(Canadian dollars, except as noted)
This news release contains "forward-looking information and
statements" within the meaning of applicable securities laws. For a
full disclosure of the forward-looking information and statements
and the risks to which they are subject, see the "Cautionary
Statement Regarding Forward-Looking Information and Statements"
later in this news release.
Precision Drilling Trust (the "Trust" or "Precision") reported
revenue of $253 million for the third quarter of 2009, an 11%
decrease from the third quarter of 2008. Earnings before interest,
taxes, depreciation and amortization and foreign exchange
("EBITDA") were $86 million for the third quarter of 2009, a 28%
decline from the third quarter of 2008. The decrease in revenue and
EBITDA is due to significantly lower customer demand on an
industry-wide basis, partially mitigated by Precision's acquisition
in December 2008 of Grey Wolf, Inc ("Grey Wolf"), an onshore
drilling contractor in the United States with 123 rigs including
two in Mexico. Precision reported net earnings of $72 million or
$0.25 per diluted unit for the quarter ended September 30, 2009, a
decrease of 13% compared to $82 million or $0.61 per diluted unit
in the third quarter of 2008. