Precision Drilling Corporation announces improved second quarter
earnings CALGARY, July 29 /PRNewswire-FirstCall/ -- Precision
Drilling Corporation ("Precision" or the "Corporation") today
announces improved results for the quarter ended June 30, 2004
compared to the same quarter in 2003. Diluted earnings per share
from continuing operations were $0.29 compared to $0.16 in 2003.
Diluted net earnings per share were $0.28 in the second quarter of
2004 compared to $0.16 in 2003. Earnings from continuing operations
and net earnings were both increased in the second quarter of 2004
by a $4.4 million ($0.05 per share) foreign exchange gain on
temporary bank borrowings incurred in connection with business
acquisitions completed in the quarter. During the quarter the
Corporation completed the acquisition of Reeves Wireline Ltd. and
the land drilling business of GlobalSanteFe for US $164.9 and US
$316.5 respectively. The GlobalSanteFe acquisition added a drilling
operation complete with experienced people, 31 well-maintained rigs
and operating contracts in five countries, transforming Precision
into the third largest player in the international market. Reeves'
unique Compact(TM) wireline technology will allow Technology
Services to service a broader market, particularly in the more
mature oilfields throughout the world. To finance these
acquisitions, the Corporation completed in May a public offering of
US $300 million, 5.625% Notes due in 2014 and in July a public
offering of 4,000,000 common shares for gross proceeds of
approximately US $200 million. In conjunction with the Notes
offering the Corporation sought and received a rating of Baa2
(positive outlook) from Moody's to complement its Standard &
Poors rating of BBB+ (stable outlook) and its Dominion Bond Rating
Service rating of BBB (stable trend). With these transactions
Precision maintains its strong balance sheet allowing the
continuance of our internal growth initiatives and the exploration
of acquisition opportunities as they arise. Contract Drilling
revenue increased by 31 % in the second quarter compared to the
same period last year while operating earnings increased by 114%.
The increase in operating earnings as a percentage of revenue was
driven primarily by year over year drilling and service rig rate
increases in the Canadian market. Operating efficiency initiatives
undertaken in the service rig operation have also lead to cost
savings. International drilling operations saw activity increase
with two rigs being added in Mexico, increased activity in
Venezuela, and with the acquisition of 31 rigs. The Canadian
Drilling rig fleet achieved 5,297 operating days for a 26%
utilization rate in the quarter compared to 5,605 operating days
and a 27% utilization rate in the comparable quarter of the prior
year. Activity was slowed by wet weather which rendered ground
conditions unsuitable for well site construction and equipment
transportation. Service rig hours increased by 3,968 or 5% in the
second quarter of 2004 compared to the same quarter of 2003. The
increased activity occurred in the northwestern portion of our
operating area where customers were more willing to transport rigs
to complete work to take advantage of sustained high crude oil and
natural gas prices. This was offset somewhat by lower activity in
the southeastern portion of our operating area as a result of wet
weather conditions. Technology Services revenue increased by 26% to
$179.6 million from $142.7 million in the second quarter of 2003.
The increase is attributable to improving activity levels in the US
market, the commencement of new contracts in the Asia Pacific
region, more wells being completed on the Burgos integrated
services project and the acquisition of Reeves Wireline in May.
These improvements were offset somewhat by reductions in Canada and
the non-Burgos operations in Mexico. Operating earnings, however,
declined by $2.8 million in the second quarter compared to the same
period in 2003. Activity levels in Canada were curtailed by wet
weather conditions and the operation was unable to maintain winter
pricing levels. This operation has significant fixed costs that can
not be quickly adjusted downward when revenue expectations are not
met and when operating capability must be maintained to meet the
high demand for service that is expected to return when weather
permits. The region also incurred higher repair and maintenance
costs in anticipation of a speedier pick up in activity. Non-Burgos
operations in Mexico also suffered in comparison to the prior year
as contracts for Testing/CPD and Drilling Services came to an end.
Elsewhere, there were encouraging signs especially in Burgos,
Asia/Pacific and United States where revenue and operating earnings
grew, compared to the prior year. Research and engineering expense
rose year over year as increased resources have been put towards
completing the design, testing and build out of the Rotary
Steerable tools in various hole sizes. R&E associated with the
Reeves acquisition is also reflected for the first time.
