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, 2024   December 31, 2023   January 1, 2023 
ASSETS      (see Note 2d) 
Current assets:               
Cash  $24,304   $54,182   $21,587 
Accounts receivable   401,652    421,427    413,925 
Inventory   41,398    35,272    35,158 
Assets held for sale (Note 11)   5,203    -    - 
Total current assets   472,557    510,881    470,670 
Non-current assets:               
Income tax recoverable   696    682    1,602 
Deferred tax assets   27,767    73,662    455 
Property, plant and equipment   2,296,079    2,338,088    2,303,338 
Intangibles   15,566    17,310    19,575 
Right-of-use assets   63,708    63,438    60,032 
Finance lease receivables   4,938    5,003    - 
Investments and other assets   6,685    9,971    20,451 
Total non-current assets   2,415,439    2,508,154    2,405,453 
Total assets  $2,887,996   $3,019,035   $2,876,123 
                
LIABILITIES AND EQUITY               
Current liabilities:               
Accounts payable and accrued liabilities  $282,810   $350,749   $404,350 
Income taxes payable   3,059    3,026    2,991 
Current portion of lease obligations   19,263    17,386    12,698 
Current portion of long-term debt (Note 5)   952    2,848    2,287 
Total current liabilities   306,084    374,009    422,326 
                
Non-current liabilities:               
Share-based compensation (Note 7)   10,339    16,755    47,836 
Provisions and other   7,408    7,140    7,538 
Lease obligations   54,010    57,124    52,978 
Long-term debt (Note 5)   787,008    914,830    1,085,970 
Deferred tax liabilities   62,047    73,515    28,946 
Total non-current liabilities   920,812    1,069,364    1,223,268 
Equity:               
Shareholders’ capital (Note 8)   2,337,079    2,365,129    2,299,533 
Contributed surplus   76,656    75,086    72,555 
Deficit   (915,629)   (1,012,029)   (1,301,273)
Accumulated other comprehensive income   158,602    147,476    159,714 
Total equity attributable to shareholders   1,656,708    1,575,662    1,230,529 
Non-controlling interest (Note 12)   4,392    -    - 
Total equity   1,661,100    1,575,662    1,230,529 
Total liabilities and equity  $2,887,996   $3,019,035   $2,876,123 

 

See accompanying notes to condensed interim consolidated financial statements.

 

 1

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF NET EARNINGS (UNAUDITED)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
(Stated in thousands of Canadian dollars, except per share amounts)  2024   2023   2024   2023 
                 
                 
Revenue (Note 3)  $477,155   $446,754   $1,434,157   $1,430,983 
Expenses:                    
Operating   311,467    288,002    936,383    888,039 
General and administrative   23,263    44,177    97,079    83,057 
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   142,425    114,575    400,695    459,887 
Depreciation and amortization   75,073    73,192    227,104    218,823 
Gain on asset disposals   (3,323)   (2,438)   (14,235)   (15,586)
Foreign exchange   849    363    772    (894)
Finance charges (Note 6)   16,914    19,618    53,472    63,946 
Gain on repurchase of unsecured senior notes   -    (37)   -    (137)
Loss (gain) on investments and other assets   (150)   (3,813)   (330)   6,075 
Earnings before income taxes   53,062    27,690    133,912    187,660 
Income taxes:                    
Current   2,297    2,047    4,659    4,008 
Deferred   11,582    5,851    32,853    41,130 
    13,879    7,898    37,512    45,138 
Net earnings  $39,183   $19,792   $96,400   $142,522 
Net earnings per share attributable to shareholders: (Note 9)                    
Basic  $2.77   $1.45   $6.74   $10.45 
Diluted  $2.31   $1.45   $6.73   $9.84 

 

See accompanying notes to condensed interim consolidated financial statements.

