Precision Drilling Corporation announces results for the third
quarter CALGARY, Oct. 28 /PRNewswire-FirstCall/ -- Precision
Drilling Corporation ("Precision" or the "Corporation") today
announces its results for the third quarter of 2004. Diluted
earnings per share from continuing operations were $0.68 for the
quarter ended September 30, 2004 compared to $0.66 in 2003. Revenue
and operating earnings both increased by 26% with the acquisition
of Reeves Oilfield Services Limited ("Reeves") and the land
drilling operations of GlobalSantaFe Corporation contributing
significantly to the increase. This improvement was achieved
despite a 13% reduction in Canadian drilling activity, which was
hampered by the much reported wet weather conditions in western
Canada. Although activity levels were lower than the third quarter
of 2003, anticipated strong demand for services going into the
winter drilling season has provided support for pricing
improvements across most of our service lines in Canada. The
increased value of the Canadian dollar relative to the US Dollar
had a significant negative impact in the third quarter of 2004,
reducing before tax earnings by $6.8 million. Most of the
Corporation's international operations are carried on in US dollars
and as a result the 6% strengthening of the Canadian dollar versus
the US dollar had a two fold impact. First, the Canadian dollar
equivalent of our net US dollar denominated monetary asset position
declined, leading to a foreign exchange loss being recorded, and
second, the Canadian dollar equivalent of US dollar denominated
operating cash flow was reduced. Stock-based compensation expense
amounted to $4.9 million ($0.08 per share) in the quarter compared
to $1.9 million ($0.04 per share) in the third quarter of 2003. In
September, the Corporation launched a branding campaign focused on
its Technology Services segment. This important milestone in the
Corporation's technology services development will see all the
businesses that currently make up the Technology Services segment
combined under one brand, "Precision Energy Services". The segment
will have three product lines: Wireline Services, Drilling &
Evaluation Services and Production Services. Contract Drilling
Contract Drilling revenue increased by 26% in the third quarter
compared to the same period in 2003 as a result of the acquisition
of 31 internationally based rigs in May 2004 and pricing increases
in the Canadian market. These positive factors were mitigated
somewhat by lower activity levels in Canada as a result of wet
weather conditions hindering the movement and operation of drilling
rigs. Western Canada received 23% more rainfall in the third
quarter of 2004 than in the third quarter of 2003 contributing to a
13% reduction in well completions. Operating earnings as a
percentage of revenue declined to 25% from 27% in 2003. Improved
margins in the Canadian market were more than offset by lower
margins realized internationally. Reduced spending by PEMEX, the
Mexican National Oil Company, reduced our activity and
profitability in that country. In addition, expenses were incurred
in connection with the integration of the GlobalSantaFe land
drilling business. Foreign exchange fluctuations also contributed
to the reduced profitability of the Contract Drilling segment. The
Canadian drilling rig fleet achieved 9,479 operating days for a
utilization rate of 46% in the quarter compared to 10,848 operating
days and a 52% utilization rate in 2003. The service rig operation
was less affected by the wet conditions in western Canada and saw a
slight increase in operating hours from 110,447 in 2003 to 112,637
in 2004. Energy Services Compared to the same period in 2003,
revenues in the Energy Services segment increased 31% in the third
quarter of 2004. This growth was primarily achieved in
international operations. Revenue from Canadian operations remained
relatively flat year over year where the impact of adverse weather
conditions was offset by the addition of Reeves. The same is true
for operating earnings where overall results increased $9.0
million, despite the inclusion of a foreign exchange loss of $3.4
million. The addition of Reeves contributed significantly to the
profitability of the Energy Services segment in the quarter. The
biggest geographical improvements came from operations in the
United States, Latin America and Asia Pacific. Wireline Services
generated the largest increase in results from 2003 levels, with
improvements coming from both the core business as well as from the
addition of Reeves. Continued capital spending in 2004, to round
out LWD and RST service offerings, resulted in increased
depreciation charges and a slight decline in operating earnings for
Drilling & Evaluation Services. Business levels for this
product-line have not yet reached a sustainable threshold where the
global fleet is enjoying continuous utilization of assets. The
outlook for the balance of the year appears promising as we are
experiencing an increase in jobs being awarded for our drilling and
evaluation services. The Production Services division experienced
mixed performances with some regions achieving excellent results,
while others, such as Canada, struggled in adverse business
environments. With renewal of a key North Sea contract and the
start-up of other international projects before year end we are
anticipating a stronger finish to 2004. In spite of utilization
growing pains within our drilling and evaluation business we have
been encouraged by the performance of our new RST and LWD tools.
Several key customer trials were successfully completed around the
world in the third quarter, with both reliability and performance
demonstrating top tier industry standards. With respect to
Wireline, we have been very encouraged by the addition of Reeves to
our existing business. We believe Reeves' unique technology, as
well as its cost effective service solutions, will provide exciting
opportunities for our formation evaluation business in mature
basins. Rental and Production The Rental and Production segment saw
a 9% increase in revenue, with the majority of the increase coming
from the industrial plant maintenance business. The Canadian rental
business experienced a slight decrease in rental days, however the
impact on revenue was more than offset by pricing increases.