Depreciation increased in line with the continued build out of the
logging-while-drilling (LWD), measurement-while-drilling (MWD) and
rotary steerable fleets. Rental and Production revenue declined by
$7.5 million or 12% in the second quarter compared to the second
quarter of 2003. This decrease stemmed from the industrial plant
maintenance business which experienced a slowing of activity with
our Fort McMurray area oilsands customers who delayed or cancelled
several projects. Activity in the rental operation was relatively
consistent year over year with rental rates improving somewhat.
Certain statements contained in this press release, including
statements which are related to drivers for improved earnings,
customer requests for services and drilling activity and which may
contain words such as "anticipate", "could", "should", "expect",
"believe", "will" and similar expressions and statements relating
to matters that are not historical facts are forward-looking
statements. Such forward-looking statements involve known and
unknown risks and uncertainties which may cause the actual results,
performance or achievements of Precision to be materially different
from any future results, performances or achievements expressed or
implied by such forward-looking statements. Such factors include
fluctuations in the market for oil and gas and related products and
services; competition; political and economic conditions in
countries in which Precision does business; the demand for services
provided by Precision; changes in laws and regulations, including
environmental, to which Precision is subject and other factors,
which are described in further detail in Precision's filings with
the Securities and Exchange Commission. CONSOLIDATED STATEMENTS OF
EARNINGS AND RETAINED EARNINGS CDN $000's, except per share amounts
Three Months Ended Six Months Ended (unaudited) June 30, June 30,
2004 2003 2004(x) 2003
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Revenue $ 418,691 $ 345,641 $1,083,856 $ 933,611 Expenses:
Operating 297,970 255,072 685,832 631,109 General and
administrative 42,287 32,988 84,543 68,212 Depreciation and
amortization 41,923 35,022 91,648 83,880 Research and engineering
12,374 8,746 24,188 17,645 Foreign exchange (5,298) 547 (4,986) 648
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389,256 332,375 881,225 801,494
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Operating earnings 29,435 13,266 202,631 132,117 Interest 10,706
8,943 18,894 18,212 Gain on disposal of investments (42) (1,164)
(42) (1,164)
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Earnings from continuing operations before income taxes and
non-controlling interest 18,771 5,487 183,779 115,069 Income taxes:
Current 19,954 11,543 56,847 34,111 Future (17,805) (15,333) 2,015
(2,751)
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2,149 (3,790) 58,862 31,360
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Earnings from continuing operations before non-controlling interest
16,622 9,277 124,917 83,709 Non-controlling interest 429 280 1,286
566
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Earnings from continuing operations 16,193 8,997 123,631 83,143
Discontinued operations, net of tax (198) (375) (7,117) 8,608
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Net earnings 15,995 8,622 116,514 91,751 Retained earnings,
beginning of period 894,798 696,934 794,279 613,805
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Retained earnings, end of period $ 910,793 $ 705,556 $ 910,793 $
705,556
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Earnings per share from continuing operations: Basic $ 0.29 $ 0.17
$ 2.22 $ 1.53 Diluted $ 0.29 $ 0.16 $ 2.19 $ 1.51
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Earnings per share: Basic $ 0.29 $ 0.16 $ 2.09 $ 1.69 Diluted $
0.28 $ 0.16 $ 2.06 $ 1.66
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Common shares outstanding (000's) 55,909 54,399 55,909 54,399
Weighted average shares outstanding (000's) 55,871 54,325 55,677
54,243 Diluted shares outstanding (000's) 56,549 55,203 56,429
55,174 (x) Certain expenses have been reclassified from general and
administrative expenses to be more appropriately included in
research and engineering. CONSOLIDATED BALANCE SHEETS June 30,
December 31, CDN $000's 2004 2003
