pds-ex993_11.htm

The accompanying Consolidated Financial Statements and all information in this Annual Report are the responsibility of management. The Consolidated Financial Statements have been prepared by management in accordance with the accounting policies in the Notes to the Consolidated Financial Statements. When necessary, management has made informed judgments and estimates in accounting for transactions that were not complete at the balance sheet date. In the opinion of management, the Consolidated Financial Statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards (IFRS) appropriate in the circumstances. The financial information elsewhere in this Annual Report has been reviewed to ensure consistency with that in the Consolidated Financial Statements.

Management has prepared Management’s Discussion and Analysis (MD&A). The MD&A is based on the financial results of Precision Drilling Corporation (the Corporation) prepared in accordance with IFRS. The MD&A compares the audited financial results for the years ended December 31, 2019 and December 31, 2018.

Management is responsible for establishing and maintaining adequate internal control over the Corporation’s financial reporting and is supported by an internal audit function that conducts periodic testing of these controls. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Consolidated Financial Statements for external reporting purposes in accordance with IFRS. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision of, and with direction from, our principal executive officer and principal financial and accounting officer, management conducted an evaluation of the effectiveness of the Corporation’s internal control over financial reporting. Management’s evaluation of internal control over financial reporting was based on the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013). Based on this evaluation, management concluded that the Corporation’s internal control over financial reporting was effective as of December 31, 2019. Also, management determined that there were no material weaknesses in the Corporation’s internal control over financial reporting as of December 31, 2019.

KPMG LLP (KPMG), an independent firm of Chartered Professional Accountants, was engaged, as approved by a vote of shareholders at the Corporation’s most recent annual meeting, to audit the Consolidated Financial Statements and provide an independent professional opinion.

KPMG also completed an audit of the design and effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2019, as stated in its report included in this Annual Report and expressed an unqualified opinion on the design and effectiveness of internal control over financial reporting as of December 31, 2019.

The Audit Committee of the Board of Directors, which is comprised of eight independent directors who are not employees of the Corporation, provides oversight to the financial reporting process. Integral to this process is the Audit Committee’s review and discussion with management and KPMG of the quarterly and annual financial statements and reports prior to their respective release. The Audit Committee is also responsible for reviewing and discussing with management and KPMG major issues as to the adequacy of the Corporation’s internal controls. KPMG has unrestricted access to the Audit Committee to discuss its audit and related matters. The Consolidated Financial Statements have been approved by the Board of Directors and its Audit Committee.

We have audited the accompanying consolidated statements of financial position of Precision Drilling Corporation (the “Corporation”) as of December 31, 2019 and 2018, the related consolidated statements of net earnings (loss), comprehensive loss, changes in equity, and cash flow for the years then ended, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2019 and 2018, and the results of its financial performance and its cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 6, 2020 expressed an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting.

As discussed in Note 3(u) to the consolidated financial statements, the Corporation has changed its method of accounting for leases as of January 1, 2019 due to the adoption of International Financial Reporting Standard 16, Leases.

These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

As discussed in note 3(t) to the consolidated financial statements the Corporation reviews the carrying amount of each of the cash generating units (“CGUs”) at each reporting date to determine whether an indicator of impairment exists based on an analysis of relevant internal and external factors. The Corporation analyzes indicators that an asset may be impaired such as financial performance of the CGUs compared to historical results and forecasts and consideration of the Corporation’s market capitalization. The Corporation did not identify an indication of impairment within the Corporation’s Canadian CGUs as at December 31, 2019. Accordingly, no impairment tests were performed. Total assets recognized in Canada at December 31, 2019 were approximately $1,134 million.

We identified the assessment of indicators of impairment for the Corporation’s Canadian CGUs as a critical audit matter. Complex auditor judgement was required in evaluating certain of the internal and external impairment indicators included in the Corporation’s indicators of impairment analysis including the financial performance of the CGUs compared to historical results and forecasts and consideration of the Corporation’s market capitalization.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Corporation’s identification and evaluation of indicators that CGUs may be impaired, including controls related to the Corporation’s preparation and approval of the annual forecast which is used to identify possible indicators of impairment. We evaluated the internal and external factors analyzed by the Corporation in their impairment indicators analysis and compared

them to relevant external market data or internal source documents. We evaluated the Corporation’s 2020 forecasted earnings before interest, taxes, depreciation and amortization for the Canadian CGUs by comparing growth assumptions to historical results. We compared the Corporation’s 2019 forecasted earnings before interest, taxes, depreciation and amortization for the Canadian CGUs to actual results to assess the Corporation’s ability to accurately forecast. We evaluated the changes in market capitalization over 2019 and its impact on the Corporation’s impairment indicator analysis.

We have audited Precision Drilling Corporation’s (the “Corporation”) internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statements of financial position of the Corporation as of December 31, 2019 and 2018, the related consolidated statements of net earnings (loss), comprehensive loss, changes in equity and cash flow for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated March 6, 2020 expressed an unqualified opinion on those consolidated financial statements.

The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report to the Shareholders. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(Stated in thousands of Canadian dollars)		December 31, 2019			December 31, 2018
ASSETS
Current assets:
Cash		$	74,701		$	96,626
Accounts receivable	(Note 26)		310,204			372,336
Income tax recoverable			1,142			—
Inventory			31,718			34,081
			417,765			503,043
Assets held for sale	(Note 6)		—			19,658
Total current assets			417,765			522,701
Non-current assets:
Income taxes recoverable			—			2,449
Deferred tax assets	(Note 15)		4,724			36,880
Property, plant and equipment	(Note 7)		2,749,463			3,038,612
Intangibles	(Note 8)		31,746			35,401
Right of use assets	(Note 13)		66,142			—
Total non-current assets			2,852,075			3,113,342
Total assets		$	3,269,840		$	3,636,043
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	(Note 26)	$	199,478		$	274,489
Current portion of lease obligation	(Note 13)		12,449			—
Income tax payable			4,142			7,673
Total current liabilities			216,069			282,162
Non-current liabilities:
Share based compensation	(Note 14)		8,830			6,520
Provisions and other	(Note 17)		9,959			10,577
Long-term debt	(Note 10)		1,427,181			1,706,253
Lease obligation	(Note 13)		54,980			—
Deferred tax liabilities	(Note 15)		25,389			72,779
Total non-current liabilities			1,526,339			1,796,129
Shareholders’ equity:
Shareholders’ capital	(Note 18)		2,296,378			2,322,280
Contributed surplus			66,255			52,332
Deficit			(969,456	)		(978,874	)
Accumulated other comprehensive income	(Note 20)		134,255			162,014
Total shareholders’ equity			1,527,432			1,557,752
Total liabilities and shareholders’ equity		$	3,269,840		$	3,636,043

Years ended December 31, (Stated in thousands of Canadian dollars, except per share amounts)		2019			2018
Revenue	(Note 4)	$	1,541,320		$	1,541,189
Expenses:
Operating	(Note 26)		1,038,967			1,067,264
General and administrative	(Note 26)		104,010			111,830
Restructuring	(Note 11)		6,438			1,164
Other recoveries	(Note 11)		—			(14,200	)
Earnings before income taxes, gain on redemption and repurchase of unsecured senior notes, finance charges, foreign exchange, impairment of goodwill, reversal of impairment of property, plant and equipment, loss on asset decommissioning, gain on asset disposals and depreciation and amortization			391,905			375,131
Depreciation and amortization			333,616			377,044
Gain on asset disposals			(50,741	)		(11,384	)
Loss on asset decommissioning	(Note 7)		20,263			—
Reversal of impairment of property, plant and equipment	(Note 7)		(5,810	)		—
Impairment of goodwill	(Note 9)		—			207,544
Foreign exchange			(8,722	)		4,017
Finance charges	(Note 12)		118,453			127,178
Gain on redemption and repurchase of unsecured senior notes			(6,815	)		(5,672	)
Loss before income taxes			(8,339	)		(323,596	)
Income taxes:	(Note 15)
Current			1,080			8,573
Deferred			(16,037	)		(37,899	)
			(14,957	)		(29,326	)
Net earnings (loss)		$	6,618		$	(294,270	)
Net earnings (loss) per share:	(Note 19)
Basic		$	0.02		$	(1.00	)
Diluted		$	0.02		$	(1.00	)

Years ended December 31, (Stated in thousands of Canadian dollars)		2019			2018
Cash provided by:
Operations:
Net earnings (loss)		$	6,618		$	(294,270	)
Adjustments for:
Long-term compensation plans			19,457			17,401
Depreciation and amortization			333,616			377,044
Gain on asset disposals			(50,741	)		(11,384	)
Loss on asset decommissioning			20,263			—
Reversal of impairment of property, plant and equipment			(5,810	)		—
Impairment of goodwill			—			207,544
Foreign exchange			(8,585	)		2,341
Finance charges			118,453			127,178
Gain on redemption and repurchase of unsecured senior notes			(6,815	)		(5,672	)
Income taxes			(14,957	)		(29,326	)
Other			(981	)		(1,269	)
Income taxes paid			(5,060	)		(4,446	)
Income taxes recovered			2,479			33,283
Interest paid			(116,655	)		(108,622	)
Interest received			1,370			1,412
Funds provided by operations			292,652			311,214
Changes in non-cash working capital balances	(Note 26)		(4,493	)		(17,880	)
Cash provided by operations			288,159			293,334
Investments:
Purchase of property, plant and equipment	(Note 7)		(159,886	)		(114,576	)
Purchase of intangibles	(Note 8)		(808	)		(11,567	)
Proceeds on sale of property, plant and equipment	(Note 7)		90,768			24,457
Changes in non-cash working capital balances	(Note 26)		(4,574	)		892
Cash used in investing activities			(74,500	)		(100,794	)
Financing:
Redemption and repurchase of unsecured senior notes	(Note 10)		(198,387	)		(168,722	)
Repurchase of share capital	(Note 18)		(25,902	)		—
Debt amendment fees	(Note 8)		(702	)		(638	)
Lease payments			(6,823	)		—
Issuance of common shares on the exercise of options	(Note 18)		—			275
Cash used in financing activities			(231,814	)		(169,085	)
Effect of exchange rate changes on cash and cash equivalents			(3,770	)		8,090
Increase (decrease) in cash and cash equivalents			(21,925	)		31,545
Cash and cash equivalents, beginning of year			96,626			65,081
Cash and cash equivalents, end of year		$	74,701		$	96,626

(Stated in thousands of Canadian dollars)		Shareholders’ Capital (Note 18)			Contributed Surplus		Accumulated Other Comprehensive Income (Note 20)			Deficit			Total Equity
Balance at January 1, 2019			2,322,280			52,332		162,014			(978,874	)	$	1,557,752
Lease transition adjustment	(Note 3)		—			—		—			2,800			2,800
Net earnings for the period			—			—		—			6,618			6,618
Other comprehensive loss			—			—		(27,759	)		—			(27,759	)
Share repurchase	(Note 18)		(25,902	)		—		—			—			(25,902	)
Share based compensation expense	(Note 14)		—			13,923		—			—			13,923
Balance at December 31, 2019		$	2,296,378		$	66,255	$	134,255		$	(969,456	)	$	1,527,432

(Stated in thousands of Canadian dollars)		Shareholders’ Capital (Note 18)		Contributed Surplus			Accumulated Other Comprehensive Income (Note 20)		Deficit			Total Equity
Balance at January 1, 2018		$	2,319,293	$	44,037		$	131,610	$	(684,604	)	$	1,810,336
Net loss for the period			—		—			—		(294,270	)		(294,270	)
Other comprehensive income			—		—			30,404		—			30,404
Share options exercised	(Note 18)		378		(103	)		—		—			275
Redemption of non-management directors’ DSUs	(Note 18)		2,609		(809	)		—		—			1,800
Share based compensation expense	(Note 14)		—		9,207			—		—			9,207
Balance at December 31, 2018		$	2,322,280	$	52,332		$	162,014	$	(978,874	)	$	1,557,752

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

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 exploration and production companies in Canada, the United States and certain international locations. The address of the registered office is 800, 525 – 8th Avenue S.W., Calgary, Alberta, Canada, T2P 1G1.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

These consolidated financial statements were authorized for issue by the Board of Directors on March 6, 2020.

