation of units owned
by dissenting unitholders (9) 3 -
Reclassification of
exchangeable LP unit
liability on conversion to
a corporation 891 - -
Reclassification of share
option plan and
non-management directors
DSU liabilities on
conversion to a corporation - 7,271 -
Share based compensation
expense - 696 -
----------------------------------------------------------------------------
Balance at June 30, 2010 $ 2,199,824 $ 7,970 $ 15,150
----------------------------------------------------------------------------
----------------------------------------------------------------------------
------------------------------------------------------------
Total
Deficit equity
------------------------------------------------------------
Balance at January 1, 2010 $ (275,786) $ 1,922,952
Net loss for the
period (12,501) (12,501)
Other comprehensive income
for the period - 15,150
Issued on redemption of non-
management directors DSUs - 204
Cancellation of units owned
by dissenting unitholders - (6)
Reclassification of
exchangeable LP unit
liability on conversion to
a corporation - 891
Reclassification of share
option plan and
non-management directors
DSU liabilities on
conversion to a corporation - 7,271
Share based compensation
expense - 696
------------------------------------------------------------
Balance at June 30, 2010 $ (288,287) $ 1,934,657
------------------------------------------------------------
------------------------------------------------------------
SECOND QUARTER 2011 EARNINGS 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
Friday, July 22, 2011.
The conference call dial in numbers are 1-877-440-9795 or
416-340-8527
A live webcast of the conference call will be accessible on
Precision's website at www.precisiondrilling.com by selecting
"Investor Centre", then "Webcasts". Shortly after the live webcast,
an archived version will be available for approximately 30
days.
An archived recording of the conference call will be available
approximately one hour after the completion of the call until July
29, 2011 by dialing 1-800-408-3053 or 905-694-9451, pass code
3051552.
About Precision
Precision is a leading provider of safe, High Performance, High
Value energy services to the North American oil and gas industry.
Precision provides customers with access to an extensive fleet of
contract drilling rigs, service rigs, directional drilling
services, camps, snubbing units, wastewater treatment units and
rental equipment backed by a comprehensive mix of technical support
services and skilled, experienced personnel.
Precision is headquartered in Calgary, Alberta, Canada.
Precision is listed on the Toronto Stock Exchange under the trading
symbol "PD" and on the New York Stock Exchange under the trading
symbol "PDS".
Contacts: Precision Drilling Corporation Carey Ford Vice
President, Finance and Investor Relations 403.716.4575 403.716.4755
(FAX) Precision Drilling Corporation 4200, 150 - 6th Avenue S.W.
Calgary, Alberta, Canada T2P 3Y7 www.precisiondrilling.com
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