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
(Stated in thousands of Canadian dollars)  2024   2023   2024   2023 
Net earnings  $39,183   $19,792   $96,400   $142,522 
Unrealized gain (loss) on translation of assets and liabilities of operations denominated in foreign currency   (16,104)   39,180    30,409    3,322 
Foreign exchange gain (loss) on net investment hedge with U.S. denominated debt   9,536    (24,616)   (19,283)   (1,484)
Comprehensive income  $32,615   $34,356   $107,526   $144,360 

 

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)  2024   2023   2024   2023 
Cash provided by (used in):                    
Operations:                    
Net earnings  $39,183   $19,792   $96,400   $142,522 
Adjustments for:                    
Long-term compensation plans   2,620    11,577    14,490    9,200 
Depreciation and amortization   75,073    73,192    227,104    218,823 
Gain on asset disposals   (3,323)   (2,438)   (14,235)   (15,586)
Foreign exchange   815    1,275    965    (13)
Finance charges   16,914    19,618    53,472    63,946 
Income taxes   13,879    7,898    37,512    45,138 
Other   27    -    120    (220)
Loss (gain) on investments and other assets   (150)   (3,813)   (330)   6,075 
Gain on repurchase of unsecured senior notes   -    (37)   -    (137)
Income taxes paid   (508)   (187)   (4,842)   (2,395)
Income taxes recovered   58    4    58    7 
Interest paid   (31,692)   (35,500)   (69,435)   (79,702)
Interest received   426    227    1,558    562 
Funds provided by operations   113,322    91,608    342,837    388,220 
Changes in non-cash working capital balances   (33,648)   (3,108)   (23,545)   (57,904)
Cash provided by operations   79,674    88,500    319,292    330,316 
                     
Investments:                    
Purchase of property, plant and equipment   (63,797)   (51,546)   (157,747)   (146,378)
Purchase of intangibles   (51)   (847)   (51)   (1,524)
Proceeds on sale of property, plant and equipment   5,647    6,698    21,825    20,724 
Proceeds from sale of investments and other assets   -    10,013    3,623    10,013 
Business acquisitions   -    -    -    (28,000)
Purchase of investments and other assets   (7)   (3,211)   (7)   (5,282)
Receipt of finance lease payments   207    64    591    64 
Changes in non-cash working capital balances   19,149    4,551    (9,266)   (6,774)
Cash used in investing activities   (38,852)   (34,278)   (141,032)   (157,157)
                     
Financing:                    
Issuance of long-term debt   10,900    23,600    10,900    162,649 
Repayments of long-term debt   (59,658)   (49,517)   (162,506)   (288,538)
Repurchase of share capital (Note 8)   (16,891)   -    (50,465)   (12,951)
Issuance of common shares from the exercise of options   495    -    686    - 
Debt amendment fees   -    -    (1,317)   - 
Lease payments   (3,586)   (2,410)   (10,005)   (6,413)
Funding from non-controlling interest (Note 12)   4,392    -    4,392    - 
Cash used in financing activities   (64,348)   (28,327)   (208,315)   (145,253)
Effect of exchange rate changes on cash   (403)   251    177    (428)
Increase (decrease) in cash   (23,929)   26,146    (29,878)   27,478 
Cash, beginning of period   48,233    22,919    54,182    21,587 
Cash, end of period  $24,304   $49,065   $24,304   $49,065 

 

See accompanying notes to condensed interim consolidated financial statements.

 

 3

 

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

 

   Attributable to shareholders of the Corporation         
(Stated in thousands of Canadian dollars)  Shareholders’
Capital		   Contributed
Surplus		   Accumulated
Other
Comprehensive
Income		   Deficit   Total   Non-
controlling interest		   Total
Equity		 
Balance at January 1, 2024  $2,365,129   $75,086   $147,476   $(1,012,029)  $1,575,662   $-   $1,575,662 
Net earnings for the period   -    -    -    96,400    96,400    -    96,400 
Other comprehensive income for the period   -    -    11,126    -    11,126    -    11,126 
Share options exercised   978    (292)   -    -    686    -    686 
Settlement of Executive Performance and Restricted Share Units   21,846    (1,479)   -    -    20,367    -    20,367 
Share repurchases (Note 8)   (51,050)   -    -    -    (51,050)   -    (51,050)
Redemption of non-management directors share units   176    (176)   -    -    -    -    - 
Share-based compensation expense   -    3,517    -    -    3,517    -    3,517 
Funding from non-controlling interest (Note 12)   -    -    -    -    -    4,392    4,392 
Balance at September 30, 2024  $2,337,079   $76,656   $158,602   $(915,629)  $1,656,708   $4,392   $1,661,100 