Operating margins remained relatively consistent year over year in
both businesses. 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 the outlook for the balance of the year for our Energy
Services segment, statements 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 within the meaning
of the United States Private Securities Litigation Reform Act of
1995. 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 U.S. Securities and Exchange Commission. CONSOLIDATED
STATEMENTS OF EARNINGS AND RETAINED EARNINGS CDN $000's, except
Three Months Ended Nine Months Ended per share amounts September
30, September 30, (unaudited) 2004 2003 2004 2003
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Revenue $ 570,047 $ 450,942 $1,645,729 $1,376,501 Expenses:
Operating 370,784 299,156 1,053,559 927,075 General and
administrative 48,408 38,166 132,006 104,384 Depreciation and
amortization 53,888 41,789 145,342 125,472 Research and engineering
13,097 13,208 37,279 30,834 Foreign exchange 6,796 (2,335) 1,801
(1,569)
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492,973 389,984 1,369,987 1,186,196
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Operating earnings 77,074 60,958 275,742 190,305 Interest 13,087
8,540 31,981 26,752 Gain on disposal of investments (2,532) (1,862)
(2,574) (3,026)
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Earnings from continuing operations before income taxes and
non-controlling interest 66,519 54,280 246,335 166,579 Income
taxes: Current 20,659 4,316 76,154 37,352 Future 3,770 13,509 5,785
10,758
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24,429 17,825 81,939 48,110
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Earnings from continuing operations before non-controlling interest
42,090 36,455 164,396 118,469 Non-controlling interest 1,056 -
1,298 -
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Earnings from continuing operations 41,034 36,455 163,098 118,469
Discontinued operations, net of tax 1,673 (690) (3,877) 9,047
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Net earnings 42,707 35,765 159,221 127,516 Retained earnings,
beginning of period 910,793 705,556 794,279 613,805
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Retained earnings, end of period $ 953,500 $ 741,321 $ 953,500 $
741,321
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Earnings per share from continuing operations: Basic $ 0.69 $ 0.67
$ 2.87 $ 2.18 Diluted $ 0.68 $ 0.66 $ 2.83 $ 2.15
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Earnings per share: Basic $ 0.72 $ 0.66 $ 2.80 $ 2.35 Diluted $
0.71 $ 0.65 $ 2.77 $ 2.31
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Common shares outstanding (000's) 60,673 54,639 60,673 54,639
Weighted average shares outstanding (000's) 59,154 54,514 56,844
54,334 Diluted shares outstanding (000's) 59,908 55,334 57,578
55,226 CONSOLIDATED BALANCE SHEETS September 30, December 31, CDN
$000's 2004 2003
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(unaudited) Assets Current assets: Cash $ 79,422 $ 21,370 Accounts
receivable 636,155 539,370 Inventory 111,425 95,210 Assets of
discontinued operations - 30,508
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827,002 686,458 Property, plant and equipment, net of accumulated
depreciation 1,932,174 1,584,954 Intangibles, net of accumulated
amortization 160,058 65,262 Goodwill 767,415 527,443 Other assets
10,096 8,932 Assets of discontinued operations - 35,336
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$ 3,696,745 $ 2,908,385
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Liabilities and Shareholders' Equity Current liabilities: Bank
indebtedness $ - $ 147,909 Accounts payable and accrued liabilities
327,101 258,803 Income taxes payable 25,890 7,136 Current portion
of long-term debt - 17,158 Liabilities of discontinued operations -
7,191
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352,991 438,197 Long-term debt 732,154 399,422 Future income taxes
359,903 320,599 Future income taxes of discontinued operations -
1,107 Non-controlling interest 9,545 3,771 Shareholders' equity:
Share capital 1,265,258 936,744 Contributed surplus 21,445 14,266
Cumulative translation adjustment 1,949 - Retained earnings 953,500
794,279
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2,242,152 1,745,289
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$ 3,696,745 $ 2,908,385
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Common shares outstanding (000's) 60,673 54,846 Common share
purchase options outstanding (000's) 3,433 3,393 CONSOLIDATED
STATEMENTS OF CASH FLOW Three Months Ended Nine Months Ended CDN
$000's September 30, September 30, (unaudited) 2004 2003 2004 2003
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Cash provided by (used in): Continuing operations: Earnings from
continuing operations $ 41,034 $ 36,455 $ 163,098 $ 118,469 Items
not affecting cash: Stock-based compensation 4,934 1,946 8,883
5,872 Depreciation and amortization 53,888 41,789 145,342 125,472
Gain on disposal of investments (2,532) (1,862) (2,574) (3,026)
Future income taxes 3,770 13,509 5,785 10,758 Non-controlling
interest 1,056 - 1,298 - Amortization of deferred financing costs
465 321 1,145 965 Unrealized foreign exchange (gain) loss on
