Precision Drilling Corporation (“Precision” or “the Company”)
(TSX:PD; NYSE:PDS) provides a series of announcements including: 1)
An introduction to its capital allocation framework through
2025; 2) 2021 debt reduction and year-end liquidity updates; and 3)
Operations update for drilling activity, Alpha™ technologies and
EverGreen™ solutions.
Capital Allocation Framework Through 2025
Precision’s debt reduction plans will continue with the goal of
repaying over $400 million in debt over the next four years and
reaching a sustained Net Debt to Adjusted EBITDA ratio of below 1.5
times. At the end of 2025, Precision expects to have reduced debt
by well over $1 billion since 2018. In addition to debt reduction
targets through 2025, Precision plans to allocate 10% to 20% of
free cash flow before debt principal repayments toward the return
of capital to shareholders. Precision will continue to support its
High Performance, High Value strategy by investing in routine fleet
maintenance, Alpha™ technologies, EverGreen™ solutions
and contracted Super Series rig upgrades as market conditions and
customer demand warrant.
2021 Debt Repayment and Liquidity Update
Precision reduced total debt by $115 million in 2021, exceeding
the midpoint of its annual debt reduction goal of $100 million to
$125 million. Since the beginning of 2018, Precision has paid down
approximately $665 million of debt. As of December 31, 2021,
Precision’s outstanding debt obligations included:
- US$118 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 has approximately US$25 million of real
estate credit facilities due in 2025 and 2026. Precision’s run rate
cash interest expense to start 2022 is expected to be approximately
$75 million. The Company ended 2021 with over $530 million of total
liquidity including a cash balance of approximately $40 million and
revolver availability.
Operations Update
Precision continues to experience increased demand for drilling
services, Alpha™ technologies and EverGreen™ solutions
into 2022.
Drilling Activity
In the fourth quarter of 2021, Precision’s average active rig
count was 52 for Canada, 45 for the U.S., and six internationally.
As of January 6, 2022, Precision has 66 active rigs in Canada and
50 active rigs in the U.S., representing increases of 38% and 61%,
respectively, from the same date in 2021. Precision continues to
have six rigs active internationally.
For the first quarter of 2022, Precision expects its Canadian
average drilling activity to be up approximately 40% compared with
2021, while average U.S. activity is expected to be up
approximately 60% year over year with our active rig count
continuing to trend higher through the next several quarters.
Alpha™
Precision exited the year with 47 AC Super Triple Alpha-rigs
equipped with our AlphaAutomation™ platform, a 26% increase
from the beginning of 2021. Our fourth quarter paid
AlphaApp™ days increased 50% compared with the third quarter
of 2021 and 440% compared to the fourth quarter of 2020. Precision
added four new Alpha™ customers in the fourth quarter.
EverGreen™
Precision’s EverGreen™ suite of environmental solutions
expects three Battery Energy Storage System deployments in the
first quarter with several additional pending commitments by
mid-year. In addition, by the end of the first quarter, we expect
to have eight Integrated Power & Emissions Monitoring Systems
deployed as our customers are expressing keen interest in
establishing a real-time wellsite Greenhouse Gas (GHG) footprint
and gaining insight into the correlation between power demand, fuel
consumption and resulting GHG emissions throughout the well
construction process. Capturing and analyzing a pool of data across
different rigs, well profiles, engine types and geographic areas,
will meaningfully improve both Precision’s and its customers
understanding of the variability of land drilling GHG emissions and
help operate power generating equipment with optimal fuel
consumption and carbon footprint efficiency.
CFO Quote
Precision’s CFO, Carey Ford stated: “Precision achieved its 2021
debt reduction target, despite incurring approximately $50 million
of debt increases or calls on cash resulting from debt refinancings
and activity-driven increases in capital expenditures and working
capital throughout the year. We expect to continue to generate
strong free cash flow over the next several years by maximizing our
operating leverage in an increasing activity environment, bolstered
by Precision’s global scale, high-quality, digitally-enabled Super
Series fleet and lean fixed cost structure. In addition to
continued debt reduction progress and disciplined high-return
investments in our rig fleet, we believe Precision’s existing debt
structure and reduced interest expense position the Company to
increase shareholder value through allocating a higher percentage
of free cash flow to the return of capital to shareholders.”
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, 2020, 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:
Carey Ford, Senior Vice President and Chief
Financial Officer713.435.6100Precision Drilling Corporation800, 525
- 8th Avenue S.W.Calgary, Alberta, Canada T2P 1G1Website:
www.precisiondrilling.com
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