 

   Attributable to shareholders of the Corporation         
(Stated in thousands of Canadian dollars)  Shareholders’
Capital		   Contributed
Surplus		   Accumulated
Other
Comprehensive
Income		   Deficit   Total  

Non-
controllng

interest

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

 

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 IFRS Accounting Standards 34, Interim Financial Reporting, using accounting policies consistent with IFRS as issued by the International Accounting Standards Board (IASB).

 

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 annual financial statements of the Corporation as at and for the year ended December 31, 2023.

 

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, 2023, except as noted in Note 2 (d).

 

These condensed interim consolidated financial statements were approved by the Board of Directors on October 29, 2024.

 

(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, 2023.

 

(c) Environmental Reporting Regulations

 

Environmental reporting continues to evolve and the Corporation may be subject to additional future disclosure requirements. The International Sustainability Standards Board (ISSB) has issued two IFRS Sustainability Disclosure Standards with the objective to develop a global framework for environmental sustainability disclosure. The Canadian Sustainability Standards Board (CSSB) has also released two Exposure Drafts on the Proposed Canadian Sustainability Disclosure Standards which are aligned with the ISSB, in which the comment period closed on June 10, 2024 . Final CSSB standards are anticipated to be issued later in 2024.

 

The Canadian Securities Administrators (CSA) have also issued a proposed National Instrument 51-107 Disclosure of Climate-related Matters which sets forth additional reporting and disclosure requirements for Canadian public companies. Until such time as the CSA and CSSB make final decisions on sustainability standards for Canada, there is no requirement for public companies in Canada to adopt sustainability standards. Precision continues to monitor the development of these reporting requirements as it progresses with its determination of the financial and disclosure-related implications of complying with these regulations.

 

(d) Change in Accounting Policy

 

The Corporation has adopted Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants - Amendments to IAS 1, as issued in 2020 and 2022. The amendments apply retrospectively for annual reporting periods beginning on or after January 1, 2024. They clarify certain requirements for determining whether a liability should be classified as current or non-current and require new disclosures for non-current liabilities that are subject to covenants within 12 months after the reporting period.

 

 5

 

Due to the change in policy, there is a retrospective impact on the comparative statement of financial position, as the Corporation has a Deferred Share Unit (DSU) plan for non-management directors which are redeemable in cash or for an equal number of common shares upon the director's retirement. In the case of a director retiring, the director's respective DSU liability would become payable and the Corporation would not have the right to defer settlement of the liability for at least 12 months. As such, the liability is impacted by the revised policy. The following presentation changes were made to the Statement of Financial Position:

 

·As at January 1, 2023, accounts payable and accrued liabilities increased by $12 million and non-current share-based compensation liability decreased by $12 million.

 

·As at December 31, 2023, accounts payable and accrued liabilities increased by $8 million and non-current share-based compensation liability decreased by $8 million.

 

The related liability is now classified as current at September 30, 2024 because the DSUs can be redeemed by the holders within 12 months after the reporting period. The Corporation's other liabilities were not impacted by the amendments.

 

The change in accounting policy will also be reflected in the Corporation's consolidated financial statements as at and for the year ending December 31, 2024.