The consolidated financial statements have been prepared using the historical cost basis and are presented in thousands of Canadian dollars.

The preparation of the consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingencies. These estimates and judgments 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 consolidated financial statements may change as future events unfold, more experience is acquired, or the Corporation’s operating environment changes. The Corporation reviews its estimates and assumptions on an ongoing basis. Adjustments that result from a change in estimate are recorded in the period in which they become known. Significant estimates and judgments used in the preparation of the financial statements are described in Note 3(d), (e), (g), (i), (j), (l), (s) and (t).

These consolidated financial statements include the accounts of the Corporation and all of its subsidiaries and partnerships, substantially all of which are wholly-owned. The financial statements of the subsidiaries are prepared for the same period as the parent entity, using consistent accounting policies. All significant intercompany balances and transactions and any unrealized gains and losses arising from intercompany transactions, have been eliminated.

Subsidiaries are entities controlled by the Corporation. Control exists when Precision has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are considered. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Precision does not hold investments in any companies where it exerts significant influence and does not hold interests in any special-purpose entities.

The acquisition method is used to account for acquisitions of subsidiaries and assets that meet the definition of a business under IFRS. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized immediately in the statement of earnings. Transaction costs, other than those associated with the issuance of debt or equity securities, that the Corporation incurs in connection with a business combination are expensed as incurred.

Cash and cash equivalents consist of cash and short-term investments with original maturities of three months or less.

Inventory is primarily comprised of operating supplies and carried at the lower of average cost, being the cost to acquire the inventory, and net realizable value. Inventory is charged to operating expenses as items are sold or consumed at the amount of the average cost of the item.

Property, plant and equipment are carried at cost, less accumulated depreciation and any accumulated impairment losses.

Cost includes an expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and borrowing costs on qualifying assets.

The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Corporation, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment (repair and maintenance) are recognized in profit or loss as incurred.

	Expected Life	Salvage Value	Basis of Depreciation
Drilling rig equipment:
– Power & Tubulars	5 years	–	straight-line
– Dynamic	10 years	–	straight-line
– Structural	20 years	10%	straight-line
Service rig equipment	20 years	10%	straight-line
Drilling rig spare equipment	up to 15 years	–	straight-line
Service rig spare equipment	up to 15 years	–	straight-line
Rental equipment	up to 15 years	0 to 25%	straight-line
Other equipment	3 to 10 years	–	straight-line
Light duty vehicles	4 years	–	straight-line
Heavy duty vehicles	7 to 10 years	–	straight-line
Buildings	10 to 20 years	–	straight-line

Property, plant and equipment are depreciated based on estimates of useful lives and salvage values. These estimates consider data and information from various sources including vendors, industry practice, and Precision’s own historical experience and may change as more experience is gained, market conditions shift, or technological advancements are made.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal to the carrying amount of property, plant and equipment, and are recognized in the consolidated statements of earnings (loss).

Determination of which parts of the drilling rig equipment represent significant cost relative to the entire rig and identifying the consumption patterns along with the useful lives of these significant parts, are matters of judgment. This determination can be complex and subject to differing interpretations and views, particularly when rig equipment comprises individual components for which different depreciation methods or rates are appropriate.

The estimated useful lives, residual values and method and components of depreciation are reviewed annually, and adjusted prospectively if appropriate.

Intangible assets that are acquired by the Corporation with finite lives are initially recorded at estimated fair value and subsequently measured at cost less accumulated amortization and any accumulated impairment losses.

Subsequent expenditures are capitalized only when they increase the future economic benefits of the specific asset to which they relate.

Intangible assets are amortized based on estimates of useful lives. These estimates consider data and information from various sources including vendors and Precision’s own historical experience and may change as more experience is gained or technological advancements are made.

Amortization is recognized in profit and loss using the straight-line method over the estimated useful lives of the respective assets. Precision’s loan commitment fees are amortized over the term of the respective facility. Software is amortized over its expected useful life of up to 10 years.

The estimated useful lives and methods of amortization are reviewed annually and adjusted prospectively if appropriate.

Goodwill is the amount that results when the purchase price of an acquired business exceeds the sum of the amounts allocated to the assets acquired, less liabilities assumed, based on their fair values.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, attributed to the cash-generating unit (CGU) or groups of cash-generating units that are expected to benefit and as identified in the business combination.

The carrying amounts of the Corporation’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit). Judgment is required in the aggregation of assets into CGUs.

If any such indication exists, then the asset or CGU’s recoverable amount is estimated. Judgement is required when evaluating whether a CGU has indications of impairment. For CGUs that contain goodwill and other intangible assets that have indefinite lives or that are not yet available for use, an impairment test is, at a minimum, completed annually as of December 31.

The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using an after-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Value in use is generally computed by reference to the present value of the future cash flows expected to be derived from the cash-generating unit.

An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Interest and borrowing costs that are directly attributable to the acquisition, construction or production of assets that take a substantial period of time to prepare for their intended use are capitalized as part of the cost of those assets. Capitalization ceases during any extended period of suspension of construction or when substantially all activities necessary to prepare the asset for its intended use are complete.

All other interest and borrowing costs are recognized in earnings in the period in which they are incurred.

Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the expected tax payable or receivable on the taxable earnings or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in profit or loss in the period that includes the date of enactment or substantive enactment. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities that are expected to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

The Corporation is subject to taxation in numerous jurisdictions. Uncertainties exist with respect to the interpretation of complex tax regulations and requires significant judgement. Differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to taxable income and expense already recorded. The Corporation establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax

authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority.

Precision recognizes revenue from a variety of sources. In general, customer invoices are issued upon rendering all performance obligations for an individual well-site job. Under the Corporation’s standard contract terms, customer payments are to be received within 30 days of the customer’s receipt of an invoice.

The Corporation contracts individual drilling rig packages, including crews and support equipment, to its customers. Depending on the customer’s drilling program, contracts may be for a single well, multiple wells or a fixed term. Revenue from contract drilling services is recognized over time from spud to rig release on a daily basis. Operating days are measured through industry standard tour sheets that document the daily activity of the rig. Revenue is recognized at the applicable day rate for each well, based on rates specified in the drilling contract.

The Corporation provides services under turnkey contracts, whereby Precision is required to drill a well to an agreed upon depth under specified conditions for a fixed price, regardless of the time required or problems encountered in drilling the well. Revenue from turnkey drilling contracts is recognized over time using the input method based on costs incurred to date in relation to estimated total contract costs, as that most accurately depicts the Corporation’s performance.

The Corporation also provides directional drilling services, which include the provision of directional drilling equipment, tools and personnel to the wellsite, and performance of daily directional drilling services. Directional drilling revenue is recognized over time, upon the daily completion of operating activities. Operating days are measured through daily tour sheets. Revenue is recognized at the applicable day rate, as stipulated in the directional drilling contract.

The Corporation provides a variety of well completion and production services including well servicing and snubbing. In general, service rigs do not involve long-term contracts or penalties for termination. Revenue is recognized daily upon completion of services. Operating days are measured through daily tour sheets and field tickets. Revenue is recognized at the applicable daily or hourly rate, as stipulated in the contract.

The Corporation offers a variety of oilfield equipment for rental to its customers. Rental revenue is recognized daily at the applicable rate stated in the rental contract. Rental days are measured through field tickets.

The Corporation provides accommodation and catering services to customers in remote locations. Customers contract these services either as a package or individually for a fixed term. For accommodation services, the Corporation supplies camp equipment and revenue is recognized over time on a daily basis, once the equipment is on-site and available for use, at the applicable rate stated in the contract. For catering services, the Corporation recognizes revenue daily according to meals served. Accommodation and catering services provided are measured through field tickets.

Precision sponsors various defined contribution retirement plans for its employees. The Corporation’s contributions to defined contribution plans are expensed as employees earn the entitlement.

Provisions are recognized when the Corporation has a present obligation as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

The Corporation has established several cash-settled share based incentive compensation plans for non-management directors, officers, and other eligible employees. The estimated fair value of amounts payable to eligible participants under these plans are recognized as an expense with a corresponding increase in liabilities over the period that the participants become unconditionally entitled to payment. The recorded liability is re-measured at the end of each reporting period until settlement with the resultant change to the fair value of the liability recognized in profit or loss for the period. When the plans are settled, the cash paid reduces the outstanding liability.

The Corporation has an employee share purchase plan that allows eligible employees to purchase common shares through payroll deductions. Under this plan, contributions made by employees are matched to a specific percentage by the Corporation. The contributions made by the Corporation are expensed as incurred.

Prior to January 1, 2012, the Corporation had an equity-settled deferred share unit plan whereby non-management directors of Precision could elect to receive all or a portion of their compensation in fully-vested deferred share units. Compensation expense was recognized based on the fair value price of the Corporation’s shares at the date of grant with a corresponding increase to contributed surplus. Upon redemption of the deferred share units into common shares, the amount previously recognized in contributed surplus is recorded as an increase to shareholders’ capital. The Corporation continues to have obligations under this plan.

The Corporation has a share option plan for certain eligible employees. Under this plan, the fair value of share purchase options is calculated at the date of grant using the Black-Scholes option pricing model, and that value is recorded as compensation expense over the grant’s vesting period with an offsetting credit to contributed surplus. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest. Upon exercise of the equity purchase option, the associated amount is reclassified from contributed surplus to shareholders’ capital. Consideration paid by employees upon exercise of the equity purchase options is credited to shareholders’ capital.

Transactions of the Corporation’s individual entities are recorded in the currency of the primary economic environment in which it operates (its functional currency). Transactions in currencies other than the entities’ functional currency are translated at rates in effect at the time of the transaction. At each period end, monetary assets and liabilities are translated at the prevailing period-end rates. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Gains and losses are included in profit or loss except for gains and losses on translation of long-term debt designated as a hedge of foreign operations, which are deferred and included in other comprehensive income.

For the purpose of preparing the Corporation’s consolidated financial statements, the financial statements of each foreign operation that does not have a Canadian dollar functional currency are translated into Canadian dollars. Assets and liabilities are translated at exchange rates in effect at the period end date. Revenues and expenses are translated using average exchange rates for the month of the respective transaction. Gains or losses resulting from these translation adjustments are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the foreign operation.

Basic per share amounts are calculated using the weighted average number of shares outstanding during the period. Diluted per share amounts are calculated by using the treasury stock method for equity-based compensation arrangements. The treasury stock method assumes that any proceeds obtained on exercise of equity-based compensation arrangements would be used to purchase common shares at the average market price during the period. The weighted average number of shares outstanding is then adjusted by the difference between the number of shares issued from the exercise of equity-based compensation arrangements and shares repurchased from the related proceeds.

