EX-99.2 5 exh_992.htm EXHIBIT 99.2

Exhibit 99.2

 

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

 

(Stated in thousands of Canadian dollars)  September 30, 2023   December 31, 2022 
ASSETS          
Current assets:          
Cash  $49,065   $21,587 
Accounts receivable   393,286    413,925 
Inventory   35,045    35,158 
Total current assets   477,396    470,670 
Non-current assets:          
Income tax recoverable   699    1,602 
Deferred tax assets   454    455 
Property, plant and equipment   2,238,680    2,303,338 
Intangibles   18,047    19,575 
Right-of-use assets   57,168    60,032 
Finance lease receivables   5,112    — 
Investments and other assets   10,645    20,451 
Total non-current assets   2,330,805    2,405,453 
Total assets  $2,808,201   $2,876,123 
           
LIABILITIES AND EQUITY          
Current liabilities:          
Accounts payable and accrued liabilities  $280,519   $392,053 
Income taxes payable   3,197    2,991 
Current portion of lease obligations   13,650    12,698 
Current portion of long-term debt (Note 5)   2,290    2,287 
Total current liabilities   299,656    410,029 
           
Non-current liabilities:          
Share-based compensation (Note 7)   28,360    60,133 
Provisions and other   7,331    7,538 
Lease obligations   55,143    52,978 
Long-term debt (Note 5)   963,827    1,085,970 
Deferred tax liabilities   70,149    28,946 
Total non-current liabilities   1,124,810    1,235,565 
Shareholders’ equity:          
Shareholders’ capital (Note 8)   2,306,545    2,299,533 
Contributed surplus   74,389    72,555 
Deficit   (1,158,751)   (1,301,273)
Accumulated other comprehensive income   161,552    159,714 
Total shareholders’ equity   1,383,735    1,230,529 
Total liabilities and shareholders’ equity  $2,808,201   $2,876,123 

 

See accompanying notes to condensed interim consolidated financial statements.

 

  1

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF NET EARNINGS (LOSS) (UNAUDITED)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
(Stated in thousands of Canadian dollars, except per share amounts)  2023   2022   2023   2022 
                 
                 
Revenue (Note 3)  $446,754   $429,335   $1,430,983   $1,106,690 
Expenses:                    
Operating   288,002    284,868    888,039    784,394 
General and administrative   44,177    24,906    83,057    101,781 
Earnings before income taxes, loss (gain) on
   investments and other assets, gain on
   repurchase of unsecured senior notes,
   finance charges, foreign exchange, gain on
   asset disposals, and depreciation and
   amortization		   114,575    119,561    459,887    220,515 
Depreciation and amortization   73,192    69,448    218,823    207,662 
Gain on asset disposals   (2,438)   (8,238)   (15,586)   (22,152)
Foreign exchange   363    1,344    (894)   1,362 
Finance charges (Note 6)   19,618    22,521    63,946    64,294 
Gain on repurchase of unsecured senior notes   (37)   —    (137)   — 
Loss (gain) on investments and other assets   (3,813)   (2,515)   6,075    (3,738)
Earnings (loss) before income taxes   27,690    37,001    187,660    (26,913)
Income taxes:                    
Current   2,047    958    4,008    2,563 
Deferred   5,851    5,364    41,130    8,300 
    7,898    6,322    45,138    10,863 
Net earnings (loss)  $19,792   $30,679   $142,522   $(37,776)
Net earnings (loss) per share: (Note 9)                    
Basic  $1.45   $2.26   $10.45   $(2.79)
Diluted  $1.45   $2.03   $9.84   $(2.79)

 

See accompanying notes to condensed interim consolidated financial statements.

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
(Stated in thousands of Canadian dollars)  2023   2022   2023   2022 
Net earnings (loss)  $19,792   $30,679   $142,522   $(37,776)
Unrealized gain on translation of assets and
   liabilities of operations denominated in foreign
   currency		   39,180    111,811    3,322    139,478 
Foreign exchange loss on net investment hedge
   with U.S. denominated debt		   (24,616)   (84,060)   (1,484)   (105,123)
Comprehensive income (loss)  $34,356   $58,430   $144,360   $(3,421)

 

See accompanying notes to condensed interim consolidated financial statements.

