Market Overview

Precision Drilling Corporation announces 2019 Second Quarter Unaudited Financial Results


CALGARY, Alberta, July 25, 2019 (GLOBE NEWSWIRE) -- (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. This news release contains references to Adjusted EBITDA, Covenant EBITDA, Operating Earnings (Loss), Funds Provided by (Used in) Operations and Working Capital. These terms do not have standardized meanings prescribed under International Financial Reporting Standards (IFRS) and may not be comparable to similar measures used by other companies, see "Non-GAAP Measures" later in this news release.

Precision Drilling announces 2019 second quarter financial results:

  • Revenue of $359 million was an increase of 9% compared with the second quarter of 2018.
  • Net loss of $14 million or negative $0.05 per diluted share compares to a net loss of $47 million or negative $0.16 per diluted share in the second quarter of 2018.
  • Earnings before income taxes, loss (gain) on repurchase of unsecured senior notes, finance charges, foreign exchange, impairment reversal, gain on asset disposals and depreciation and amortization (Adjusted EBITDA see "NON-GAAP MEASURES") of $81 million was 30% higher than the second quarter of 2018.
  • Funds provided by operations (see "NON-GAAP MEASURES") was $41 million versus $50 million in the prior year quarter. Cash provided by operations was $106 million versus $130 million in the prior year quarter. The decrease in funds and cash provided by operations in the current quarter was primarily the result of a $28 million tax refund received in the prior year comparative quarter partially offset by improved operating results in 2019.
  • Second quarter ending cash balance was $81 million.
  • Second quarter capital expenditures were $43 million and as at June 30, 2019, we have spent $115 million or 68% of our 2019 capital budget.
  • Second quarter proceeds from asset sales was $25 million.
  • Second quarter debt reduction totaled $107 million, increasing our year to date reductions to $124 million. For the year we have repurchased and cancelled US$26 million of the 7.125% unsecured senior notes due 2026 and US$17 million of the 5.25% notes due 2024 and redeemed US$50 million principal amount of our 6.50% senior notes due 2021.
  • Completed construction of our sixth rig in Kuwait. The rig commenced drilling on July 1, 2019.

Precision's President and CEO Kevin Neveu stated:

"Precision delivered strong second quarter operating performance supported by the competitive strength and resulting market share of our Super Triple rigs in our three core markets, the U.S., Canada and Middle East. Precision's average global activity of 112 rigs for the quarter was in line with last year (111), despite industry headwinds and lower industry activity levels in North America. Second quarter adjusted EBITDA of $81 million increased 30% from prior year due to improved pricing and cost control efforts, yielding stronger than expected cash flow and enabling Precision to reduce debt at a faster rate than planned. With $124 million of debt repayments completed year-to-date, we are increasing our 2019 debt reduction target to $200 million, compared to our previous targeted range of $100 million to $150 million. Reducing debt levels remains a strategic priority and we expect to continue our accelerated pace with strong free cash flow." 

"In the U.S., our High Performance, High Value strategy and Super Triple fleet quality and field performance continue to drive strong financial results. Our 68 AC Super Triples remain over 90% utilized with firm pricing. During the quarter, we signed 15 new term contracts from six months to two years duration, increasing our average 2019 U.S. contract coverage to 48 rigs. We completed our previously announced full SCR to AC Super Triple upgrade, entering service in June and representing the sixth AC ST-1500 walking rig added to our U.S. fleet since early 2018. We expect Super Triple demand and pricing to remain firm in the second half of the year as our customers continue to throttle spending within cash flow while focusing on the most efficient and best performing rigs."

"In the Middle East, our new-build rig in Kuwait spudded its first well on July 1, ahead of schedule and under budget. Scale is critical to Precision's strategy and with our ninth active rig in the region, we are delivering excellent results for our customers and adding strong stable contracted cash flow for our business."

"In Canada, while cash generation remains our key priority, the market relevance of our Super Series fleet is clearly represented with over 30% Canadian market share achieved during the second quarter, our highest market share in recent history. Despite challenges in the Canadian region with industry activity off 30% year-to-date, Precision's Super Series rigs substantially outperformed industry utilization. We expect this trend of firm utilization and pricing, supported by our 26 AC Super Triple rigs, to continue into the back half of the year."

"While also weathering Canadian industry challenges and lower activity levels, our Completion and Production segment posted another strong quarter, demonstrating the results of business improvement initiatives and strong execution by our team with a continued focus on cost control across all product lines. The segment delivered a $4 million improvement in EBITDA from the second quarter of 2018." 

"I remain excited about Precision's progress on technology initiatives, led by continued traction of our 33 Process Automated Control systems installed. During the quarter, 31 of these systems were active in the field and drilled approximately 195 wells, an increase of 65% from the prior year. We continue to demonstrate to customers, our system's ability to deliver consistent, high-quality results as we progress towards our 2019 commercialization targets. Precision is an industry leader in technological offerings, as demonstrated through our scalable, field-hardened product rapidly commercializing in multiple basins throughout North America."

"We are confident our firm market position in the U.S., expanding scale internationally, leadership position in Canada and technology initiatives will deliver a runway of free cash flow to facilitate further deleveraging and future growth opportunities." concluded Mr. Neveu.


On January 1, 2019, Precision applied IFRS 16 using the modified retrospective approach under which comparative information has not been restated and continues to be reported under IAS 17 and related interpretations. Please refer to "CHANGES IN ACCOUNTING POLICY" for additional information on the impact to our financial information.


Financial Highlights

  Three months ended June 30,     Six months ended June 30,  
(Stated in thousands of Canadian dollars, except per share amounts) 2019     2018     % Change     2019     2018     % Change  
Revenue   359,424       330,716       8.7       793,467       731,722       8.4  
Adjusted EBITDA(1)   81,037       62,182       30.3       189,004       159,651       18.4  
Operating earnings (loss)(1)   5,569       (26,439 )     (121.1 )     67,643       (16,278 )     (515.5 )
Net earnings (loss)   (13,801 )     (47,217 )     (70.8 )     11,213       (65,294 )     (117.2 )
Cash provided by operations   106,035       129,695       (18.2 )     146,622       167,884       (12.7 )
Funds provided by operations(1)   40,950       50,225       (18.5 )     136,943       154,251       (11.2 )
Capital spending:                                              
Expansion   29,543       15,786       87.1       91,986       16,471       458.5  
Upgrade   4,052       5,447
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