 

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, 2024  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
United States  $143,624   $3,199   $-   $-   $146,823 
Canada   215,109    69,875    -    (2,074)   282,910 
International   47,422    -    -    -    47,422 
   $406,155   $73,074   $-   $(2,074)  $477,155 
                          
Day rate/hourly services  $403,902   $73,074   $-   $(195)  $476,781 
Shortfall payments/idle but contracted   54    -    -    -    54 
Other   2,199    -    -    (1,879)   320 
   $406,155   $73,074   $-   $(2,074)  $477,155 

 

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

 

Nine Months Ended September 30, 2024  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
United States  $443,656   $11,210   $-   $-   $454,866 
Canada   617,115    214,777    -    (6,955)   824,937 
International   154,354    -    -    -    154,354 
   $1,215,125   $225,987   $-   $(6,955)  $1,434,157 
                          
Day rate/hourly services  $1,207,438   $225,987   $-   $(550)  $1,432,875 
Shortfall payments/idle but contracted   54    -    -    -    54 
Other   7,633    -    -    (6,405)   1,228 
   $1,215,125   $225,987   $-   $(6,955)  $1,434,157 

 

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 

 

(b)Seasonality

 

Precision has operations that are carried on in Canada which represent approximately 58% (2023 – 46%) of consolidated revenue for the nine months ended September 30, 2024 and 41% (2023 – 37%) of consolidated total assets as at September 30, 2024. 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, 2024  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
Revenue  $406,155   $73,074   $-   $(2,074)  $477,155 
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		   133,235    19,741    (10,551)   -    142,425 
Depreciation and amortization   67,215    5,436    2,422    -    75,073 
Gain on asset disposals   (2,331)   (946)   (46)   -    (3,323)
Total assets   2,495,082    251,955    140,959    -    2,887,996 
Capital expenditures   58,000    5,648    200    -    63,848 

 

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 

 

NineMonthsEnded September 30, 2024  Contract
Drilling
Services		   Completion
and
Production
Services		   Corporate
and Other		   Inter-
Segment
Eliminations		   Total 
Revenue  $1,215,125   $225,987   $-   $(6,955)  $1,434,157 
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   406,662    50,786    (56,753)   -    400,695 
Depreciation and amortization   204,999    15,314    6,791    -    227,104 
Gain on asset disposals   (8,885)   (2,463)   (2,887)   -    (14,235)
Total assets   2,495,082    251,955    140,959    -    2,887,996 
Capital expenditures   143,253    13,495    1,050    -    157,798 

 

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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 

 

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 is as follows:

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2024   2023   2024   2023 
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		  $142,425   $114,575   $400,695   $459,887 
Deduct:                    
Depreciation and amortization   75,073    73,192    227,104    218,823 
Gain on asset disposals   (3,323)   (2,438)   (14,235)   (15,586)
Foreign exchange   849    363    772    (894)
Finance charges   16,914    19,618    53,472    63,946 
Gain on repurchase of unsecured senior notes   -    (37)   -    (137)
Loss (gain) on investments and other assets   (150)   (3,813)   (330)   6,075 
Income taxes   13,879    7,898    37,512    45,138 
Net earnings  $39,183   $19,792   $96,400   $142,522 

 

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NOTE 5. LONG-TERM DEBT

 

   U.S. Denominated Facilities  

Canadian Facilities and Translated

U.S. Facilities

 
         
   September 30,   December 31,   September 30,   December 31, 
   2024   2023   2024   2023 
                 
Current Portion of Long-Term Debt                    
Canadian Real Estate Credit Facility  US$-   US$-   $-   $1,915 
U.S. Real Estate Credit Facility   704    704    952    933 
   US$704   US$704   $952   $2,848 
                     
Long-Term Debt                    
Canadian Real Estate Credit Facility   -    -    -    24,018 
U.S. Real Estate Credit Facility   4,307    7,685    5,825    10,181 
Unsecured Senior Notes:                    
7.125% senior notes due 2026   184,330    273,330    249,269    362,096 
6.875% senior notes due 2029   400,000    400,000    540,920    529,904 
   US$588,637   US$681,015    796,014    926,199 
Less net unamortized debt issue costs and original issue discount             (9,006)   (11,369)
             $787,008   $914,830 

 

 