 

  2

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
(Stated in thousands of Canadian dollars)  2023   2022   2023   2022 
Cash provided by (used in):                    
Operations:                    
   Net earnings (loss)  $19,792   $30,679   $142,522   $(37,776)
   Adjustments for:                    
   Long-term compensation plans   11,577    411    9,200    34,847 
   Depreciation and amortization   73,192    69,448    218,823    207,662 
   Gain on asset disposals   (2,438)   (8,238)   (15,586)   (22,152)
   Foreign exchange   1,275    773    (13)   924 
   Finance charges   19,618    22,521    63,946    64,294 
   Income taxes   7,898    6,322    45,138    10,863 
   Other   —    (2)   (220)   273 
   Loss (gain) on investments and other assets   (3,813)   (2,515)   6,075    (3,738)
   Gain on repurchase of unsecured senior notes   (37)   —    (137)   — 
   Income taxes paid   (187)   (220)   (2,395)   (3,023)
   Income taxes recovered   4    10    7    10 
   Interest paid   (35,500)   (38,005)   (79,702)   (80,706)
   Interest received   227    143    562    177 
Funds provided by operations   91,608    81,327    388,220    171,655 
Changes in non-cash working capital balances   (3,108)   (73,185)   (57,904)   (93,633)
    88,500    8,142    330,316    78,022 
Investments:                    
Purchase of property, plant and equipment   (51,546)   (51,103)   (146,378)   (126,941)
Purchase of intangibles   (847)   —    (1,524)   — 
Proceeds on sale of property, plant and equipment   6,698    22,337    20,724    32,033 
Proceeds from sale of investments and other assets   10,013    —    10,013    — 
Business acquisitions   —    (10,200)   (28,000)   (10,200)
Purchase of investments and other assets   (3,211)   (73)   (5,282)   (609)
Receipt of finance lease payments   64    —    64    — 
Changes in non-cash working capital balances   4,551    7,328    (6,774)   6,881 
    (34,278)   (31,711)   (157,157)   (98,836)
Financing:                    
Issuance of long-term debt   23,600    50,360    162,649    144,889 
Repayments of long-term debt   (49,517)   (34,475)   (288,538)   (118,586)
Repurchase of share capital   —    (5,010)   (12,951)   (10,010)
Issuance of common shares from the exercise
   of options		   —    —    —    6,162 
Lease payments   (2,410)   (1,777)   (6,413)   (5,186)
    (28,327)   9,098    (145,253)   17,269 
Effect of exchange rate changes on cash   251    2,878    (428)   3,005 
Increase (decrease) in cash   26,146    (11,593)   27,478    (540)
Cash, beginning of period   22,919    51,641    21,587    40,588 
Cash, end of period  $49,065   $40,048   $49,065   $40,048 

 

See accompanying notes to condensed interim consolidated financial statements.

 

  3

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

 

(Stated in thousands of Canadian dollars)  Shareholders’
Capital		   Contributed
Surplus		   Accumulated
Other
Comprehensive
Income		   Deficit   Total
Equity		 
Balance at January 1, 2023  $2,299,533   $72,555   $159,714   $(1,301,273)  $1,230,529 
Net earnings for the period   —    —    —    142,522    142,522 
Other comprehensive income
   for the period		   —    —    1,838    —    1,838 
Settlement of Executive Performance
   and Restricted Share Units		   19,206    —    —    —    19,206 
Share repurchases   (12,951)   —    —    —    (12,951)
Redemption of non-management
   directors share units		   757    —    —    —    757 
Share-based compensation expense   —    1,834    —    —    1,834 
Balance at September 30, 2023  $2,306,545   $74,389   $161,552   $(1,158,751)  $1,383,735 

 