Financial assets and liabilities are classified and measured at amortized cost, fair value through other comprehensive income or fair value through profit and loss. The classification of financial assets and liabilities is generally based on the business model in which the asset or liability is managed and its contractual cash flow characteristics. Financial assets held within a business model whose objective is to collect contractual cash flows and whose contractual terms give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding are measured at amortized cost. After their initial fair value measurement, accounts receivable, accounts payable and accrued liabilities and long-term debt are classified and measured at amortized cost using the effective interest rate method.

Upon initial recognition of a non-derivative financial asset a loss allowance is recorded for expected credit losses (ECL). Loss allowances for trade receivables are measured based on lifetime ECL that incorporates historical loss information and is adjusted for current economic and credit conditions.

The Corporation may enter into certain financial derivative contracts in order to manage the exposure to market risks from fluctuations in interest rates or exchange rates. These instruments are not used for trading or speculative purposes. Precision has not designated its financial derivative contracts as effective accounting hedges, and thus has not applied hedge accounting, even though it considers certain financial contracts to be economic hedges. As a result, financial derivative contracts are classified as fair value through profit or loss and are recorded on the statement of financial position at estimated fair value. Transaction costs are recognized in profit or loss when incurred.

Derivatives embedded in financial assets are never separated. Rather, the financial instrument as a whole is assessed for classification. Derivatives embedded in financial liabilities are separated from the host contract and accounted for separately when their economic characteristics and risks are not closely related to the host contract. Embedded derivatives in financial liabilities are recorded on the statement of financial position at estimated fair value and changes in the fair value are recognized in earnings.

The Corporation utilizes foreign currency long-term debt to hedge its exposure to changes in the carrying values of the Corporation’s net investment in certain foreign operations from fluctuations in foreign exchange rates. To be accounted for as a hedge, the foreign currency long-term debt must be designated and documented as a hedge and must be effective at inception and on an ongoing basis. The documentation defines the relationship between the foreign currency long-term debt and the net investment in the foreign operations, as well as the Corporation’s risk management objective and strategy for undertaking the hedging transaction. The Corporation formally assesses, both at inception and on an ongoing basis, whether the changes in fair value of the foreign currency long-term debt is highly effective in offsetting changes in fair value of the net investment in the foreign operations. The portion of gains or losses on the hedging item determined to be an effective hedge is recognized in other comprehensive income, net of tax, and is limited to the translation gain or loss on the net investment, while ineffective portions are recorded through profit or loss.

A reduction in the fair value of the net investment in the foreign operations or increase in the foreign currency long-term debt balance may result in a portion of the hedge becoming ineffective. If the hedging relationship ceases to be effective or is terminated, hedge accounting is not applied to subsequent gains or losses. The amounts recognized in other comprehensive income are reclassified to profit and loss and the corresponding exchange gains or losses arising from the translation of the foreign operation are recorded through profit and loss upon dissolution or substantial dissolution of the foreign operation.

Non-current assets, or disposal groups, are classified as held-for sale if it is highly probable that their carrying amount will be recovered primarily through a sale transaction rather than through continued use. Such assets, or disposal groups, are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held-for-sale and subsequent gains or losses on remeasurement are recognized in profit or loss.

At inception, Precision assesses whether its contracts contain a lease. A contract contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The assessment of whether a contract conveys the right to control the use of an identified asset considers whether:

At inception or on reassessment of a contract that contains a lease component, Precision allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

Precision recognizes a right of use asset and corresponding lease obligation at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease obligation adjusted for lease payments made on or before commencement date, incurred initial direct costs, estimated site retirement costs and any lease incentives received.

The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right of use asset or the end of the lease term. The estimated useful lives of right of use assets are consistent with those of property, plant and equipment. In addition, the right of use asset is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease obligation.

The lease obligation is initially measured at the present value of the minimum lease payments not paid at commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, Precision’s incremental borrowing rate. Generally, Precision uses its incremental borrowing rate as the discount rate for those leases in which it is the lessee.

Lease payments included in the measurement of the lease obligation comprise the following:

The lease obligation is measured at amortized cost using the effective interest method. The measurement of lease obligations require the use of certain estimates and assumptions including discount rates, exercise of lease term extension options, and escalating lease rates. It is remeasured when there is a change in:

When the lease obligation is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right of use asset, or is recorded in profit or loss if the carrying amount of the right of use asset has been reduced to zero.

When Precision acts as a lessor, at inception, Precision evaluates the classification as either a finance or operating lease.

To classify each lease, Precision makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.

When acting as a sub-lessor, Precision accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right of use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease then Precision classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, Precision applies IFRS 15 to allocate the consideration in the contract. Precision recognizes lease payments received under operating leases for drilling rigs as income on a systematic basis, drilling days, over the lease term as part of revenue.

The accounting policies applicable to Precision as a lessor in the comparative period were not different from IFRS 16. However, when Precision was an intermediate lessor the sub-leases were classified with reference to the underlying asset.

At each reporting date, the Corporation reviews the carrying amount of assets in each CGU to determine whether an indicator of impairment exists. The Corporation’s analysis is based on relevant internal and external factors that indicate a CGU may be impaired such as the obsolescence or planned disposal of significant assets, financial performance of the CGU compared to forecasts and consideration of the Corporation’s market capitalization.

When indications of impairment exist within a CGU, a recoverable amount is determined and requires assumptions to estimate future discounted cash flows. These estimates and assumptions include future drilling activity, margins and market conditions over the long-term life of the CGU. In selecting a discount rate, the Corporation uses observable market data inputs to develop a rate that the Corporation believes approximates the discount rate of market participants.

Although the Corporation believes the assumptions and estimates are reasonable and consistent with current conditions, internal planning, and expected future operations, such assumptions and estimations are subject to significant uncertainty and judgment.

Significant estimation and assumptions are required in determining the provision for income taxes. The recognition of deferred tax assets in respect of deductible temporary differences and unused tax losses and credits is based on the Corporation’s estimation of future taxable profit against which these differences, losses and credits may be used. The assessment is based upon existing tax laws and estimates of the Corporation’s future taxable income. These estimates may be materially different from the actual final tax return in future periods.

IFRS 16 introduced a single, on-balance sheet lease accounting model for lessees and requires a lessee to recognize a right of use asset representing its right to direct the use of the underlying asset as well as a lease obligation representing the Corporation’s obligation to make future lease payments. Lessor accounting remained similar to the prior lease standard in which lessors classify leases as either finance or operating leases.

On January 1, 2019, Precision adopted IFRS 16 using the modified retrospective approach. Under this approach, comparative information has not been restated and continues to be reported under IAS 17 and related interpretations.

Precision adopted IFRS 16 on January 1, 2019 using the modified retrospective method of adoption. When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17 and related interpretations, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on

transition. On initial adoption of the new standard, Precision elected to use the following practical expedients, where applicable, to:

In addition, at the date of initial application, for those leases previously classified as an operating lease under IAS 17, Management elected to recognize and measure the respective right of use assets at the amount equal to the lease obligation, adjusted for any prepaid or accrued lease payment immediately before the date of initial application. The opening balance sheet adjustment in relation to these leases was:

When measuring certain lease obligations at the date of transition, minimum lease payments were discounted using Precision’s incremental borrowing rate. The weighted average incremental borrowing rates applied was 6.1%. At the date of transition, Precision derecognized $3 million of its deferred base rent balance which was established to straight-line amortize escalating corporate office rent expenses over the term of the lease.

In the comparative period, Precision classified its leases that transferred substantially all the risks and rewards of ownership as finance leases. These leased assets were measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments, excluding any contingent payments. Subsequently, these assets were accounted for in accordance with the applicable accounting policy respective to that asset.

Assets held under other leases were classified as operating leases and were not recognized on the consolidated statement of financial position. Payments made under operating leases were recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognized as an integral part of the total lease expense, over the term of the lease.

IFRIC 23 clarifies the accounting for uncertainties in income taxes. The interpretation requires the entity to use the most likely amount or the expected value of the income tax treatment if it concludes that it is not probable that a particular income tax treatment will be accepted. It requires an entity to assume that a taxation authority with the right to examine any amounts reported to it will examine those amounts and will have full knowledge of all relevant information when doing so. Using the modified retrospective method of adoption, Precision initially applied IFRIC 23 on January 1, 2019 and it did not have a material impact on the consolidated financial statements.

The following table includes a reconciliation of disaggregated revenue by reportable segment (Note 5). Revenue has been disaggregated by primary geographical market and type of service provided.

Twelve months ended December 31, 2019	Contract Drilling Services		Completion and Production Services		Corporate and Other		Inter- Segment Eliminations			Total
Canada	$	336,483	$	128,202	$	—	$	(5,308	)	$	459,377
United States		852,293		19,627		—		(269	)		871,651
International		210,292		—		—		—			210,292
	$	1,399,068	$	147,829	$	—	$	(5,577	)	$	1,541,320

Day rate/hourly services	$	1,333,114	$	147,829	$	—	$	(905	)	$	1,480,038
Shortfall payments/idle but contracted		9,789		—		—		—			9,789
Turnkey drilling services		3,754		—		—		—			3,754
Directional services		41,876		—		—		—			41,876
Other		10,535		—		—		(4,672	)		5,863
	$	1,399,068	$	147,829	$	—	$	(5,577	)	$	1,541,320

Twelve months ended December 31, 2018	Contract Drilling Services		Completion and Production Services		Corporate and Other		Inter- Segment Eliminations			Total
Canada	$	426,475	$	138,030	$	—	$	(5,759	)	$	558,746
United States		778,886		12,730		—		(304	)		791,312
International		191,131		—		—		—			191,131
	$	1,396,492	$	150,760	$	—	$	(6,063	)	$	1,541,189

Day rate/hourly services	$	1,302,575	$	150,760	$	—	$	(1,009	)	$	1,452,326
Shortfall payments/idle but contracted		12,520		—		—		—			12,520
Turnkey drilling services		37,811		—		—		—			37,811
Directional services		31,943		—		—		—			31,943
Other		11,643		—		—		(5,054	)		6,589
	$	1,396,492	$	150,760	$	—	$	(6,063	)	$	1,541,189

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

2019	Contract Drilling Services			Completion and Production Services			Corporate and Other			Inter- Segment Eliminations			Total
Revenue	$	1,399,068		$	147,829		$	—		$	(5,577	)	$	1,541,320
Operating earnings (loss)		160,997			10,041			(76,461	)		—			94,577
Depreciation and amortization		300,882			17,881			14,853			—			333,616
Gain on asset disposals		(46,849	)		(3,767	)		(125	)		—			(50,741	)
Loss on asset decommissioning		20,263			—			—			—			20,263
Reversal of impairment of property, plant and equipment		(5,810	)		—			—			—			(5,810	)
Total assets		2,963,260			152,611			153,969			—			3,269,840
Capital expenditures		154,066			5,448			1,180			—			160,694

2018	Contract Drilling Services			Completion and Production Services			Corporate and Other			Inter- Segment Eliminations			Total
Revenue	$	1,396,492		$	150,760		$	—		$	(6,063	)	$	1,541,189
Operating loss		(129,965	)		(8,998	)		(59,110	)		—			(198,073	)
Depreciation and amortization		341,712			22,801			12,531			—			377,044
Loss (gain) on asset disposals		(7,157	)		1,078			(5,305	)		—			(11,384	)
Impairment of goodwill		207,544			—			—			—			207,544
Total assets		3,301,457			170,113			164,473			—			3,636,043
Capital expenditures		108,610			5,004			12,529			—			126,143

A reconciliation of operating earnings (loss) to loss before income taxes is as follows:

	2019			2018
Operating earnings (loss)	$	94,577		$	(198,073	)
Add (deduct):
Foreign exchange		(8,722	)		4,017
Finance charges		118,453			127,178
Gain on redemption and repurchase of unsecured senior notes		(6,815	)		(5,672	)
Loss before income taxes	$	(8,339	)	$	(323,596	)

The Corporation’s operations are carried on in the following geographic locations:

In December 2018, Precision commenced a process to sell drilling rigs that no longer met the Corporation’s High Performance technology standards. The disposal group, contained within its Contract Drilling Services segment, was classified as held for sale and measured at the lower of its carrying value and fair value less costs to sell. At December 31, 2018, the disposal group was stated at its carrying value of $20 million, which was less than its estimated fair value. In 2019, Precision’s efforts to sell the disposal group were unsuccessful and the drilling rigs were decommissioned.

