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Precision Drilling Corporation Announces 2019 Third Quarter Unaudited Financial Results

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CALGARY, Alberta, Oct. 24, 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 third quarter highlights:

  • Revenue of $376 million was a decrease of 2% compared with the third quarter of 2018.
  • Net loss of $4 million or negative $0.01 per share compares to a net loss of $31 million or negative $0.10 per share in the third 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 $98 million was 21% higher than the third quarter of 2018. During the quarter, we recognized $6 million of non-recurring items that positively impacted Adjusted EBITDA but did not relate to current period operations.
  • Funds provided by operations (see "NON-GAAP MEASURES") was $80 million versus $64 million in the prior year quarter. Cash provided by operations was $67 million versus $32 million in the prior year quarter. The increase in funds and cash provided by operations in the current quarter was primarily the result of improved operations and management's focus on free cash flow.
  • Strict cost control focus resulted in year-to-date general and administrative costs decreasing 13% from the same period in 2018.
  • For the first nine months of 2019, debt reduction of $146 million and share repurchases of $8 million while our cash balance of $94 million remained largely unchanged from the start of the year.
  • In the quarter the Toronto Stock Exchange approved our application to implement a Normal Course Issuer Bid. We purchased and cancelled 5 million common shares for $8 million in the third quarter and, as of October 23, 2019, purchased and cancelled an additional 3 million common shares for $4 million.
  • Year-to-date market share gains in both the U.S. and Canada evident by Precision's year-to-date average U.S. rig count increasing 7% despite a 4% industry decrease from the same period in 2018 and Precision's Canadian average rig count decreasing 25% compared to a 32% decrease for the industry.
  • Substantial increases in Process Automation Control (PAC) utilization and commercial agreements. With 584 wells drilled in 2019, Precision is on track to achieve our 2019 commercialization target.
  • Our year-to-date Completion and Production Services Adjusted EBITDA of $18 million was more than double our total for the comparable 2018 period.

Precision's President and CEO Kevin Neveu stated: "The strength of Precision's business is demonstrated by our robust third quarter financial results, excellent operating performance and substantial progress on our stated 2019 strategic priorities, all delivered despite lower industry drilling activity and persistent macroeconomic concerns influencing energy industry sentiment."

"Our Adjusted EBITDA and cash provided by operations increased 21% and 108%, respectively, from the third quarter in 2018 and are a result of Precision's market positioning, success of our technology initiatives and the intense cost control and cash management efforts across the organization. Cash flow generation is a core focus for Precision and the $213 million in cash from operations year-to-date has largely been used to strengthen our balance sheet."

"During the quarter, Precision reduced debt by $21 million. We have reduced debt by $146 million year-to-date and fully expect to meet or exceed our 2019 debt reduction target of $200 million. I reiterate our previously disclosed 2020 debt reduction target of $100 to $150 million, which we expect will include the balance of our 2021 senior notes. Debt reduction will remain a strategic priority for Precision in 2020 as we believe it is the best avenue to increase shareholder value in the current market. Our strong cash management also provided flexibility to execute our previously announced share buyback plan. To date, we have repurchased 3% of our outstanding shares and used approximately $12 million in cash. We have effected these balance sheet enhancements while sustaining an essentially flat cash balance over the course of the year."

"In the field, the success of our High Performance, High Value strategy and our Super Series fleet drove market share gains in North America during the quarter with Precision once again reaching record market shares in the U.S. and Canada. Additionally, we expanded our Middle East presence with our sixth newbuild rig successfully deployed to Kuwait. We see strong alignment with our competitive strategy and our customers' drive for efficiency and consistency in the capital-intensive multi-year development programs in our core markets."

"Our automation technology initiatives continued operational and commercial momentum as we delivered a step-change in utilization and commercial adoption rates during the quarter. Before the end of this month, Precision will have drilled 1,000 wells using our PAC system with 32 units currently deployed in the field. Our customers are widely acknowledging the drilling efficiency, cost savings and consistency gains our system delivers. We find the current market conditions ideal to commercialize our PAC technology, which reduces our customer's well cost and risk, while enhancing Precision's competitive advantage. As a result of these customer benefits, during the third quarter we doubled the number of revenue generating systems from the second quarter. I am excited not only by the future growth potential of our rapidly scalable technology offering, but also by the value we are delivering to our customers today."

"For the remainder of the year we expect customers to continue managing budgets within cash flow. Precision will actively help our customers achieve the highest efficiency levels through our service delivery and operational excellence and remain focused on cost management to help generate strong margins and cash flow in all parts of the commodity cycle," concluded Mr. Neveu.

IMPACT OF IFRS 16 - LEASES ON FINANCIAL INFORMATION

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.

SELECT FINANCIAL AND OPERATING INFORMATION

Financial Highlights

  Three months ended September 30,     Nine months ended September 30,  
(Stated in thousands of Canadian dollars, except per share amounts) 2019     2018     % Change     2019     2018     % Change  
Revenue   375,552       382,457       (1.8 )     1,169,019       1,114,179       4.9  
Adjusted EBITDA(1)   97,895       80,988       20.9       286,899       240,639       19.2  
Operating earnings (loss)(1)   19,235       (9,702 )     (298.3 )     86,878       (25,980 )     (434.4 )
Net earnings (loss)   (3,534 )     (30,648 )     (88.5 )     7,679       (95,942 )     (108.0 )
Cash provided by operations   66,556       31,961       108.2       213,178       199,845       6.7  
Funds provided by operations(1)   79,930       64,368       24.2       216,873       218,619       (0.8 )
Capital spending:                                              
Expansion   8,162       9,909       (17.6 )     100,148       26,380       279.6  
Upgrade   4,921       11,545       (57.4 )     12,647       28,355       (55.4 )
Maintenance and infrastructure   10,831       6,913       56.7       25,550       30,247       (15.5 )
Intangibles   12       660       (98.2 )     476       10,880       (95.6 )
Proceeds on sale   (3,385 )     (3,757 )     (9.9 )     (85,837 )  
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