(Stated in thousands of Canadian dollars)  Shareholders’
Capital		   Contributed
Surplus		   Accumulated
Other
Comprehensive
Income		   Deficit   Total
Equity		 
Balance at January 1, 2022  $2,281,444   $76,311   $134,780   $(1,266,980)  $1,225,555 
Net loss for the period   —    —    —    (37,776)   (37,776)
Other comprehensive income
   for the period		   —    —    34,355    —    34,355 
Share options exercised   8,843    (2,681)   —    —    6,162 
Share repurchases   (10,010)   —    —    —    (10,010)
Share-based compensation
   reclassification		   14,083    (219)   —    —    13,864 
Share-based compensation expense   —    646    —    —    646 
Balance at September 30, 2022  $2,294,360   $74,057   $169,135   $(1,304,756)  $1,232,796 

 

See accompanying notes to condensed interim consolidated financial statements.

 

 

 

 

 

  4

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Tabular amounts are stated in thousands of Canadian dollars except share numbers and per share amounts)

 

NOTE 1. DESCRIPTION OF BUSINESS

 

Precision Drilling Corporation (Precision or the Corporation) is incorporated under the laws of the Province of Alberta, Canada and is a provider of contract drilling and completion and production services primarily to oil and natural gas and geothermal exploration and production companies in Canada, the United States and certain international locations.

 

NOTE 2. BASIS OF PRESENTATION

 

(a) Statement of Compliance

 

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee.

 

The condensed interim consolidated financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Corporation as at and for the year ended December 31, 2022.

 

These condensed interim consolidated financial statements were prepared using accounting policies and methods of their application are consistent with those used in the preparation of the Corporation’s consolidated annual financial statements for the year ended December 31, 2022, except as noted in Note 2 (c).

 

These condensed interim consolidated financial statements were approved by the Board of Directors on October 25, 2023.

 

(b) Use of Estimates and Judgements

 

The preparation of the condensed interim consolidated financial statements requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingencies. These estimates and judgements are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The estimation of anticipated future events involves uncertainty and, consequently, the estimates used in preparation of the condensed interim consolidated financial statements may change as future events unfold, more experience is acquired, or the Corporation’s operating environment changes.

 

Significant estimates and judgements used in the preparation of these condensed interim consolidated financial statements remained unchanged from those disclosed in the Corporation’s consolidated annual financial statements for the year ended December 31, 2022.

 

(c) Significant Accounting Policies

 

Interests in equity-accounted investees

 

An associate is an entity for which the Corporation has significant influence and thereby has the power to participate in the financial and operational decisions but does not control or jointly control the investee. Investments in associates are accounted for using the equity method of accounting and are recognized at cost and subsequently adjusted for the proportionate share of the investee's net assets. The Corporation's consolidated financial statements include its share of the investee's net earnings (loss) and other comprehensive income (loss) until the date that significant influence ceases.

 

Foreign currency translation

 

Change in functional currency

 

On July 1, 2023, as a result of changing facts and circumstances in the current year, a subsidiary of the Corporation changed its functional currency from U.S. Dollars (USD) to Kuwaiti Dinar (KWD) to reflect the business activities within the primary economic environment in which the subsidiary operates. The changes in facts and circumstances that led to this determination included, but were not limited to, the expiration of multiple material USD denominated customer drilling contracts and the execution of multiple material KWD denominated customer drilling contracts. The change in functional currency was applied prospectively, in accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates, on July 1, 2023, with the assets and liabilities of the subsidiary being converted into KWD from USD at a fixed exchange rate of USD1 : KWD3.24.

 

  5

 

NOTE 3. Revenue

 

(a)Disaggregation of revenue

 

The following table includes a reconciliation of disaggregated revenue by reportable segment. Revenue has been disaggregated by primary geographical market and type of service provided.