	2019			2018
Cost	$	6,670,979		$	6,937,062
Accumulated depreciation		(3,921,516	)		(3,898,450	)
	$	2,749,463		$	3,038,612
Rig equipment		2,510,505			2,745,172
Rental equipment		34,437			43,992
Other equipment		38,604			52,195
Vehicles		7,796			12,702
Buildings		56,834			65,561
Assets under construction		67,740			84,561
Land		33,547			34,429
	$	2,749,463		$	3,038,612

	Rig Equipment			Rental Equipment			Other Equipment			Vehicles			Buildings			Assets Under Construction			Land			Total
Balance, December 31, 2017	$	6,034,166		$	148,011		$	244,950		$	43,201		$	127,385		$	102,035		$	33,886		$	6,733,634
Additions		7,013			—			347			—			569			106,647			—			114,576
Disposals		(32,153	)		(18,227	)		(59,865	)		(228	)		(3,663	)		—			(893	)		(115,029	)
Reclassifications		127,668			—			507			—			—			(128,175	)		—			—
Reclassification to assets held for sale		(135,398	)		—			—			—			—			—			—			(135,398	)
Effect of foreign currency exchange differences		321,240			679			5,351			2,483			4,036			4,054			1,436			339,279
Balance, December 31, 2018		6,322,536			130,463			191,290			45,456			128,327			84,561			34,429			6,937,062
Additions		18,436			—			976			224			415			139,835			—			159,886
Disposals		(69,945	)		(19,982	)		(4,708	)		(6,014	)		(58	)		—			—			(100,707	)
Reclassifications		150,674			—			1,197			—			—			(151,871	)		—			—
Asset decommissioning		(4,364	)		—			—			—			—			—			—			(4,364	)
Effect of foreign currency exchange differences		(307,954	)		(174	)		(3,436	)		(1,160	)		(2,507	)		(4,785	)		(882	)		(320,898	)
Balance, December 31, 2019	$	6,109,383		$	110,307		$	185,319		$	38,506		$	126,177		$	67,740		$	33,547		$	6,670,979

	Rig Equipment			Rental Equipment			Other Equipment			Vehicles			Buildings			Assets Under Construction		Land		Total
Balance, December 31, 2017	$	3,210,384		$	87,832		$	178,390		$	26,921		$	56,283		$	—	$	—	$	3,559,810
Depreciation expense		335,215			9,418			15,993			4,820			8,126			—		—		373,572
Disposals		(28,399	)		(11,249	)		(59,857	)		(220	)		(3,161	)		—		—		(102,886	)
Reclassification to assets held for sale		(115,740	)		—			—			—			—			—		—		(115,740	)
Effect of foreign currency exchange differences		175,904			470			4,569			1,233			1,518			—		—		183,694
Balance, December 31, 2018		3,577,364			86,471			139,095			32,754			62,766			—		—		3,898,450
Depreciation expense		289,056			7,473			13,023			3,521			7,663			—		—		320,736
Disposals		(33,929	)		(17,933	)		(3,274	)		(4,768	)		(58	)		—		—		(59,962	)
Asset decommissioning		(3,518	)		—			—			—			—			—		—		(3,518	)
Reversal of impairment of property, plant and equipment		(5,810	)		—			—			—			—			—		—		(5,810	)
Effect of foreign currency exchange differences		(224,285	)		(141	)		(2,129	)		(797	)		(1,028	)		—		—		(228,380	)
Balance, December 31, 2019	$	3,598,878		$	75,870		$	146,715		$	30,710		$	69,343		$	—	$	—	$	3,921,516

In addition to those items below, through the completion of normal course business operations, the Corporation sold used assets incurring gains or losses on disposal.

In the second quarter of 2019, Precision concluded the sale of its Mexico-based drilling rigs and ancillary equipment, contained within its Contract Drilling Services segment, for total proceeds of US$48 million. Precision recognized a gain on asset disposal of US$24 million and reversed US$4 million of previous impairment charges.

In the second quarter of 2019, Precision disposed of certain snubbing units and related equipment, contained within the Completion and Production Services segment, for proceeds of $8 million resulting in a gain on asset disposal of $3 million.

Precision reviews the carrying value of its long-lived assets at each reporting period for indications of impairment. The Corporation did not identify an indication of impairment within the Corporation’s CGUs as at December 31, 2019. Accordingly, no impairment tests were performed.

For the year ended December 31, 2018, impairment charges of $208 million were recorded against goodwill. Refer to Note 9 for discussion of impairment tests performed.

In 2019, the Corporation incurred a $20 million (2018 – nil) loss on the decommissioning of certain drilling and ancillary equipment, contained within the Contract Drilling Services segment, that no longer met the Corporation’s High Performance technology standards. The decommissioning charge included those drilling rigs that were previously held for sale.

In the fourth quarter of 2019, Precision performed its annual review of estimated useful lives, residual values and methods and components of depreciation of property, plant and equipment. Due to changes in the timing, nature and complexity of certain rig recertifications, the Corporation determined the associated costs represent a separate component of property, plant and equipment. This change has been recognized prospectively and is expected to increase the Corporation’s 2020 depreciation expense by approximately $3 million.

In 2018, Precision performed its annual impairment test for those CGUs containing goodwill and determined the goodwill associated with the Canadian Contract Drilling and U.S. Directional Drilling CGUs were not recoverable. Accordingly, an impairment charge of $208 million was recorded in the statement of net earnings (loss) for the period ended December 31, 2018. Both CGUs were contained within the Contract Drilling Services segment.

In performing the 2018 goodwill impairment tests, the Corporation used a value in use approach. Projected cash flows covered a five-year period and were based on future expected outcomes taking into account existing term contracts, past experience and management’s expectation of future market conditions. The primary source of cash flow information was the strategic plan approved by the Corporation’s Board of Directors. These strategic plans were developed based on benchmark commodity prices and industry supply-demand fundamentals.

Cash flows used in the impairment calculation were discounted using a discount rate specific to the Canadian Contract Drilling CGU. The after-tax discount rate derived from Precision’s weighted average cost of capital, adjusted for risk factors specific to the CGU and used in determining the recoverable amount for the Canadian Contract Drilling CGU was 11.66%. The test resulted in a goodwill impairment charge of $172 million as the carrying value of the CGU’s assets exceeded its value in use of $942 million.

The key assumptions used in the calculation of the CGU’s value in use included the discount rate and a terminal value growth rate of nil. An increase of 0.5% to the discount rate would result in approximately $37 million of additional impairment charges to the remaining assets within the CGU.

Cash flows used in the impairment calculation were discounted using a discount rate specific to the U.S. Directional Drilling CGU. The after-tax discount rate derived from Precision’s weighted average cost of capital, adjusted for risk factors specific to the CGU and used in determining the recoverable amount for the U.S. Directional Drilling CGU was 12.16%. The test resulted in a goodwill impairment charge of $35 million as the carrying value of the CGU’s assets exceeded its value in use of $39 million.

The key assumptions used in the calculation of the CGU’s value in use included the discount rate and a terminal value growth rate of nil. An increase of 0.5% to the discount rate would result in approximately $2 million of additional impairment charges to the remaining assets within the CGU.

		2019			2018		2019			2018
Senior Credit Facility	US	$	—	US	$	—	$	—		$	—
Unsecured Senior Notes:
6.5% senior notes due 2021			90,625			165,625		117,678			226,113
7.75% senior notes due 2023			344,845			350,000		447,792			477,823
5.25% senior notes due 2024			307,690			351,104		399,545			479,331
7.125% senior notes due 2026			369,735			400,000		480,112			546,084
	US	$	1,112,895	US	$	1,266,729		1,445,127			1,729,351
Less net unamortized debt issue costs								(17,946	)		(23,098	)
							$	1,427,181		$	1,706,253

	Senior Credit Facility		Unsecured Senior Notes			Debt Issue Costs			Total
Balance December 31, 2017	$	—	$	1,758,519		$	(28,082	)	$	1,730,437
Changes from financing cash flows:
Redemption / repurchase of senior notes		—		(168,722	)		—			(168,722	)
Non-cash changes:
Gain on redemption / repurchase of unsecured senior notes		—		(5,672	)		—			(5,672	)
Amortization of debt issue costs		—		—			4,984			4,984
Foreign exchange adjustment		—		145,226			—			145,226
Balance December 31, 2018		—		1,729,351			(23,098	)		1,706,253
Changes from financing cash flows:
Redemption / repurchase of senior notes		—		(198,387	)		—			(198,387	)
Non-cash changes:
Gain on redemption / repurchase of unsecured senior notes		—		(6,815	)		—			(6,815	)
Amortization of debt issue costs		—		—			5,152			5,152
Foreign exchange adjustment		—		(79,022	)		—			(79,022	)
Balance December 31, 2019	$	—	$	1,445,127		$	(17,946	)	$	1,427,181

The senior secured revolving credit facility (Senior Credit Facility) provides Precision with senior secured financing for general corporate purposes, including for acquisitions, of up to US$500 million with a provision for an increase in the facility of up to an additional US$300 million. The Senior Credit Facility is secured by charges on substantially all of the present and future assets of Precision, its material U.S. and Canadian subsidiaries and, if necessary, to adhere to covenants under the Senior Credit Facility, certain subsidiaries organized in jurisdictions outside of Canada and the U.S.

The Senior Credit Facility requires that Precision comply with certain restrictive and financial covenants including a leverage ratio of consolidated senior debt to consolidated Covenant EBITDA (as defined in the debt agreement) of less than 2.5:1. For purposes of calculating the leverage ratio consolidated senior debt only includes secured indebtedness. It also requires the Corporation to maintain a ratio of consolidated Covenant EBITDA to consolidated interest expense for the most recent four consecutive quarters, of greater than 2.5:1.

Distributions under the Senior Credit Facility are subject to a pro-forma senior net leverage covenant of less than or equal to 1.75:1. The Senior Credit Facility also limits the redemption and repurchase of junior debt subject to a pro-forma senior net leverage covenant test of less than or equal to 1.75:1.

The Senior Credit Facility has a term of four years, with an annual option on Precision’s part to request that the lenders extend, at their discretion, the facility to a new maturity date not to exceed five years from the date of the extension request. The current maturity date of the Senior Credit Facility is November 21, 2023.

Under the Senior Credit Facility, amounts can be drawn in U.S. dollars and/or Canadian dollars. At December 31, 2019, no amounts were drawn under this facility (2018 – nil). Up to US$200 million of the Senior Credit Facility is available for letters of credit denominated in U.S and/or Canadian dollars and other currencies acceptable to the fronting lender. As at December 31, 2019 outstanding letters of credit amounted to US$25 million (2018 – US$28 million).

