Precision Drilling Corporation (“Precision” or the “Company”)
(TSX:PD; NYSE:PDS) provides a series of positive announcements
including: 1) 2022 debt repayment and year-end liquidity update; 2)
capital allocation framework update; and 3) operations update for
drilling activity, Alpha™ technologies and
EverGreen™ environmental solutions.
2022 Debt Repayment and Year-End Liquidity
Update
Precision reduced total debt by $106 million in 2022, exceeding
its $75 million debt reduction goal. As of December 31, 2022,
Precision’s outstanding debt obligations included:
- US$44 million – senior credit facility due June 18, 2025
- US$348 million – 7.125% senior notes due January 15, 2026
- US$400 million – 6.875% senior notes due June 15, 2029
In addition, Precision had approximately US$22
million of real estate credit facilities and ended 2022 with a cash
balance of approximately $22 million and total liquidity of
approximately $600 million.
Capital Allocation Framework
Update
Precision is well on track to achieve its
long-term goal of repaying over $400 million in debt and reaching a
sustained Net Debt to Adjusted EBITDA leverage ratio of below 1.5
times by the end of 2025. Given its strong free cash flow outlook,
the Company now expects leverage between 1.25 and 1.75 times by the
end of 2023 and will look to exceed its long-term debt reduction
targets on both an absolute level and as a multiple of Adjusted
EBITDA.
Precision will also continue to allocate 10% to
20% of free cash flow before debt principal repayments toward the
return of capital to shareholders. During 2022, Precision
repurchased and cancelled 130,395 common shares under its Normal
Course Issuer Bid.
Operations Update
Precision continues to experience strong
customer demand for drilling services, Alpha™ technologies and
EverGreen™ environmental solutions and expects its Canadian and
U.S. fourth quarter field margins to exceed our previous guidance
and continue trending upward in 2023.
Drilling Activity
In the fourth quarter of 2022, Precision’s
average active rig count was 66 for Canada and 59 for the U.S.,
representing increases of 27% and 31%, respectively from the same
period in 2021. In Canada, we currently have 74 rigs active and
expect our rig count to peak at approximately 80 rigs within the
next few weeks. All 28 of our Canadian Super Triple rigs are
currently active, and later in the quarter the Company will
activate an additional Super Triple rig that has been redeployed
from the U.S. to work on a multi-year contract related to an LNG
export project. In the U.S., we currently have 62 rigs active and
expect activity levels to continue trending modestly upward through
the next several quarters. Precision has six rigs active
internationally, increasing to eight by the middle of 2023.
Alpha
Precision exited the year with 70 AC Super
Triple rigs equipped with its AlphaAutomation™ platform, a 49%
increase from the beginning of 2022. During the fourth quarter,
revenue from our Alpha™ technologies grew by over 50% compared
with the fourth quarter of 2021 as our total paid days for
AlphaAutomation™ increased by over 60%. Customers see the
value in our technology and we expect to convert the entire fleet
of Super Triple rigs by early 2024.
EverGreen™
Precision’s EverGreen™ suite of
environmental solutions offers customers products and applications
to measure and reduce their Greenhouse Gas (“GHG”) emissions during
drilling operations. Precision exited 2022 with seven field
deployed EverGreen™ Battery Energy Storage Systems and 15
EverGreen™ Integrated Power and Emissions Monitoring Systems.
In 2023, we will continue to scale our EverGreen™ suite of
environmental solutions, which will drive additional revenue growth
and help our customers achieve their GHG reduction targets.
CFO Quote
Carey Ford, Precision’s CFO, commented, “With a
robust free cash flow outlook expected over the next several years,
we will continue to advance our debt reduction plans while
maintaining direct returns to shareholders. Since the beginning of
2018, our debt reduction and share repurchases have exceeded $800
million and I am confident Precision’s High Performance, High Value
strategy, exceptional field results, capital discipline and capital
allocation will continue to support increased shareholder
value.”
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.”
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”, “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:
- anticipated future activity levels;
- anticipated demand for drilling, Alpha™ and
EverGreen™ services;
- anticipated cash interest expense;
- anticipated free cash flow;
- anticipated capital spending plans; and
- our future debt reduction and shareholder capital return
plans.
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:
- the fluctuation in oil prices may pressure customers into
reducing or limiting their drilling budgets;
- the success of our response to the COVID-19 global
pandemic;
- the status of current negotiations with our customers and
vendors;
- customer focus on safety performance;
- existing term contracts are neither renewed nor terminated
prematurely;
- our ability to deliver rigs to customers on a timely basis;
and
- the general stability of the economic and political
environments in the jurisdictions where we operate.
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:
- volatility 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;
- our customers’ inability to obtain adequate credit or financing
to support their drilling and production activity;
- the success of our response to the COVID-19 global
pandemic;
- changes in drilling and well servicing technology, which could
reduce demand for certain rigs or put us at a competitive
advantage;
- shortages, delays and interruptions in the delivery of
equipment supplies and other key inputs;
- liquidity of the capital markets to fund customer drilling
programs;
- availability of cash flow, debt and equity sources to fund our
capital and operating requirements, as needed;
- the impact of weather and seasonal conditions on operations and
facilities;
- competitive operating risks inherent in contract drilling, well
servicing and ancillary oilfield services;
- ability to improve our rig technology to improve drilling
efficiency;
- general economic, market or business conditions;
- the availability of qualified personnel and management;
- a decline in our safety performance which could result in lower
demand for our services;
- changes in laws or regulations, including changes in
environmental laws and regulations such as increased regulation of
hydraulic fracturing or restrictions on the burning of fossil fuels
and GHG emissions, which could have an adverse impact on the demand
for oil and natural gas;
- terrorism, social, civil and political unrest in the foreign
jurisdictions where we operate;
- fluctuations in foreign exchange, interest rates and tax rates;
and
- other unforeseen conditions which could impact the use of
services supplied by Precision and Precision’s ability to respond
to such conditions.
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 news 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.
For further information, please contact:
Lavonne Zdunich, CPA, CADirector Investor
Relations403.716.4500Precision Drilling Corporation800, 525 - 8th
Avenue S.W.Calgary, Alberta, Canada T2P 1G1Website:
www.precisiondrilling.com
Precision Drilling (NYSE:PDS)
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