 

Three Months Ended September 30, 2023  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
United States  $179,827   $4,262   $—   $(6)  $184,083 
Canada   172,546    53,311    —    (1,541)   224,316 
International   38,355    —    —    —    38,355 
   $390,728   $57,573   $—   $(1,547)  $446,754 
                          
Day rate/hourly services  $380,519   $57,573   $—   $(146)  $437,946 
Shortfall payments/idle but contracted   8,136    —    —    —    8,136 
Other   2,073    —    —    (1,401)   672 
   $390,728   $57,573   $—   $(1,547)  $446,754 

 

 

 

 

 

 

 

 

 

 

 

  6

 

 

Three Months Ended September 30, 2022  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
United States  $189,744   $4,496   $—   $(5)  $194,235 
Canada   148,525    52,146    —    (1,767)   198,904 
International   36,196    —    —    —    36,196 
   $374,465   $56,642   $—   $(1,772)  $429,335 
                          
Day rate/hourly services  $371,018   $56,642   $—   $(166)  $427,494 
Shortfall payments/idle but contracted   1,161    —    —    —    1,161 
Other   2,286    —    —    (1,606)   680 
   $374,465   $56,642   $—   $(1,772)  $429,335 

 

Nine Months Ended September 30, 2023  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
United States  $655,154   $11,946   $—   $(23)  $667,077 
Canada   503,312    166,311    —    (5,013)   664,610 
International   99,296    —    —    —    99,296 
   $1,257,762   $178,257   $—   $(5,036)  $1,430,983 
                          
Day rate/hourly services  $1,226,836   $178,257   $—   $(383)  $1,404,710 
Shortfall payments/idle but contracted   15,377    —    —    —    15,377 
Turnkey drilling services   8,988    —    —    —    8,988 
Other   6,561    —    —    (4,653)   1,908 
   $1,257,762   $178,257   $—   $(5,036)  $1,430,983 

 

Nine Months Ended September 30, 2022  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
United States  $495,183   $12,833   $—   $(33)  $507,983 
Canada   379,115    115,088    —    (4,107)   490,096 
International   108,611    —    —    —    108,611 
   $982,909   $127,921   $—   $(4,140)  $1,106,690 
                          
Day rate/hourly services  $949,078   $127,921   $—   $(592)  $1,076,407 
Shortfall payments/idle but contracted   1,791    —    —    —    1,791 
Turnkey drilling services   26,580    —    —    —    26,580 
Other   5,460    —    —    (3,548)   1,912 
   $982,909   $127,921   $—   $(4,140)  $1,106,690 

 

(b)Seasonality

 

Precision has operations that are carried on in Canada which represent approximately 46% (2022 – 44%) of consolidated revenue for the nine months ended September 30, 2023 and 37% (2022 – 36%) of consolidated total assets as at September 30, 2023. The ability to move heavy equipment in Canadian oil and natural gas fields is dependent on weather conditions. As warm weather returns in the spring, the winter's frost comes out of the ground rendering many secondary roads incapable of supporting the weight of heavy equipment until they have thoroughly dried out. The duration of this “spring break-up” has a direct impact on Precision’s activity levels. In addition, many exploration and production areas in northern Canada are accessible only in winter months when the ground is frozen hard enough to support equipment. The timing of freeze up and spring break-up affects the ability to move equipment in and out of these areas. As a result, late March through May is traditionally Precision’s slowest time in this region.

 

  7

 

NOTE 4. SEGMENTED INFORMATION

 

The Corporation has two reportable operating segments; Contract Drilling Services and Completion and Production Services. Contract Drilling Services includes drilling rigs, procurement and distribution of oilfield supplies, and manufacture, sale and repair of drilling equipment. Completion and Production Services includes service rigs, oilfield equipment rental and camp and catering services. The Corporation provides services primarily in Canada, the United States and certain international locations.