The interest rate on loans that are denominated in U.S. dollars is, at the option of Precision, either a margin over a U.S. base rate or a margin over LIBOR. The interest rate on loans denominated in Canadian dollars is, at the option of Precision, either a margin over the Canadian prime rate or a margin over the Canadian Dollar Offered Rate (CDOR); such margins will be based on the then applicable ratio of consolidated total debt to EBITDA.

These notes bear interest at a fixed rate of 6.5% per annum and mature on December 15, 2021. Interest is payable semi-annually on June 15 and December 15 of each year.

Precision may redeem these notes in whole or in part after December 15, 2019 for their principal amount plus accrued interest. Upon specified change of control events, each holder of a note will have the right to sell to Precision all or a portion of its notes at a purchase price in cash equal to 101% of the principal amount, plus accrued interest to the date of purchase.

During 2019, Precision redeemed US$75 million principal amount of these notes for an aggregate purchase price of US$76 million. The difference was recognized as a loss on redemption of unsecured senior notes within the consolidated statement of earnings (loss).

Subsequent to December 31, 2019, Precision redeemed US$25 million principal amount of these notes for an aggregate purchase price of US$25 million.

These notes bear interest at a fixed rate of 7.75% per annum and mature on December 15, 2023. Interest is payable semi-annually on June 15 and December 15 of each year.

Precision may redeem these notes in whole or in part at any time on or after December 15, 2019 and before December 15, 2021, at redemption prices ranging between 103.875% and 101.938% of their principal amount plus accrued interest. Any time on or after December 15, 2021, these notes can be redeemed for their principal amount plus accrued interest. Upon specified change of control events, each holder of a note will have the right to sell to Precision all or a portion of its notes at a purchase price in cash equal to 101% of the principal amount, plus accrued interest to the date of purchase.

During 2019, Precision repurchased and cancelled US$5 million of these notes for an aggregate purchase price of US$5 million. The difference was recognized as a gain on redemption of unsecured senior notes within the consolidated statement of earnings (loss).

These notes bear interest at a fixed rate of 5.25% per annum and mature on November 15, 2024. Interest is payable semi-annually on May 15 and November 15 of each year.

Precision may redeem these notes in whole or in part at any time on or after May 15, 2019 and before May 15, 2022, at redemption prices ranging between 102.625% and 100.875% of their principal amount plus accrued interest. Any time on or after May 15, 2022, these notes can be redeemed for their principal amount plus accrued interest. Upon specified change of control events, each holder of a note will have the right to sell to Precision all or a portion of its notes at a purchase price in cash equal to 101% of the principal amount, plus accrued interest to the date of purchase.

During 2019, Precision repurchased and cancelled US$43 million of these notes for an aggregate purchase price of US$39 million. The difference was recognized as a gain on repurchase of unsecured senior notes within the consolidated statement of earnings (loss).

Subsequent to December 31, 2019, Precision repurchased and cancelled US$5 million of these notes for an aggregate purchase price of US$4 million.

These notes bear interest at a fixed rate of 7.125% per annum and mature on January 15, 2026. Interest is payable semi-annually on January 15 and July 15 of each year, commencing July 15, 2018.

Prior to November 15, 2020, Precision may redeem up to 35% of the 7.125% senior notes due 2026 with the net proceeds of certain equity offerings at a redemption price equal to 107.125% of the principal amount plus accrued interest. Prior to November 15, 2020, Precision may redeem these notes in whole or in part at 100.0% of their principal amount, plus accrued interest and the greater of 1.0% of the principal amount of the note to be redeemed and the excess, if any, of the present value of the November 15, 2020 redemption price plus required interest payments through November 15, 2020 (calculated using the U.S. Treasury rate plus 50 basis points) over the principal amount of the note. As well, Precision may redeem these notes in whole or in part at any time on or after November 15, 2020 and before November 15, 2022, at redemption prices ranging between 105.344% and 101.781% of their principal amount plus accrued interest. Any time on or after November 15, 2023, these notes can be redeemed for their principal amount plus accrued interest. Upon specified change of control events, each holder of a note will have the right to sell to Precision all or a portion of its notes at a purchase price in cash equal to 101% of the principal amount, plus accrued interest to the date of purchase.

During 2019, Precision repurchased and cancelled US$30 million of these notes for an aggregate purchase price of US$29 million. The difference was recognized as a gain on repurchase of unsecured senior notes within the consolidated statement of earnings (loss).

Subsequent to December 31, 2019, Precision repurchased and cancelled US$2 million of these notes for an aggregate purchase price of US$2 million.

The unsecured senior notes require Precision to comply with certain restrictive and financial covenants including an incurrence based test of Consolidated Interest Coverage Ratio, as defined in the senior note agreements, of greater than or equal to 2.0:1 for the most recent four consecutive fiscal quarters. In the event that the Consolidated Interest Coverage Ratio is less than 2.0:1 for the most recent four consecutive fiscal quarters the senior notes restrict our ability to incur additional indebtedness.

The unsecured senior notes also contain a restricted payments covenant that limits Precision’s ability to make payments in the nature of dividends, distributions and for repurchases from shareholders. This restricted payment basket grows by, among other things, 50% of cumulative consolidated net earnings, and decreases by 100% of cumulative consolidated net losses as defined in the note agreements, and cumulative payments made to shareholders. As at December 31, 2019, the governing net restricted payments basket was negative $517 million (2018 – negative $496 million), therefore limiting us from making any further dividend payments or share repurchases until the governing restricted payments basket once again becomes positive.

Precision’s unsecured senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all U.S. and Canadian subsidiaries that guaranteed the Senior Credit Facility (Guarantor Subsidiaries). These Guarantor Subsidiaries are directly or indirectly 100% owned by the parent company. Separate financial statements for each of the Guarantor Subsidiaries have not been provided; instead the Corporation has included in Note 28 condensed consolidating financial statements based on Rule 3-10 of the U.S. Securities and Exchange Commission’s Regulation S-X.

Following is a listing of the currently applicable restrictive and financial covenants as at December 31, 2019:

^{(1) For purposes of calculating the leverage ratio consolidated senior debt only includes secured indebtedness.}

At December 31, 2019, Precision was in compliance with the covenants of the Senior Credit Facility and unsecured senior notes.

For the period ended December 31, 2019, the Corporation had restructuring charges of $6 million (2018 - $1 million) and other recoveries of nil (2018 - $14 million). Restructuring costs incurred in 2019 pertained to severance costs as the Corporation continued to align its cost structure to reflect reduced activity levels. In 2018, the Corporation had other recoveries of $14 million relating to the recovery of transactions costs resulting from the termination of an arrangement agreement to acquire an oilfield services drilling contractor.

Precision recognizes right of use assets primarily from its leases of real estate and vehicles and equipment.

	Real Estate			Vehicles and Equipment			Total
Balance, January 1, 2019	$	—		$	—		$	—
Transition adjustments		58,635			14,829			73,464
Additions		—			1,947			1,947
Derecognition		(29	)		—			(29	)
Depreciation		(4,055	)		(4,403	)		(8,458	)
Lease remeasurements		163			—			163
Effect of foreign currency exchange differences		(688	)		(257	)		(945	)
Balance, December 31, 2019	$	54,026		$	12,116		$	66,142

Precision’s real estate lease contracts often contain renewal options which may impact the determination of the lease term for purposes of calculating the lease obligation. If it is reasonably certain that a renewal option will be exercised, the renewal period is included in the lease term. When entering into a lease, Precision assesses whether it is reasonably certain renewal options will be exercised. Reasonable certainty is established if all relevant facts and circumstances indicate an economic incentive to exercise the renewal option. For the majority of its real estate leases, Precision is reasonably certain it will exercise its renewal option. Accordingly, the renewal period has been included in the lease term used to calculate the lease obligation.

For the period ended December 31, 2019, Precision had total cash outflows of $10 million in relation to its lease obligations.

The Corporation has commitments under various lease agreements, primarily for real estate and vehicles and equipment. Terms of our real estate leases run for a period of one to 10 years while the vehicle leases are typically for terms of between three and four years. Expected non-cancellable operating lease payments are as follows:

Precision leases its rig equipment under long-term drilling contracts with terms ranging from one to five years. For the year ended December 31, 2019, approximately 59% of our total contract drilling revenue pertained to drilling rigs working under term contracts. At December 31, 2019, the net book value of the underlying rig equipment subject to long-term drilling contracts was $1 billion.

The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after December 31, 2019.

In May 2017 shareholders approved an omnibus equity incentive plan (Omnibus Plan) that allows the Corporation to settle short-term incentive awards (annual bonus) and long-term incentive awards (options, performance share units and restricted share units) issued on or after February 8, 2017 in voting shares of Precision (either issued from treasury or purchased in the open market), cash, or a combination of both. Precision intends to settle all short-term incentive, restricted share unit and non-executive performance share unit awards issued under the Omnibus Plan in cash and to settle performance share awards issued to senior executives and all options in voting shares. No further grants will be made under the legacy stock option plan, performance share unit plan or restricted share unit plan.

	Restricted Share Units			Performance Share Units				Non- Management Directors’ DSUs				Total
Balance, December 31, 2017	$	6,950			$	11,407			$	3,512			$	21,869
Expensed during the period		5,223				398				769				6,390
Payments		(6,764	)			(7,284	)			(1,800	)			(15,848	)
Balance, December 31, 2018		5,409				4,521				2,481				12,411
Expensed during the period		5,755				1,583				855				8,193
Payments		(3,846	)			(3,246	)			—				(7,092	)
Balance, December 31, 2019	$	7,318			$	2,858			$	3,336			$	13,512
Current	$	3,956			$	726			$	—			$	4,682
Long-term		3,362				2,132				3,336				8,830
	$	7,318			$	2,858			$	3,336			$	13,512

Precision has two cash-settled share based incentive plans for officers and other eligible employees. Under the Restricted Share Unit (RSU) incentive plan, shares granted to eligible employees vest annually over a three-year term. Vested shares are automatically paid out in cash at a value determined by the fair market value of the shares at the vesting date. Under the Performance Share Unit (PSU) incentive plan, shares granted to eligible employees vest at the end of a three-year term. Vested shares are automatically paid out in cash in the first quarter following the vested term at a value determined by the fair market value of the shares at the vesting date and based on the number of performance shares held multiplied by a performance factor that ranges from zero to two times. The performance factor is based on Precision’s share price performance compared to a peer group over the three-year period.

A summary of the RSUs and PSUs outstanding under these share based incentive plans is presented below:

	RSUs Outstanding			PSUs Outstanding
December 31, 2017		2,796,858			5,726,259
Granted		2,918,912			1,292,550
Redeemed		(1,404,284	)		(2,137,163	)
Forfeited		(255,572	)		(338,656	)
December 31, 2018		4,055,914			4,542,990
Granted		4,187,350			2,038,900
Redeemed		(1,505,683	)		(1,322,758	)
Forfeited		(399,518	)		(1,923,782	)
December 31, 2019		6,338,063			3,335,350

Precision has a deferred share unit (DSU) plan for non-management directors whereby fully vested DSUs are granted quarterly based on an election by the non-management director to receive all or a portion of his or her compensation in DSUs. These DSUs are redeemable in cash or for an equal number of common shares upon the director’s retirement. The redemption of DSUs in cash or common shares is solely at Precision’s discretion. Non-management directors can receive a lump sum payment or two separate payments any time up until December 15 of the year following retirement. If the non-management director does not specify a redemption date, the DSUs will be redeemed on a single date six months after retirement. The cash settlement amount is based on the weighted average trading price for Precision’s shares on the Toronto Stock Exchange for the five days immediately prior to payout. A summary of the DSUs outstanding under this share based incentive plan is presented below:

Under this plan, the exercise price of each option equals the fair market value of the option at the date of grant determined by the weighted average trading price for the five days preceding the grant. The options are denominated in either Canadian or U.S. dollars, and vest over a period of three years from the date of grant, as employees render continuous service to the Corporation, and have a term of seven years.