long-term monetary items 480 (394) (2,749) (14,125)
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Funds provided by continuing operations 103,095 91,764 320,228
244,385 Changes in non-cash working capital balances (60,639)
(83,491) (10,874) (85,143)
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42,456 8,273 309,354 159,242 Funds provided by (used in)
discontinued operations 1,898 1,450 110 (709) Changes in non-cash
working capital balances of discontinued operations (5,260) (849)
(447) 886
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(3,362) 601 (337) 177 Investments: Business acquisitions (1,160) -
(660,002) (6,800) Purchase of property, plant and equipment
(83,629) (69,049) (192,610) (237,438) Purchase of intangibles (314)
- (314) - Proceeds on sale of property, plant and equipment 13,371
5,500 24,617 16,646 Proceeds on disposal of investments 5,829 2,960
5,877 10,580 Proceeds on disposal of discontinued operations 8,553
- 49,299 67,274 Investments 1,340 144 - (730)
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(56,010) (60,445) (773,133) (150,468)
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Financing: Increase in long-term debt - 35,980 522,136 80,940
Repayment of long-term debt (161,994) (4,486) (173,257) (145,657)
Deferred financing costs of long-term debt (627) - (5,612) -
Issuance of common shares on exercise of options 13,584 6,115
50,355 16,264 Issuance of common shares 276,455 - 276,455 - Change
in bank indebtedness (71,795) 21,275 (147,909) 40,457
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55,623 58,884 522,168 (7,996)
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Increase in cash 38,707 7,313 58,052 955 Cash, beginning of period
40,715 10,957 21,370 17,315
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Cash, end of period $ 79,422 $ 18,270 $ 79,422 $ 18,270
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SEGMENT INFORMATION CDN $000's (unaudited) Three months ended
Contract Energy Rental and Corporate September 30, Drilling
Services Production and Other Total
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2004 Revenue $ 287,721 $ 229,246 $ 53,080 $ - $ 570,047 Operating
earnings (loss) 71,469 9,245 9,507 (13,147) 77,074 Research and
engineering - 13,097 - - 13,097 Depreciation and amortization
24,474 24,334 3,626 1,454 53,888 Total assets 1,863,678 1,557,996
177,993 97,078 3,696,745 Goodwill 383,041 355,672 28,702 - 767,415
Capital expenditures 34,551 43,464 2,126 3,802 83,943
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2003 Revenue $ 227,490 $ 174,593 $ 48,859 $ - $ 450,942 Operating
earnings (loss) 62,011 275 9,175 (10,503) 60,958 Research and
engineering - 13,208 - - 13,208 Depreciation and amortization
19,961 17,558 3,072 1,198 41,789 Total assets 1,342,054 1,260,539
174,117 82,980 2,859,690 Goodwill 257,531 241,340 28,572 - 527,443
Capital expenditures 32,798 27,609 2,269 6,373 69,049
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CDN $000's (unaudited) Nine months ended Contract Energy Rental and
Corporate September 30, Drilling Services Production and Other
Total
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2004 Revenue $ 857,711 $ 627,890 $ 160,128 $ - $1,645,729 Operating
earnings (loss) 261,396 21,886 28,861 (36,401) 275,742 Research and
engineering - 37,279 - - 37,279 Depreciation and amortization
63,565 67,528 10,199 4,050 145,342 Total assets 1,863,678 1,557,996
177,993 97,078 3,696,745 Goodwill 383,041 355,672 28,702 - 767,415
Capital expenditures(x) 74,086 92,901 11,611 14,326 192,924
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2003 Revenue $ 701,884 $ 512,305 $ 162,312 $ - $1,376,501 Operating
earnings (loss) 185,834 173 31,636 (27,338) 190,305 Research and
engineering - 30,834 - - 30,834 Depreciation and amortization
58,234 54,307 9,364 3,567 125,472 Total assets 1,342,054 1,260,539
174,117 82,980 2,859,690 Goodwill 257,531 241,340 28,572 - 527,443
Capital expenditures(x) 62,794 148,817 9,463 16,364 237,438
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(x) excludes business acquisitions CANADIAN DRILLING OPERATING
STATISTICS Nine Months Ended September 30, 2004 2003
---------------------------------------------------------- Industry
Market Industry Market Precision (x) Share % Precision (x) Share %
---------------------------------------------------------- Number
of drilling rigs 226 686 32.9 224 654 34.3 Number of operating days
(spud to release) 29,526 92,896 31.8 31,094 91,830 33.9 Wells
drilled 5,644 15,981 35.3 6,128 15,137 40.5 Average days per well
5.2 5.8 5.1 6.1 Metres drilled (000's) 5,905 16,901 34.9 6,265
15,899 39.4 Average metres/day 200 182 201 173 Average metres/well
1,046 1,058 1,022 1,050 Rig utilization rate (%) 47.8 49.8 50.6
51.7 (x) Excludes non-CAODC rigs. A conference call to review the
third quarter 2004 results has been scheduled for 12:00 noon MST on
Thursday, October 28, 2004. The conference call dial-in number is
1-800-814-4857. 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 corporate subsidiary offices in
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, 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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