   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  $-   $-   $1,915   $933   $-   $2,848 
Long-term   -    892,000    24,018    10,181    (11,369)   914,830 
December 31, 2023   -    892,000    25,933    11,114    (11,369)   917,678 
Changes from financing cash flows:                              
Proceeds from Senior Credit Facility   10,900    -    -    -    -    10,900 
Repayment of unsecured senior notes   -    (121,012)   -    -    -    (121,012)
Repayment of Senior Credit Facility   (10,982)   -    -    -    -    (10,982)
Repayment of Real Estate Credit Facility   -    -    (25,933)   (4,579)   -    (30,512)
    (82)   770,988    -    6,535    (11,369)   766,072 
Amortization of debt issue costs   -    -    -    -    2,366    2,366 
Foreign exchange adjustment   82    19,201    -    242    (3)   19,522 
September 30, 2024  $-   $790,189   $-   $6,777   $(9,006)  $787,960 
                               
Current  $-   $-   $-   $952   $-   $952 
Long-term   -    790,189    -    5,825    (9,006)   787,008 
September 30, 2024  $-   $790,189   $-   $6,777   $(9,006)  $787,960 

 

On June 28, 2024, Precision extended its Senior Credit Facility’s maturity date, revised the available borrowing capacity, and amended certain terms of the facility. The maturity date was extended to June 28, 2027, and the size was revised to US$375 million.

 

As at September 30, 2024, Precision was in compliance with the covenants of the Senior Credit Facility and Real Estate Credit Facility.

 

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   Covenant  As of  September 30, 2024 
Senior Credit Facility        
Consolidated senior debt to consolidated covenant EBITDA(1)  < 2.50   0.02 
Consolidated covenant EBITDA to consolidated interest expense  > 2.50   7.66 
Real Estate Credit Facilities        
Consolidated covenant EBITDA to consolidated interest expense  > 2.50   7.66 
(1)For purposes of calculating the leverage ratio consolidated senior debt only includes secured indebtedness.

 

NOTE 6. FINANCE CHARGES

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2024   2023   2024   2023 
Interest:                    
Long-term debt  $15,341   $17,990   $49,008   $58,863 
Lease obligations   1,122    948    3,204    2,719 
Other   17    105    266    293 
Income   (416)   (342)   (1,761)   (702)
Amortization of debt issue costs, loan commitment fees and original issue discount   850    917    2,755    2,773 
Finance charges  $16,914   $19,618   $53,472   $63,946 

 

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, 2023  $16,114   $64,042   $8,367   $88,523 
Expensed during period   7,904    19,033    1,873    28,810 
Settlement in shares   (2,012)   (18,355)   -    (20,367)
Payments and redemptions   (13,030)   (40,016)   -    (53,046)
Foreign exchange   2    5    -    7 
September 30, 2024  $8,978   $24,709   $10,240   $43,927 
                     
Current  $6,823   $16,525   $10,240   $33,588 
Long-term   2,155    8,184    -    10,339 
   $8,978   $24,709   $10,240   $43,927 

 

(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, 2023   276,094    794,743 
Granted   91,778    158,380 
Redeemed   (180,989)   (450,726)
Forfeited   (7,768)   (5,404)
September 30, 2024   179,115    496,993 

  

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

 

A summary of the activity under the non-management director DSU plan is presented below:

 

   DSUs
Outstanding		 
December 31, 2023   116,280 
Granted   6,676 
September 30, 2024   122,956 

 

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, 2023   46,740   $96.90 
Granted   61,930    79.84 
Redeemed   (15,570)   96.90 
Forfeited   (608)   96.90 
September 30, 2024   92,492   $85.48 

 

Included in net earnings for the three and nine months ended September 30, 2024 were expenses of $1 million (2023 – $1 million) and $3 million (2023 – $1 million) 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, 2023   23,055   $87.00 — 145.97   $113.01    23,055 
Exercised   (925)   87.00 — 87.00    87.00      
Forfeited   (10,170)   145.97 — 145.97    145.97      
September 30, 2024   11,960   $ 87.00 — 87.00   $87.00    11,960 

 

U.S. share options  Outstanding   Range of
 Exercise Price
(US$)		   Weighted
Average
Exercise Price
(US$)		   Exercisable 
December 31, 2023   128,398   $ 51.20 — 111.47    85.80    128,398 
Exercised   (6,485)   68.80 — 68.80    68.80      
Forfeited   (61,861)   68.80 — 111.47    106.37      
September 30, 2024   60,052   $ 51.20 — 72.46    66.45    60,052 