 

Three Months Ended September 30, 2023  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
Revenue  $390,728   $57,573   $—   $(1,547)  $446,754 
Earnings before income taxes, loss (gain)
   on investments and other assets, gain on
   repurchase of unsecured senior notes,
   finance charges, foreign exchange,
   gain on asset disposals, and
   depreciation and amortization		   131,701    14,118    (31,244)   —    114,575 
Depreciation and amortization   67,431    3,485    2,276    —    73,192 
Gain on asset disposals   (2,402)   (22)   (14)   —    (2,438)
Total assets   2,494,557    172,127    141,517    —    2,808,201 
Capital expenditures   48,517    2,818    1,058    —    52,393 

 

 

 

 

 

 

  8

 

 

Three Months Ended September 30, 2022  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
Revenue  $374,465   $56,642   $—   $(1,772)  $429,335 
Earnings before income taxes, loss (gain)
   on investments and other assets, gain on
   repurchase of unsecured senior notes,
   finance charges, foreign exchange,
   gain on asset disposals, and
   depreciation and amortization		   118,599    14,788    (13,826)   —    119,561 
Depreciation and amortization   63,513    3,598    2,337    —    69,448 
Gain on asset disposals   (6,780)   (762)   (696)   —    (8,238)
Total assets   2,605,071    192,917    129,396    —    2,927,384 
Capital expenditures   49,647    1,289    167    —    51,103 

 

Nine Months Ended September 30, 2023  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
Revenue  $1,257,762   $178,257   $—   $(5,036)  $1,430,983 
Earnings before income taxes, loss (gain)
   on investments and other assets, gain on
   repurchase of unsecured senior notes,
   finance charges, foreign exchange,
   gain on asset disposals, and
   depreciation and amortization		   468,302    39,031    (47,446)   —    459,887 
Depreciation and amortization   201,137    10,854    6,832    —    218,823 
Gain on asset disposals   (14,688)   (736)   (162)   —    (15,586)
Total assets   2,494,557    172,127    141,517    —    2,808,201 
Capital expenditures   138,716    7,043    2,143    —    147,902 

 

Nine Months Ended September 30, 2022  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
Revenue  $982,909   $127,921   $—   $(4,140)  $1,106,690 
Earnings before income taxes, loss (gain)
   on investments and other assets, gain on
   repurchase of unsecured senior notes,
   finance charges, foreign exchange,
   gain on asset disposals, and
   depreciation and amortization		   260,202    26,166    (65,853)   —    220,515 
Depreciation and amortization   190,306    10,202    7,154    —    207,662 
Gain on asset disposals   (19,243)   (2,151)   (758)   —    (22,152)
Total assets   2,605,071    192,917    129,396    —    2,927,384 
Capital expenditures   122,696    3,847    398    —    126,941 

 

  9

 

A reconciliation of total segment earnings before income taxes, loss (gain) on investments and other assets, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, gain on asset disposals, depreciation and amortization to net earnings (loss) is as follows:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2023   2022   2023   2022 
Total segment earnings before income taxes, loss (gain)
   on investments and other assets, gain on
   repurchase of unsecured senior notes,
   finance charges, foreign exchange, gain on
   asset disposals, and depreciation and amortization		  $114,575   $119,561   $459,887   $220,515 
Deduct:                    
Depreciation and amortization   73,192    69,448    218,823    207,662 
Gain on asset disposals   (2,438)   (8,238)   (15,586)   (22,152)
Foreign exchange   363    1,344    (894)   1,362 
Finance charges   19,618    22,521    63,946    64,294 
Gain on repurchase of unsecured senior notes   (37)   —    (137)   — 
Loss (gain) on investments and other assets   (3,813)   (2,515)   6,075    (3,738)
Income taxes   7,898    6,322    45,138    10,863 
Net earnings (loss)  $19,792   $30,679   $142,522   $(37,776)

 

NOTE 5. LONG-TERM DEBT

 

   U.S. Denominated Facilities   Canadian Facilities and Translated
U.S. Facilities		 
         
    September 30,    December 31,    September 30,    December 31, 
    2023    2022    2023    2022 
                     
Current Portion of Long-Term Debt                    
Canadian Real Estate Credit Facility  US$—   US$—   $1,333   $1,333 
U.S. Real Estate Credit Facility   704    704    957    954 
   US$704   US$704   $2,290   $2,287 
                     