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(unaudited) Assets Current assets: Cash $ 40,715 $ 21,370 Accounts
receivable 527,751 544,850 Inventory 110,589 99,088 Assets of
discontinued operations - 21,150
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679,055 686,458 Property, plant and equipment, net of accumulated
depreciation 1,930,803 1,588,250 Intangibles, net of accumulated
amortization 158,161 65,262 Goodwill 771,639 527,443 Other assets
14,571 8,932 Assets of discontinued operations - 32,040
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$ 3,554,229 $ 2,908,385
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Liabilities and Shareholders' Equity Current liabilities: Bank
indebtedness $ 71,795 $ 147,909 Accounts payable and accrued
liabilities 269,322 260,545 Income taxes payable 23,209 7,373
Current portion of long-term debt 13,553 17,158 Liabilities of
discontinued operations - 5,212
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377,879 438,197 Long-term debt 905,181 399,422 Future income taxes
354,112 320,599 Future income taxes of discontinued operations -
1,107 Non-controlling interest 13,303 3,771 Shareholders' equity:
Share capital 974,470 936,744 Contributed surplus 17,260 14,266
Cumulative translation adjustment 1,231 - Retained earnings 910,793
794,279
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1,903,754 1,745,289
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$ 3,554,229 $ 2,908,385
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Common shares outstanding (000's) 55,909 54,846 Common share
purchase options outstanding (000's) 2,408 3,393 CONSOLIDATED
STATEMENTS OF CASH FLOW Three Months Ended Six Months Ended June
30, June 30, CDN $000's (unaudited) 2004 2003 2004 2003
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Cash provided by (used in): Continuing operations: Earnings from
continuing operations $ 16,193 $ 8,997 $ 123,631 $ 83,143 Items not
affecting cash: Stock-based compensation 1,898 2,254 3,949 3,926
Depreciation and amortization 41,923 35,022 91,648 83,880 Gain on
disposal of investments (42) (1,164) (42) (1,164) Future income
taxes (17,805) (15,333) 2,015 (2,751) Non-controlling interest 429
280 1,286 566 Amortization of deferred financing costs 360 322 680
644 Unrealized foreign exchange loss (gain) on long-term monetary
items (3,514) (8,267) (3,229) (13,731)
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Funds provided by continuing operations 39,442 22,111 219,938
154,513 Changes in non-cash working capital balances 162,697
146,236 51,459 (3,477)
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202,139 168,347 271,397 151,036 Funds provided by (used in)
discontinued operations (695) (1,821) (4,593) (4,051) Changes in
non-cash working capital balances of discontinued operations
(5,473) 3,831 3,119 3,560
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(6,168) 2,010 (1,474) (491) Investments: Business acquisitions
(658,212) - (658,842) (6,800) Purchase of property, plant and
equipment (55,253) (91,657) (108,981) (168,389) Proceeds on sale of
property, plant and equipment 6,533 6,909 11,246 11,146 Proceeds on
disposal of investments 48 7,620 48 7,620 Proceeds on disposal of
discontinued operations 15,000 6,914 40,746 67,274 Investments
(1,340) (115) (1,340) (874)
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(693,224) (70,329) (717,123) (90,023) Financing: Increase in
long-term debt 520,873 - 522,136 44,960 Repayment of long-term debt
(6,898) (135,731) (11,263) (141,171) Deferred financing costs on
long-term debt (4,985) - (4,985) - Issuance of common shares on
exercise of options 6,236 3,940 36,771 10,149 Change in bank
indebtedness 2,533 16,023 (76,114) 19,182
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517,759 (115,768) 466,545 (66,880)
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Increase (decrease) in cash 20,506 (15,740) 19,345 (6,358) Cash,
beginning of period 20,209 26,697 21,370 17,315
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Cash, end of period $ 40,715 $ 10,957 $ 40,715 $ 10,957
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SEGMENT INFORMATION Three months ended June 30, 2004 CDN $000's
Contract Technology Rental and Corporate (unaudited) Drilling
Services Production and Other Total
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Revenue $ 182,739 $ 179,604 $ 56,348 $ - $ 418,691 Operating