 

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

 

Effective May 16, 2024, Precision instituted a new DSU plan for non-management directors whereby fully vested deferred share units are granted quarterly based upon an election by the non-management director to receive all or a portion of their compensation in deferred share units. The deferred share units are redeemable for an equal number of common shares on the date specified in an eligible director’s participation and election agreement, which date may be the grant date, the first, third or fifth anniversary of the grant date. The number of deferred share units granted is based upon the weighted average closing price of Precision shares on the Toronto Stock Exchange for the five trading days immediately prior to payout.

 

 12

 

A summary of the activity under the non-management director DSU plans is presented below:

 

   DSUs
Outstanding		 
December 31, 2023   1,470 
Granted   3,296 
Redeemed   (1,956)
September 30, 2024   2,810 

 

Included in net earnings for the three and nine months ended September 30, 2024 were expenses of $0.4 million (2023 – nil).

 

NOTE 8. SHAREHOLDERS’ CAPITAL

 

Common shares  Number   Amount 
December 31, 2023   14,336,539   $2,365,129 
Settlement of PSUs and RSUs   265,143    21,846 
Share options exercised   7,410    978 
Share repurchases   (543,778)   (51,050)
Redemption of non-management directors share units   1,956    176 
September 30, 2024   14,067,270   $2,337,079 

 

(a)                 Normal Course Issuer Bid

 

During the third quarter of 2024, 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 1,359,108 common shares. The NCIB will terminate no later than September 18, 2025. Prior to the renewal of the NCIB, Precision had repurchased and cancelled 543,778 common shares for $50 million and recorded $1 million of share buy back tax in 2024.

 

NOTE 9. PER SHARE AMOUNTS

 

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

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
   2024   2023   2024   2023 
Net earnings attributable to shareholders – basic  $39,183   $19,792   $96,400   $142,522 
Effect of share options and other equity compensation plans   (4,802)   -    -    3,679 
Net earnings attributable to shareholders – diluted  $34,381   $19,792   $96,400   $146,201 

 

   Three Months Ended September 30,   Nine Months Ended September 30, 
(Stated in thousands)  2024   2023   2024   2023 
Weighted average shares outstanding – basic   14,142    13,607    14,312    13,643 
Effect of share options and other equity compensation plans   748    3    5    1,215 
Weighted average shares outstanding – diluted   14,890    13,610    14,317    14,858 

 

 

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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 U.S. Real Estate Credit Facility 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, 2024 was approximately $790 million (December 31, 2023 – $867 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. ASSETS HELD FOR SALE

 

Precision has committed to sell certain assets contained within the Contract Drilling and Completion and Production Services segments. The identified assets were previously acquired through business acquisitions and subsequently deemed as redundant. Accordingly, these assets were presented as held for sale at September 30, 2024 as sales efforts have been initiated and expected to be completed within one year. At September 30, 2024, property, plant and equipment with a carrying amount of $5 million remained reclassified as assets held for sale.

 

NOTE 12. NON-CONTROLLING INTEREST

 

On September 26, 2024, Precision formed a Partnership with two Indigenous partners to provide well servicing operations in northeast British Columbia. Precision contributed $4 million in assets to the Partnership.

 

Precision holds a controlling interest in the Partnership and the portions of the net earnings and equity not attributable to Precision’s controlling interest are shown separately as Non-Controlling Interests (NCI) in the consolidated statements of net earnings and consolidated statements of financial position.

 

 

 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 2024 TRADING PROFILE

Toronto (TSX: PD)

High: $109.20

Low: $80.94

Close: $83.29

Volume Traded: 5,477,400

 

New York (NYSE: PDS)

High: US$79.07

Low: US$59.98

Close: US$61.65

Volume Traded: 3,298,504

 

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

William T. Donovan

Steven W. Krablin

Susan M. MacKenzie

Lori A. Lancaster

Kevin O. Meyers

Kevin A. Neveu

David W. Williams

Alice L. Wong

 

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

 

     

 

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