Long-Term Debt                    
Senior Credit Facility  US$—   US$44,000   $—   $59,620 
Canadian Real Estate Credit Facility   —    —    15,334    16,334 
U.S. Real Estate Credit Facility   7,861    8,389    10,679    11,368 
Unsecured Senior Notes:                    
7.125% senior notes due 2026   299,330    347,765    406,631    471,225 
6.875% senior notes due 2029   400,000    400,000    543,387    542,004 
   US$707,191   US$800,154    976,031    1,100,551 
Less net unamortized debt issue costs
   and original issue discount		             (12,204)   (14,581)
             $963,827   $1,085,970 

 

 

  10

 

   Senior Credit
Facility		   Unsecured
Senior Notes		   Canadian Real
Estate Credit
Facility		   U.S. Real
Estate Credit
Facility		   Debt Issue
Costs and
Original Issue
Discount		   Total 
Current  $—   $—   $1,333   $954   $—   $2,287 
Long-term   59,620    1,013,229    16,334    11,368    (14,581)   1,085,970 
December 31, 2022   59,620    1,013,229    17,667    12,322    (14,581)   1,088,257 
Changes from financing cash flows:                              
Proceeds from Senior Credit Facility   162,649    —    —    —    —    162,649 
Repayment of unsecured senior notes   —    (64,611)   —    —    —    (64,611)
Repayment of Senior Credit Facility   (222,216)   —    —    —    —    (222,216)
Repayment of Real Estate Credit
   Facility		   —    —    (1,000)   (711)   —    (1,711)
    53    948,618    16,667    11,611    (14,581)   962,368 
Gain on repurchase of unsecured senior
   notes		   —    (137)   —    —    —    (137)
Amortization of debt issue costs   —    —    —    —    2,377    2,377 
Foreign exchange adjustment   (53)   1,537    —    25    —    1,509 
September 30, 2023  $—   $950,018   $16,667   $11,636   $(12,204)  $966,117 
                               
Current  $—   $—   $1,333   $957   $—   $2,290 
Long-term   —    950,018    15,334    10,679    (12,204)   963,827 
September 30, 2023  $—   $950,018   $16,667   $11,636   $(12,204)  $966,117 

 

As at September 30, 2023, Precision was in compliance with the covenants of the Senior Credit Facility and Real Estate Credit Facilities.

 

NOTE 6. FINANCE CHARGES

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2023   2022   2023   2022 
Interest:                
Long-term debt  $17,990   $20,898   $58,863   $59,575 
Lease obligations   948    757    2,719    2,082 
Other   105    226    293    412 
Income   (342)   (146)   (702)   (191)
Amortization of debt issue costs, loan commitment fees
   and original issue discount		   917    786    2,773    2,416 
Finance charges  $19,618   $22,521   $63,946   $64,294 

 

  11

 

NOTE 7. SHARE-BASED COMPENSATION PLANS

Liability Classified Plans

 

   Restricted
Share Units (a)		   Performance
Share
Units (a)		   Non-
Management
Directors’
DSUs (b)		   Total 
December 31, 2022  $38,190   $100,858   $12,297   $151,345 
Expensed during period   8,615    12,402    (926)   20,091 
Settlement in shares   (2,102)   (17,104)   (757)   (19,963)
Payments and redemptions   (26,524)   (47,846)   (385)   (74,755)
Foreign exchange   12    21    —    33 
September 30, 2023  $18,191   $48,331   $10,229   $76,751 
                     
Current  $14,274   $34,117   $—   $48,391 
Long-term   3,917    14,214    10,229    28,360 
   $18,191   $48,331   $10,229   $76,751 

 

(a)Restricted Share Units and Performance Share Units

 

A summary of the activity under the Restricted Share Unit (RSU) and the Performance Share Unit (PSU) plans are presented below:

 

   RSUs
Outstanding		   PSUs
Outstanding		 
December 31, 2022   495,168    1,136,671 
Granted   65,507    121,350 
Redeemed   (266,191)   (437,113)
Forfeited   (9,832)   (11,705)
September 30, 2023   284,652    809,203 

 

(b)Non-Management Directors – Deferred Share Units Plan

 

A summary of the activity under the non-management director Deferred Share Unit (DSU) plan is presented below:

 

   DSUs
Outstanding		 
December 31, 2022   118,774 
Granted   12,458 
Redeemed   (18,830)
September 30, 2023   112,402 

 

During the second quarter of 2023, 18,830 DSUs were redeemed upon the retirement of a non-management director. Precision elected to settle the redemption of DSUs through a combination of cash and common shares.

