Precision Drilling Corporation (
Q3 2010 Earnings Call
October 21, 2010 2 pm ET
David Wehlmann - EVP of IR
Rob McNally - EVP & CFO
Kevin Neveu - CEO
Doug Strong - President, Completion & Production Services
Kevin Lo - FirstEnergy
Nima Billou - Bloom Investment
Mike Urban - Deutsche Bank
Dana Benner - Stifel Nicolaus
John Daniel - Simmons & Company
John Daniel - Simmons & Company
John Tasdemir - Canaccord Genuity
Roger Serin - TD Securities
Brian Purdy - National Bank Financials
Andrew Bradford - Raymond James
Victor Marchand - RBC Capital Markets
Jim Cantrell - Barclays
Jeff Mochoruk - Cormark Securities
Todd Garman - Peter's & Company
Previous Statements by PDS
» Precision Drilling Trust Q2 2010 Earnings Call Transcript
» Precision Drilling Trust Q4 2009 Earnings Call Transcript
» Precision Drilling Trust Q3 2007 Earnings Call Transcript
Good afternoon ladies and gentlemen and welcome to the Precision Drilling Corporation third quarter 2010 conference call and webcast. I would now like to turn the meeting over to Mr. David Wehlmann, Executive Vice President of Investor Relations. Please go ahead, sir.
Thank you. Good afternoon, everyone. I would also like to welcome you to Precision Drilling Corporation's third quarter 2010 conference call and webcast. Participating today on the call with me are Kevin Neveu, our Chief Executive Officer; Doug Strong, our President of Completion and Production Services; and Rob McNally our Executive Vice President and Chief Financial Officer.
Through the news release earlier today Precision Drilling Corporation reported on third quarter 2010 results. Please note that the financial figures are in Canadian dollars unless otherwise indicated. Some of the comments today will refer to non-GAAP measures such as EBITDA and operating earnings. Please see our press release for additional disclosure on these non-GAAP measures.
Our comments today will also include statements reflecting Precision's views about events and their potential impact on the Corporation's business, operations, structure, balance sheet and financial results, which are forward-looking statements. There are risks and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking information and statements. Please see our press release and other regulatory filings for more information on forward-looking statements and these risk factors.
Rob McNally will begin today's call with a brief overview of the third quarter operating results and our capital expenditure plans. Kevin Neveu will then provide a drilling operations update and our outlook going forward. Doug Strong will follow Kevin with a brief overview of the completions and production segment and after that we will open the call up for questions.
Before I turn it over to Rob I would like to comment that we are pleased with the quality results of this quarter despite the overhang in the market of low natural gas prices. Oil and liquids rich natural gas drilling in service activity are driving results for precision in both the Unites States and Canada. Our comments today will reinforce that and provide examples of the importance of oil in the markets today.
Rob over to you.
Thanks, David. As David mentioned, Precision had a very solid quarter. We reported net earnings of $61 million or $0.21 per diluted share on revenues of $359 million for the third quarter. These results do include an $18 million foreign exchange gain which equates to about $0.05 per share relating to our debt being primarily US dollar denominated.
Our Q3 2010 EBITDA was $113 million, which represents a 31% increase over the $86 million achieved in the third quarter of 2009. The improved third quarter results primarily reflect increased utilization. Activity levels have increased meaningfully with the continuation of positive momentum building from the beginning of the year.
Drilling days increased 62% in Canada and 76% in the US while service hours were up 42% over the third quarter of 2009. Abnormally wet weather in Canada restricted rig mobility and operating days for Precision's Canadian drilling and well service operations, otherwise Canadian results would have been meaningfully better.
In the US, the average land rig count for the third quarter of 2010 was 1,590 compared to 927 in the third quarter of 2009. The average rig count in Canada was up 94% with the Q3 2010 at 359 versus 185 in the prior year period.
Combined Precision averaged 176 rigs operating in the third quarter of 2010 versus 130 in the third quarter of 2009. Currently in Canada Precision's active rig count stands at a 119 rigs after averaging 82 during the third quarter. Precision's US and international rig count is currently at 101 after averaging 94 rigs working in US and Mexico during the third quarter.
In the quarter we had 35 rigs working under term contracts in Canada representing 42% of our active Canadian rigs. In the third quarter of 2009 Precision also had 35 rigs working under term contract although it represented 69% of our active rigs in third quarter of 2009. In the US for the third quarter of 2010 we had an average of 53 rigs under term contracts representing 57% of active rigs versus 41 rigs under contract and 77% in the prior year period.
In the third quarter Precision further strengthened its balance sheet. Already $75 million debt repayment in the second quarter, the company made a voluntary debt repayment of $13 million reducing our total debt to $773 million. Net of our $209 million of cash, Precision's net debt position is currently $564 million. Liquidity increased with positive cash flow from operations partially offset by debt reduction and increase in working capital and the addition of CapEx resulting it in a cash increase of $23 million for the quarter.
To capitalize on market opportunities Precision has increased its anticipated capital expenditures by $29 million to a total of $218 million for the full year of 2010. That's broken into $60 million planned for maintenance and infrastructure spending, $84 million for rig upgrades, $74 million for expansion capital spending and then there is an additional $82 million that will roll over into 2011 for expansion projects which was initiated in 2010. I want to comment briefly on conversion to IFRS as this has been previously disclosed the transition to IFRS as of January 1, 2011.
We are on schedule with the project and progressing well. There will be a number of changes which are primarily in non-cash to our financial statements once IFRS is implemented. As outlined in our press release, the largest impacts will be the following. Under IFRS 3 we intend to restate the December 2008 acquisition at Grey Wolf. This is expected to reduce Precision balance sheet by the amount of that the goodwill recorded on the acquisition of $465 million with an equivalent reduction in shareholders capital.