Canadian Share Options	Options Outstanding			Range of Exercise Prices	Weighted Average Exercise Price		Options Exercisable
December 31, 2017		4,900,360		$ 4.46 – 14.50	$	8.50		3,734,019
Granted		490,200		4.35 – 4.35		4.35
Forfeited		(657,404	)	10.44 – 14.50		10.58
December 31, 2018		4,733,156		4.35 – 14.31		7.78		3,786,473
Forfeited		(711,572	)	7.15 – 10.67		10.51
December 31, 2019		4,021,584		$ 4.35 – 14.31	$	7.29		3,569,069

U.S. Share Options	Options Outstanding			Range of Exercise Prices (US$)	Weighted Average Exercise Price (US$)		Options Exercisable
December 31, 2017		5,558,621		$ 3.21 – 15.21	$	6.16		2,891,808
Granted		1,569,250		3.44 – 3.62		3.45
Exercised		(66,000	)	3.21 – 3.21		3.21
Forfeited		(996,021	)	3.21 – 15.21		8.08
December 31, 2018		6,065,850		3.21 – 10.74		5.17		3,224,078
Granted		599,300		2.56 – 2.56		2.56
Forfeited		(302,100	)	7.79 – 10.74		10.68
December 31, 2019		6,363,050		$ 2.56 – 9.18	$	4.67		4,348,824

No options were exercised in 2019. The weighted average share price at the date of exercise for the U.S. share options exercised in 2018 was US$4.02.

Canadian Share Options	Total Options Outstanding						Options Exercisable
Range of Exercise Prices:	Number		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number		Weighted Average Exercise Price
$ 4.35 – 6.99		1,105,400	$	4.41		4.04		778,595	$	4.44
7.00 – 8.99		1,533,334		7.32		2.59		1,407,624		7.32
9.00 – 14.31		1,382,850		9.57		0.56		1,382,850		9.57
$ 4.35 – 14.31		4,021,584	$	7.29		2.29		3,569,069	$	7.56

U.S. Share Options	Total Options Outstanding						Options Exercisable
Range of Exercise Prices (US$):	Number		Weighted Average Exercise Price (US$)		Weighted Average Remaining Contractual Life (Years)		Number		Weighted Average Exercise Price (US$)
$ 2.56 – 3.99		3,646,250	$	3.21		4.50		2,011,540	$	3.27
4.00 – 6.99		1,924,500		5.61		3.37		1,544,984		5.62
7.00 – 9.18		792,300		9.08		0.60		792,300		9.08
$ 2.56 – 9.18		6,363,050	$	4.67		3.67		4,348,824	$	5.17

The per option weighted average fair value of the share options granted during 2019 was $1.54 (2018 – $1.96) estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: average risk-free interest rate of 2.5% (2018 – 2%), average expected life of four years (2018 – four years), expected forfeiture rate of 5% (2018 – 5%) and expected volatility of 57% (2018 – 56%). Included in net earnings for the year ended December 31, 2019 is an expense of $2 million (2018 – $3 million).

Precision grants PSUs 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. These PSUs vest over a three year period and incorporate performance criteria established at the date of grant that can adjust the number of performance share units available for settlement from zero to two times the amount originally granted. A summary of the activity under this share based incentive plan is presented below:

The per unit weighted average fair value of the performance share units granted during 2019 was $4.11 (2018 – $6.22) estimated on the grant date using a Monte Carlo simulation and Black-Scholes option pricing model with the following assumptions: share price of $3.23 (2018 – $4.29), average risk-free interest rate of 2.3% (2018 – 2.3%), average expected life of three years (2018 – three years), average expected volatility of 56% (2018 – 59%), and an expected dividend yield of nil (2018 – nil). Included in net earnings for year ended December 31, 2019 is an expense of $12 million (2018 - $6 million).

Prior to January 1, 2012, Precision had a deferred share unit plan for non-management directors. Under the plan, fully vested deferred share units were granted quarterly based on an election by the non-management director to receive all or a portion of his or her compensation in deferred share units. These deferred share units are redeemable into an equal number of common shares any time after the director’s retirement. A summary of this share based incentive plan is presented below:

The Corporation has an employee share purchase plan to encourage employees to become Precision shareholders and to attract and retain people. Under the plan, eligible employees can contribute up to 10% of their regular base salary through payroll deduction with Precision matching 20% of the employee’s contribution. These contributions are used to purchase the Corporation’s shares in the open market. No vesting conditions apply. During 2019, the Corporation recorded compensation expense of $1 million (2018 – $1 million) related to this plan.

The provision for income taxes differs from that which would be expected by applying statutory Canadian income tax rates.

A reconciliation of the difference for the years ended December 31, is as follows:

		2019				2018
Loss before income taxes	$		(8,339	)	$		(323,596	)
Federal and provincial statutory rates			27	%			27	%
Tax at statutory rates	$		(2,252	)	$		(87,371	)
Adjusted for the effect of:
Non-deductible expenses			1,597				49,455
Non-taxable capital gains			(1,408	)			(845	)
Impact of foreign tax rates			(13,549	)			4,861
Withholding taxes			1,262				1,061
Taxes related to prior years			(1,975	)			3,803
Other			1,368				(290	)
Income tax recovery	$		(14,957	)	$		(29,326	)

In 2019, the Province of Alberta announced various reductions to corporate income tax rates, that when fully implemented over the next three years will decrease the provincial corporate income tax rate from 12% to 8% by 2022. The impact of this rate reduction is nominal and has been reflected in the current year tax recovery.

On December 22, 2017, the United States government enacted new tax legislation which, in addition to changing certain U.S. federal income tax laws, reduced the U.S. federal income tax rate from 35% to 21% effective January 1, 2018. The impact of the lower U.S. federal income tax rate on Precision’s U.S. subsidiaries was reflected as at December 31, 2017.

The net deferred tax liability is comprised of the tax effect of the following temporary differences:

		2019				2018
Deferred tax liability:
Property, plant and equipment and intangibles	$		426,934		$		467,109
Debt issue costs			3,280				3,534
Partnership deferrals			850				1,730
Other			7,926				5,722
			438,990				478,095
Offsetting of assets and liabilities			(413,601	)			(405,316	)
			25,389				72,779

Deferred tax assets:
Losses (expire from time to time up to 2038)			402,025				423,595
Long-term incentive plan			6,131				6,849
Other			10,169				11,752
			418,325				442,196
Offsetting of assets and liabilities			(413,601	)			(405,316	)
			4,724				36,880

Net deferred tax liability	$		20,665		$		35,899

Included in the deferred tax assets at December 31, 2019 is $5 million of tax-effected temporary differences related to the Corporation’s international operations and at December 31, 2018, $37 million related to the Corporation’s U.S. and international operations.

The Corporation has certain loss carryforwards in U.S. and international locations and capital loss carry forwards in Canada for which it is unlikely that sufficient future taxable income will be available. Accordingly, the Corporation has not recognized a deferred tax asset on these losses totaling $31 million and $33 million, respectively.

		Property, Plant and Equipment and Intangibles				Partnership Deferrals				Other Deferred Tax Liabilities				Losses				Debt Issue Costs				Long-Term Incentive Plan				Other Deferred Tax Assets				Net Deferred Tax Liability
Balance, December 31, 2017	$		454,613		$		(335	)	$		6,709		$		(368,133	)	$		3,352		$		(7,935	)	$		(11,182	)	$		77,089
Recognized in net loss			(9,667	)			2,065				(1,005	)			(30,660	)			182				1,325				(139	)			(37,899	)
Effect of foreign currency exchange differences			22,163				—				18				(24,802	)			—				(239	)			(431	)			(3,291	)
Balance, December 31, 2018	$		467,109		$		1,730		$		5,722		$		(423,595	)	$		3,534		$		(6,849	)	$		(11,752	)	$		35,899
Recognized in net earnings			(26,825	)			(880	)			2,216				7,874				(254	)			572				1,260				(16,037	)
Effect of foreign currency exchange differences			(13,350	)			—				(12	)			13,696				—				146				323				803
Balance, December 31, 2019	$		426,934		$		850		$		7,926		$		(402,025	)	$		3,280		$		(6,131	)	$		(10,169	)	$		20,665

At December 31, 2019, Precision had unrecognized tax benefits of $nil. At December 31, 2018, Precision had $2 million of unrecognized tax benefits that, if recognized, would have a favourable impact on Precision’s effective income tax rate in future periods. Precision classifies interest accrued on unrecognized tax benefits and income tax penalties as income tax expense. Included in the unrecognized tax benefit, as at December 31, 2018 was interest and penalties of $1 million.

At December 31, 2019, Precision had available $40 million (2018 – $40 million) and US$15 million (2018 – US$15 million) under secured operating facilities, and a secured US$30 million (2018 – US$30 million) facility for the issuance of letters of credit and

performance and bid bonds to support international operations. As at December 31, 2019 and 2018, no amounts had been drawn on any of the facilities. Availability of the $40 million and US$30 million facility were reduced by outstanding letters of credit in the amount of $26 million (2018 – $28 million) and US$2 million (2018 – US$2 million), respectively. The facilities are primarily secured by charges on substantially all present and future property of Precision and its material subsidiaries. Advances under the $40 million facility are available at the bank’s prime lending rate, U.S. base rate, U.S. LIBOR rate plus 80% of applicable margin, or 80% of the applicable margin for Banker’s Acceptances, or in combination, and under the US$15 million facility at the bank’s prime lending rate.

Precision maintains a provision for the deductible and uninsured portions of workers’ compensation and general liability claims. The amount accrued for the provision for losses incurred varies depending on the number and nature of the claims outstanding at the balance sheet dates. In addition, the accrual includes management’s estimate of the future cost to settle each claim such as future changes in the severity of the claim and increases in medical costs. Precision uses third parties to assist in developing the estimate of the ultimate costs to settle each claim, which is based on historical experience associated with the type of each claim and specific information related to each claim. The specific circumstances of each claim may change over time prior to settlement and, as a result, the estimates made as of the balance sheet dates may change.

In 2019, the Toronto Stock Exchange (“TSX”) approved Precision’s application to implement a Normal Course Issuer Bid (“NCIB”). Under the terms of the NCIB, Precision may purchase and cancel up to a maximum of 29,170,887 common shares, representing 10% of the public float of common shares at the time the NCIB was approved. The NCIB commenced on August 27, 2019 and will terminate no later than August 26, 2020. Purchases under the NCIB were made through the facilities of the TSX, the New York Stock Exchange and various other designated exchanges in accordance with applicable regulatory requirements at a price per common share representative of the market price at the time of acquisition. Pursuant to the NCIB, 16 million common shares were purchased and cancelled as of December 31, 2019 for $26 million. Subsequent to December 31, 2019, Precision purchased and cancelled an additional 3 million common shares, under the NCIB, for $5 million.