 

  12

 

Equity Settled Plans

 

(c)Executive Restricted Share Units Plan

 

Precision granted Executive RSUs to certain senior executives with the intention of settling them in voting shares of the Corporation either issued from treasury or purchased in the open market. Granted units vest annually over a three-year term.

 

   Executive RSUs
Outstanding		   Weighted Average
Fair Value		 
December 31, 2022   —   $— 
Granted   46,740    96.90 
September 30, 2023   46,740   $96.90 

 

The per unit weighted average fair value of the Executive RSUs granted during 2023 was $96.90 estimated on the grant date using a Black-Scholes option pricing model with the following assumptions: average risk-free interest rate of 4%, average expected life of two years, expected forfeiture rate of 5% and expected volatility of 68%. Included in net earnings (loss) for the three and nine months ended September 30, 2023 were expenses of $1 million (2022 – nil) and $2 million (2022 – nil) respectively.

 

(d)Option Plan

 

A summary of the activity under the option plan is presented below:

 

Canadian share options  Outstanding   Range of
 Exercise Price		   Weighted
Average
Exercise Price		   Exercisable 
December 31, 2022 and September 30, 2023   23,055   $87.00    —    145.97   $113.01    23,055 

 

U.S. share options  Outstanding   Range of
 Exercise Price
(US$)		   Weighted
Average
Exercise Price
 (US$)		   Exercisable 
December 31, 2022   141,748   $51.20    —    111.47   $84.84    141,748 
Forfeited   (13,350)   64.20    —    100.40    75.66      
September 30, 2023   128,398   $51.20    —    111.47   $85.80    128,398 

 

(e)Non-Management Directors – Deferred Share Unit Plan

 

As at September 30, 2023, there were 1,470 (2022 – 1,470) deferred share units outstanding.

 

NOTE 8. SHAREHOLDERS’ CAPITAL

 

Common shares  Number   Amount 
December 31, 2022   13,558,525    2,299,533 
Settlement of PSUs and RSUs   230,336    19,206 
Share repurchases   (193,616)   (12,951)
Redemption of non-management directors share units   12,494    757 
September 30, 2023   13,607,739    2,306,545 

 

(a)Normal Course Issuer Bid

 

During the third quarter of 2023, the Toronto Stock Exchange (TSX) approved the renewal of Precision's Normal Course Issuer Bid (NCIB). Pursuant to the NCIB, the Corporation has been authorized by the TSX to repurchase and cancel up to a maximum of 1,326,321 common shares. The NCIB will terminate no later than September 18, 2024. Prior to the renewal of the NCIB, Precision had repurchased and cancelled 193,616 common shares for $13 million in 2023.

 

  13

 

NOTE 9. PER SHARE AMOUNTS

 

The following tables reconcile net earnings (loss) and weighted average shares outstanding used in computing basic and diluted net earnings (loss) per share:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2023   2022   2023   2022 
Net earnings (loss) – basic  $19,792   $30,679   $142,522   $(37,776)
Effect of share options and other equity
   compensation plans		   —    (94)   3,679    — 
Net earnings (loss) – diluted  $19,792   $30,585   $146,201   $(37,776)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
(Stated in thousands)  2023   2022   2023   2022 
Weighted average shares outstanding – basic   13,607    13,580    13,643    13,549 
Effect of share options and other equity
   compensation plans		   3    1,464    1,215    — 
Weighted average shares outstanding – diluted   13,610    15,044    14,858    13,549 

 

NOTE 10. FAIR VALUES OF FINANCIAL INSTRUMENTS

 

The carrying values of cash, accounts receivable, and accounts payable and accrued liabilities approximates their fair value due to the relatively short period to maturity of the instruments. At the end of each reporting period, investments and other assets are measured at their estimated fair value, with changes in fair value recognized in profit or loss. Amounts drawn on the Senior Credit Facility and the Canadian and U.S. Real Estate Credit Facilities are measured at amortized cost and approximate fair value as this indebtedness is subject to floating rates of interest. The fair value of the unsecured senior notes at September 30, 2023 was approximately $921 million (December 31, 2022 – $965 million).