earnings 41,319 (13,189) 9,613 (8,308) 29,435 Research and
engineering - 12,374 - - 12,374 Depreciation and amortization
14,734 22,733 3,271 1,185 41,923 Total assets 1,774,647 1,515,784
177,471 86,327 3,554,229 Goodwill 387,265 355,672 28,702 - 771,639
Capital expenditures (x) 22,334 23,714 3,020 6,185 55,253
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Three months ended June 30, 2003 CDN $000's Contract Technology
Rental and Corporate (unaudited) Drilling Services Production and
Other Total
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Revenue $ 139,082 $ 142,727 $ 63,832 $ - $ 345,641 Operating
earnings 19,298 (10,430) 14,190 (9,792) 13,266 Research and
engineering - 8,746 - - 8,746 Depreciation and amortization 12,660
18,193 2,973 1,196 35,022 Total assets 1,274,722 1,225,377 178,104
60,880 2,739,083 Goodwill 257,531 241,340 28,572 - 527,443 Capital
expenditures 21,698 61,180 3,345 5,434 91,657
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Six months ended June 30, 2004 CDN $000's Contract Technology
Rental and Corporate (unaudited) Drilling Services Production and
Other Total
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Revenue $ 569,990 $ 406,818 $ 107,048 $ - $ 1,083,856 Operating
earnings 189,927 16,604 19,354 (23,254) 202,631 Research and
engineering - 24,188 - - 24,188 Depreciation and amortization
39,091 43,388 6,573 2,596 91,648 Total assets 1,774,647 1,515,784
177,471 86,327 3,554,229 Goodwill 387,265 355,672 28,702 - 771,639
Capital expenditures (x) 39,535 49,437 9,485 10,524 108,981
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Six months ended June 30, 2003 CDN $000's Contract Technology
Rental and Corporate (unaudited) Drilling Services Production and
Other Total
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Revenue $ 474,394 $ 345,764 $ 113,453 $ - $ 933,611 Operating
earnings 123,823 2,668 22,461 (16,835) 132,117 Research and
engineering - 17,645 - - 17,645 Depreciation and amortization
38,273 36,946 6,292 2,369 83,880 Total assets 1,274,722 1,225,377
178,104 60,880 2,739,083 Goodwill 257,531 241,340 28,572 - 527,443
Capital expenditures (x) 29,996 121,208 7,194 9,991 168,389
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(x) excludes business acquisitions CANADIAN DRILLING OPERATING
STATISTICS For the Six Months Ended June 30, 2004 2003
----------------------------------------------------- Market Market
Precision Industry Share % Precision Industry Share % (x) (x)
----------------------------------------------------- Number of
drilling rigs 225 683 32.9 226 651 34.7 Number of operating days
(spud to release) 20,065 63,735 31.5 20,246 59,815 33.8 Wells
drilled 3,530 9,964 35.4 3,496 8,533 41.0 Average days per well 5.7
6.4 5.8 7.0 Metres drilled (000's) 3,799 10,882 34.9 3,643 9,272
39.3 Average metres/day 189 171 180 155 Average metres/well 1,076
1,092 1,042 1,087 Rig utilization rate (%) 48.9 51.6 49.6 51.0 (x)
Excludes non-CAODC rigs. A conference call to review the second
quarter 2004 results has been scheduled for 12:00 noon MST on
Thursday, July 29, 2004. The conference call dial-in number is
1-800-814-4853. A live webcast will be accessible at
http://www.precisiondrilling.com/ by selecting Investor Relations.
Precision Drilling Corporation (TSX: PD and PD.U; NYSE: PDS) is a
global oilfield services company providing a broad range of
drilling, production and evaluation services with focus on
fulfilling customer needs through fit-for- purpose technologies for
the maturing oilfields of the 21st century. With corporate offices
in Calgary, Alberta, Canada and Houston, Texas, and research
facilities in the U.S. and Europe, Precision employs more than
10,000 people conducting operations in more than 30 countries.
Precision is committed to providing efficient and safe services to
create value for our customers, our shareholders and our employees.
DATASOURCE: Precision Drilling Corporation CONTACT: Dale E.
Tremblay, Senior Vice President Finance and Chief Financial
Officer, 4200, 150 6th Avenue S.W., Calgary, Alberta T2P 3Y7,
Telephone: (403) 716-4500, Fax: (403) 264-0251; website:
http://www.precisiondrilling.com/.; To request a free copy of this
organization's annual report, please go to http://www.newswire.ca/
and click on reports@cnw.
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