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

The Corporation has a defined contribution pension plan covering a significant number of its employees. Under this plan, the Corporation matches individual contributions up to 5% of the employee’s eligible compensation. Total expense under the defined contribution plan in 2019 was $13 million (2018 – $12 million).

Key management personnel are comprised of the directors and executive officers of the Corporation. Certain executive officers have entered into employment agreements with Precision that provide termination benefits of up to 24 months base salary plus up to two times targeted incentive compensation upon dismissal without cause.

At December 31, 2019, the Corporation had commitments to purchase property, plant and equipment totaling $113 million (2018 – $180 million). Payments of $25 million for these commitments are expected to be made in 2020, $53 million in 2021 and $35 million in 2022.

The Board of Directors is responsible for identifying the principal risks of Precision’s business and for ensuring the implementation of systems to manage these risks. With the assistance of senior management, who report to the Board of Directors on the risks of Precision’s business, the Board of Directors considers such risks and discusses the management of such risks on a regular basis.

Precision has exposure to the following risks from its use of financial instruments:

Accounts receivable includes balances from a large number of customers primarily operating in the oil and natural gas industry. The Corporation manages credit risk by assessing the creditworthiness of its customers before providing services and on an ongoing basis, and by monitoring the amount and age of balances outstanding. In some instances, the Corporation will take additional measures to reduce credit risk including obtaining letters of credit and prepayments from customers. When indicators of credit problems appear, the Corporation takes appropriate steps to reduce its exposure including negotiating with the customer, filing liens and entering into litigation. Precision’s most significant customer accounted for $12 million of the trade receivables amount at December 31, 2019 (2018 – $18 million).

The movement in the expected credit loss allowance during the year was as follows:

	2019				2018
	Gross		Provision for Impairment		Gross		Provision for Impairment
Not past due	$	144,292	$	1	$	175,277	$	—
Past due 0 – 30 days		47,965		8		64,351		—
Past due 31 – 120 days		19,166		28		25,032		71
Past due more than 120 days		1,303		892		1,399		1,399
	$	212,726	$	929	$	266,059	$	1,470

As at December 31, 2019 and 2018, all of Precision’s outstanding long-term debt bears fixed interest rates. As a result, Precision is not exposed to significant fluctuations in interest expense as a result of changes in interest rates. The Corporation would have exposure to interest rates if it were to draw upon its Senior Credit Facility.

The Corporation is primarily exposed to foreign currency fluctuations in relation to the working capital of its foreign operations and certain long-term debt facilities of its Canadian operations. The Corporation has no significant exposures to foreign currencies other than the U.S. dollar. The Corporation monitors its foreign currency exposure and attempts to minimize the impact by aligning appropriate levels of U.S. denominated debt with cash flows from U.S. based operations.

		2019								2018
		Canadian Operations				Foreign Operations				Canadian Operations				Foreign Operations
Cash	US	$	9,727		US	$	41,154		US	$	957		US	$	49,302
Accounts receivable			242				150,873				482				181,609
Accounts payable and accrued liabilities			(17,730	)			(86,324	)			(20,655	)			(122,417	)
Long-term liabilities, excluding long-term incentive plans⁽¹⁾			—				(7,669	)			—				(7,747	)
Net foreign currency exposure	US	$	(7,761	)	US	$	98,034		US	$	(19,216	)	US	$	100,747
Impact of $0.01 change in the U.S. dollar to Canadian dollar exchange rate on net earnings (loss)		$	(78	)		$	—			$	(192	)		$	—
Impact of $0.01 change in the U.S. dollar to Canadian dollar exchange rate on comprehensive loss		$	—			$	980			$	—			$	1,007

(1) Excludes U.S. dollar long-term debt that has been designated as a hedge of the Corporation’s net investment in certain self-sustaining foreign operations.

Liquidity risk is the exposure of the Corporation to the risk of not being able to meet its financial obligations as they become due. The Corporation manages liquidity risk by monitoring and reviewing actual and forecasted cash flows to ensure there are available cash resources to meet these needs. The following are the contractual maturities of the Corporation’s financial liabilities and other contractual commitments as at December 31, 2019:

	2020		2021		2022		2023		2024		Thereafter		Total
Accounts payable and accrued liabilities	$	199,478	$	—	$	—	$	—	$	—	$	—	$	199,478
Share based compensation		5,130		6,649		6,026		—		—		—		17,805
Long-term debt⁽¹⁾		32,463		85,215		—		447,792		399,545		480,112		1,445,127
Interest on long-term debt⁽²⁾⁽³⁾		95,427		95,196		89,888		88,442		52,562		35,633		457,148
Commitments		36,812		64,098		45,346		6,643		5,195		11,117		169,211
Total	$	369,310	$	251,158	$	141,260	$	542,877	$	457,302	$	526,862	$	2,288,769

(1) At December 31, 2019, Precision committed to redeem US$25 million of its 6.5% unsecured senior notes due 2021 in the first quarter of 2020.

(2) Calculated based on December 31, 2019 debt balance less first quarter unsecured senior notes redemptions, interest rates, and foreign exchange rates in effect as at December 31, 2019.

The carrying value 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. The fair value of the unsecured senior notes at December 31, 2019 was approximately $1,428 million (2018 – $1,548 million).

Financial assets and liabilities recorded or disclosed at fair value in the consolidated statements of financial position are categorized based on the level of judgment 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 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.

The Corporation’s strategy is to carry a capital base to maintain investor, creditor and market confidence and to sustain future development of the business. The Corporation seeks to maintain a balance between the level of long-term debt and shareholders’ equity to ensure access to capital markets to fund growth and working capital given the cyclical nature of the oilfield services sector. The Corporation strives to maintain a conservative ratio of long-term debt to long-term debt plus equity. As at December 31, 2019 and 2018, these ratios were as follows:

As at December 31, 2019, liquidity remained sufficient as Precision had $75 million (2018 – $97 million) in cash and access to the US$500 million Senior Credit Facility (2018 – US$500 million) and $98 million (2018 – $101 million) secured operating facilities. As at December 31, 2019, no amounts (2018 – US$ nil) were drawn on the Senior Credit Facility with availability reduced by US$25 million (2018 – US$28 million) in outstanding letters of credit. Availability of the $40 million secured operating facility and US$30 million secured facility for the issuance of letters of credit and performance and bid bonds were reduced by outstanding letters of credit of $26 million (2018 – $28 million) and US$2 million (2018 – US$2 million), respectively. There was no amount drawn on the US$15 million secured operating facility.

Precision presents expenses in the consolidated statements of earnings by function with the exception of depreciation and amortization, gain on asset disposals, loss on asset decommissioning and reversal of impairment of property, plant and equipment, which are presented by nature. Operating expense and general and administrative expense would include $282 million and $15 million (2018 – $358 million and $7 million), respectively, of depreciation and amortization, gain on asset disposals, loss on asset decommissioning and reversal of impairment of property, plant and equipment if the statements of earnings (loss) were presented purely by function. The following table presents operating and general and administrative expenses by nature:

	2019		2018
Wages, salaries and benefits	$	697,935	$	728,101
Purchased materials, supplies and services		429,365		422,359
Share based compensation		22,115		15,598
	$	1,149,415	$	1,166,058
Allocated to:
Operating expense	$	1,038,967	$	1,067,264
General and administrative		104,010		111,830
Restructuring		6,438		1,164
Other recoveries		—		(14,200	)
	$	1,149,415	$	1,166,058

The business and operations of the Corporation are complex and the Corporation has executed a number of significant financings, business combinations, acquisitions and dispositions over the course of its history. The computation of income taxes payable as a result of these transactions involves many complex factors as well as the Corporation’s interpretation of relevant tax legislation and regulations. The Corporation’s management believes that the provision for income tax is adequate and in accordance with IFRS and applicable legislation and regulations. However, there are tax filing positions that have been and can still be the subject of review by taxation authorities who may successfully challenge the Corporation’s interpretation of the applicable tax legislation and regulations, with the result that additional taxes could be payable by the Corporation.

The Corporation, through the performance of its services, product sales and business arrangements, is sometimes named as a defendant in litigation. The outcome of such claims against the Corporation is not determinable at this time; however, their ultimate resolution is not expected to have a material adverse effect on the Corporation.

The Corporation has entered into agreements indemnifying certain parties primarily with respect to tax and specific third-party claims associated with businesses sold by the Corporation. Due to the nature of the indemnifications, the maximum exposure under these agreements cannot be estimated. No amounts have been recorded for the indemnities as the Corporation’s obligations under them are not probable or estimable.

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
Assets
Cash	$	20,952	$	20,651	$	33,098	$	—		$	74,701
Other current assets		3,952		242,968		96,140		4			343,064
Intercompany receivables		82,101		2,205,834		67,377		(2,355,312	)		—
Investments in subsidiaries		4,535,625		30		—		(4,535,655	)		—
Property, plant and equipment		48,416		2,263,355		437,413		279			2,749,463
Intangibles		30,434		1,312		—		—			31,746
Right of use assets		23,070		39,267		3,805		—			66,142
Other long-term assets		—		—		6,595		(1,871	)		4,724
Total assets	$	4,744,550	$	4,773,417	$	644,428	$	(6,892,555	)	$	3,269,840
Liabilities and shareholders’ equity
Current liabilities	$	33,862	$	130,232	$	51,975	$	—		$	216,069
Intercompany payables and debt		2,217,790		84,901		52,621		(2,355,312	)		—
Long-term debt		1,427,181		—		—		—			1,427,181
Lease obligation		20,877		31,614		2,489		—			54,980
Other long-term liabilities		26,927		18,454		668		(1,871	)		44,178
Total liabilities		3,726,637		265,201		107,753		(2,357,183	)		1,742,408
Shareholders’ equity		1,017,913		4,508,216		536,675		(4,535,372	)		1,527,432
Total liabilities and shareholders’ equity	$	4,744,550	$	4,773,417	$	644,428	$	(6,892,555	)	$	3,269,840

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
Assets
Cash	$	28,626	$	37,138	$	30,862	$	—		$	96,626
Other current assets		4,798		308,450		93,166		3			406,417
Intercompany receivables		51,616		1,887,405		80,735		(2,019,756	)		—
Investments in subsidiaries		4,522,964		68		—		(4,523,032	)		—
Assets held for sale		—		19,658		—		—			19,658
Property, plant and equipment		55,430		2,541,060		441,509		613			3,038,612
Intangibles		33,548		1,853		—		—			35,401
Other long-term assets		—		46,620		5,479		(12,770	)		39,329
Total assets	$	4,696,982	$	4,842,252	$	651,751	$	(6,554,942	)	$	3,636,043
Liabilities and shareholders’ equity
Current liabilities	$	42,211	$	190,239	$	49,712	$	—		$	282,162
Intercompany payables and debt		1,918,306		60,101		41,349		(2,019,756	)		—
Long-term debt		1,706,253		—		—		—			1,706,253
Other long-term liabilities		88,983		13,160		503		(12,770	)		89,876
Total liabilities		3,755,753		263,500		91,564		(2,032,526	)		2,078,291
Shareholders’ equity		941,229		4,578,752		560,187		(4,522,416	)		1,557,752
Total liabilities and shareholders’ equity	$	4,696,982	$	4,842,252	$	651,751	$	(6,554,942	)	$	3,636,043

Condensed Consolidated Statement of Net Earnings (Loss) for the year ended December 31, 2019