 

Financial assets and liabilities recorded or disclosed at fair value in the consolidated statement of financial position are categorized based upon the level of judgement associated with the inputs used to measure their fair value. Hierarchical levels are based on the amount of subjectivity associated with the inputs in the fair value determination and are as follows:

 

Level I—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

 

Level II—Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

 

Level III—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

 

The estimated fair value of unsecured senior notes is based on level II inputs. The fair value is estimated considering the risk-free interest rates on government debt instruments of similar maturities, adjusted for estimated credit risk, industry risk and market risk premiums.

 

NOTE 11. BUSINESS COMBINATION

 

During the quarter ended September 30, 2023, Precision entered into an agreement to acquire all of the issued and outstanding common shares of CWC Energy Services Corp. (CWC), comprised of 947,909 Precision common shares, valued at approximately $88 million as of September 1, 2023 market close, $14 million in cash, plus the assumption of CWC's outstanding debt. The transaction is expected to be completed in the fourth quarter of 2023, subject to CWC shareholder and regulatory approvals and the satisfaction of other customary closing conditions.

 

 

  14

 

SHAREHOLDER INFORMATION

 

STOCK EXCHANGE LISTINGS

Shares of Precision Drilling Corporation are listed on the Toronto Stock Exchange under the trading symbol PD and on the New York Stock Exchange under the trading symbol PDS.

 

TRANSFER AGENT AND REGISTRAR

Computershare Trust Company of Canada

Calgary, Alberta

 

TRANSFER POINT

Computershare Trust Company NA

Canton, Massachusetts

 

Q3 2023 TRADING PROFILE

Toronto (TSX: PD)

High: $100.23

Low: $61.81

Close: $91.01

Volume Traded: 5,167,035

 

New York (NYSE: PDS)

High: US$73.82

Low: US$46.29

Close: US$67.12

Volume Traded: 3,914,000

 

ACCOUNT QUESTIONS

Precision’s Transfer Agent can help you with a variety of shareholder related services, including:

• change of address

• lost unit certificates

• transfer of shares to another person

• estate settlement

 

Computershare Trust Company of Canada

100 University Avenue

9th Floor, North Tower

Toronto, Ontario M5J 2Y1

Canada

 

1-800-564-6253 (toll free in Canada and the United States)

1-514-982-7555 (international direct dialing)

Email: service@computershare.com

 

ONLINE INFORMATION

To receive news releases by email, or to view this interim report online, please visit Precision’s website at www.precisiondrilling.com and refer to the Investor Relations section. Additional information relating to Precision, including the Annual Information Form, Annual Report and Management Information Circular has been filed with SEDAR and is available at www.sedar.com and on the EDGAR website www.sec.gov

  

CORPORATE INFORMATION

 

DIRECTORS

Michael R. Culbert

William T. Donovan

Steven W. Krablin

Susan M. MacKenzie

Lori A. Lancaster

Kevin O. Meyers

Kevin A. Neveu

David W. Williams

 

OFFICERS

Kevin A. Neveu

President and Chief Executive Officer

 

Veronica H. Foley

Chief Legal & Compliance Officer

 

Carey T. Ford

Chief Financial Officer

 

Shuja U. Goraya

Chief Technology Officer

 

Darren J. Ruhr

Chief Administrative Officer

 

Gene C. Stahl

President, North American Drilling

 

AUDITORS

KPMG LLP

Calgary, Alberta

 

HEAD OFFICE

Suite 800, 525 8th Avenue SW

Calgary, Alberta, T2P 1G1

Canada

Telephone: 403-716-4500

Facsimile: 403-264-0251

Email: info@precisiondrilling.com

www.precisiondrilling.com

 

 

15