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenue	$	92		$	1,341,624		$	210,292		$	(10,688	)	$	1,541,320
Operating expense		56			909,898			139,701			(10,688	)		1,038,967
General and administrative		38,418			57,119			8,473			—			104,010
Restructuring		2,822			3,616		—			—				6,438
Earnings (loss) before income taxes, equity in earnings of subsidiaries, gain on redemption and repurchase of unsecured senior notes, finance charges, foreign exchange, reversal of impairment of property, plant and equipment, loss on asset decommissioning, gain on asset disposals and depreciation and amortization		(41,204	)		370,991			62,118			—			391,905
Depreciation and amortization		13,272			262,914			57,205			225			333,616
Gain on asset disposals		(47	)		(50,439	)		(255	)		—			(50,741	)
Loss on asset decommissioning		—			20,263			—			—			20,263
Reversal of impairment of property, plant and equipment		—			(5,810	)		—			—			(5,810	)
Foreign exchange		(8,499	)		(758	)		535			—			(8,722	)
Finance charges		118,775			(354	)		32			—			118,453
Gain on redemption and repurchase of unsecured senior notes		(6,815	)		—			—			—			(6,815	)
Equity in earnings of subsidiaries		(102,114	)	—			—				102,114		—
Earnings (loss) before income taxes		(55,776	)		145,175			4,601			(102,339	)		(8,339	)
Income taxes		(62,619	)		44,809			2,853			—			(14,957	)
Net earnings (loss)	$	6,843		$	100,366		$	1,748		$	(102,339	)	$	6,618

Condensed Consolidated Statement of Net Loss for the year ended December 31, 2018

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Revenue	$	104		$	1,356,913		$	191,131		$	(6,959	)	$	1,541,189
Operating expense		83			949,451			124,689			(6,959	)		1,067,264
General and administrative		52,638			48,748			10,444			—			111,830
Restructuring		—			1,164			—			—			1,164
Other recoveries		(14,200	)		—			—			—			(14,200	)
Earnings (loss) before income taxes, equity in loss of subsidiaries, gain on redemption and repurchase of unsecured senior notes, finance charges, foreign exchange, impairment of goodwill, gain on asset disposals and depreciation and amortization		(38,417	)		357,550			55,998			—			375,131
Depreciation and amortization		12,196			304,070			60,562			216			377,044
Gain on asset disposals		(5,314	)		(6,051	)		(19	)		—			(11,384	)
Impairment of goodwill		—			207,544			—			—			207,544
Foreign exchange		4,819			(443	)		(359	)		—			4,017
Finance charges		126,758			(233	)		653			—			127,178
Gain on redemption and repurchase of unsecured senior notes		(5,672	)		—			—			—			(5,672	)
Equity in loss of subsidiaries		168,975			—			—			(168,975	)		—
Loss before income taxes		(340,179	)		(147,337	)		(4,839	)		168,759			(323,596	)
Income taxes		(46,125	)		13,863			2,936			—			(29,326	)
Net loss	$	(294,054	)	$	(161,200	)	$	(7,775	)	$	168,759		$	(294,270	)

Condensed Consolidated Statement of Comprehensive Income (Loss) for the year ended December 31, 2019

Condensed Consolidated Statement of Comprehensive Income (Loss) for the year ended December 31, 2018

Condensed Consolidated Statement of Cash Flow for the year ended December 31, 2019

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Cash provided by (used in):
Operations	$	(189,376	)	$	480,215		$	(2,680	)	$	—		$	288,159
Investments		408,753			(56,937	)		(15,337	)		(410,979	)		(74,500	)
Financing		(226,379	)		(438,350	)		21,936			410,979			(231,814	)
Effect of exchange rate changes on cash and cash equivalents		(672	)		(1,415	)		(1,683	)		—			(3,770	)
Increase (decrease) in cash and cash equivalents		(7,674	)		(16,487	)		2,236			—			(21,925	)
Cash and cash equivalents, beginning of year		28,626			37,138			30,862			—			96,626
Cash and cash equivalents, end of year	$	20,952		$	20,651		$	33,098		$	—		$	74,701

Condensed Consolidated Statement of Cash Flow for the year ended December 31, 2018

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Cash provided by (used in):
Operations	$	(102,901	)	$	351,782		$	44,453		$	—		$	293,334
Investments		277,501			(75,740	)		(16,253	)		(286,302	)		(100,794	)
Financing		(169,085	)		(247,017	)		(39,285	)		286,302			(169,085	)
Effect of exchange rate changes on cash and cash equivalents		2,268			2,691			3,131			—			8,090
Increase (decrease) in cash and cash equivalents		7,783			31,716			(7,954	)		—			31,545
Cash and cash equivalents, beginning of year		20,843			5,422			38,816			—			65,081
Cash and cash equivalents, end of year	$	28,626		$	37,138		$	30,862		$	—		$	96,626

		Ownership Interest
	Country of Incorporation	2019		2018
Precision Limited Partnership	Canada		100		100
Precision Drilling Canada Limited Partnership	Canada		100		100
Precision Diversified Oilfield Services Corp.	Canada		100		100
Precision Directional Services Ltd.	Canada		100		100
Precision Drilling (US) Corporation	United States		100		100
Precision Drilling Holdings Company	United States		100		100
Precision Drilling Company LP	United States		100		100
Precision Completion & Production Services Ltd.	United States		100		100
Precision Directional Services, Inc.	United States		100		100
Grey Wolf Drilling Limited	Barbados		100		100
Grey Wolf Drilling (Barbados) Ltd.	Barbados		100		100

/s/ Kevin A. Neveu		/s/ Carey T. Ford

Kevin A. Neveu		Carey T. Ford
President and Chief Executive Officer		Senior Vice President and Chief Financial Officer
Precision Drilling Corporation		Precision Drilling Corporation

March 6, 2020		March 6, 2020

Years ended December 31, (Stated in thousands of Canadian dollars)	2019			2018
Net earnings (loss)	$	6,618		$	(294,270	)
Unrealized gain on translation of assets and liabilities of operations denominated in foreign currency		(106,781	)		175,630
Foreign exchange loss on net investment hedge with U.S. denominated debt, net of tax		79,022			(145,226	)
Comprehensive loss	$	(21,141	)	$	(263,866	)

	January 1, 2019
Operating lease commitment at December 31, 2018	$	67,392
Discounted using the incremental borrowing rate at January 1, 2019		54,517
Extension options reasonably certain to be exercised		18,947
Lease obligation	$	73,464

	2019			2018
Cost	$	53,416		$	51,912
Accumulated amortization		(21,670	)		(16,511	)
	$	31,746		$	35,401

Loan commitment fees related to Senior Credit Facility	$	2,272		$	2,307
Software		29,474			33,094
	$	31,746		$	35,401

	Loan Commitment Fees		Software		Total
Balance, December 31, 2017	$	11,018	$	573	$	11,591
Amortization expense		1,451		3,469		4,920
Balance, December 31, 2018		12,469		4,042		16,511
Amortization expense		737		4,422		5,159
Balance, December 31, 2019	$	13,206	$	8,464	$	21,670

	January 1, 2019
Right of use asset	$	73,464
Accounts payable and accrued liabilities		(2,800	)
Lease obligation		(73,464	)
Deficit		2,800

Balance, December 31, 2017	$	205,167
Impairment charge		(207,544	)
Exchange adjustment		2,377
Balance, December 31, 2018 and 2019	$	—

	Covenant	At December 31, 2019
Senior Credit Facility
Consolidated senior debt to consolidated covenant EBITDA⁽¹⁾	≤ 2.50		0.00
Consolidated covenant EBITDA to consolidated interest expense	≥ 2.50		3.39

Unsecured Senior Notes
Consolidated interest coverage ratio	≥ 2.00		3.30

	2019			2018
Interest:
Long-term debt	$	110,730		$	121,810
Lease obligation		3,389			—
Other		21			378
Income		(1,576	)		(1,444	)
Amortization of debt issue costs		5,889			6,434
Finance charges	$	118,453		$	127,178

	2019		2018
Less than one year	$	11,954	$	13,496
One to five years		33,566		36,639
More than five years		11,117		17,797
	$	56,637	$	67,932


Less than one year	$	297,425
One to five years		207,746
More than five years		12,437
	$	517,608

Deferred Share Units	Outstanding
Balance December 31, 2017		953,277
Granted		474,766
Redeemed		(374,408	)
Balance December 31, 2018		1,053,635
Granted		738,619
Balance December 31, 2019		1,792,254

Executive Performance Share Units	Outstanding			Weighted Fair Value
December 31, 2017		1,159,000		$	6.00
Granted		2,082,800			6.22
Forfeited		(50,733	)		6.12
December 31, 2018		3,191,067			6.14
Granted		4,211,600			4.11
Forfeited		(25,767	)		6.02
December 31, 2019		7,376,900			4.98

	Workers’ Compensation
Balance December 31, 2017	$	13,232
Expensed during the year		3,359
Payment of deductibles and uninsured claims		(4,271	)
Effects of foreign currency exchange differences		1,053
Balance December 31, 2018		13,373
Expensed during the year		4,047
Payment of deductibles and uninsured claims		(4,915	)
Effects of foreign currency exchange differences		(639	)
Balance December 31, 2019	$	11,866

(a) Authorized	–	unlimited number of voting common shares
	–	unlimited number of preferred shares, issuable in series, limited to an amount equal to one half of the issued and outstanding common shares

(b) Issued

Common shares	Number			Amount
Balance, December 31, 2017		293,238,858		$	2,319,293
Issued on redemption of non-management directors' DSUs		476,978			2,609
Options exercised – cash consideration		66,000			275
– reclassification from contributed surplus		—			103
Balance, December 31, 2018		293,781,836		$	2,322,280
Share repurchase		(16,482,032	)		(25,902	)
Balance, December 31, 2019		277,299,804		$	2,296,378

	2019		2018
Net earnings (loss) – basic and diluted	$	6,618	$	(294,270	)

(Stated in thousands)	2019		2018
Weighted average shares outstanding – basic		290,782		293,560
Effect of stock options and other equity compensation plans		6,397		—
Weighted average shares outstanding – diluted		297,179		293,560

	Unrealized Foreign Currency Translation Gains (Losses)			Foreign Exchange Gain (Loss) on Net Investment Hedge			Accumulated Other Comprehensive Income
December 31, 2017	$	440,733		$	(309,123	)	$	131,610
Other comprehensive income		175,630			(145,226	)		30,404
December 31, 2018		616,363			(454,349	)		162,014
Other comprehensive loss		(106,781	)		79,022			(27,759	)
December 31, 2019	$	509,582		$	(375,327	)	$	134,255

	2019		2018
Salaries and other benefits	$	8,747	$	6,732
Equity settled share based compensation		9,047		5,562
Cash settled share based compensation		1,432		722
	$	19,226	$	13,016

	2019			2018
Balance at January 1,	$	1,470		$	2,596
Impairment loss recognized		72			483
Amounts written-off as uncollectible		(537	)		(416	)
Impairment loss reversed		(24	)		(1,247	)
Effect of movement in exchange rates		(52	)		54
Balance at December 31,	$	929		$	1,470

	2019		2018
Trade	$	211,797	$	264,589
Accrued trade		32,167		47,426
Prepaids and other		66,240		60,321
	$	310,204	$	372,336

	2019		2018
Accounts payable	$	91,468	$	129,493
Accrued liabilities:
Payroll		54,334		73,682
Other		53,676		71,314
	$	199,478	$	274,489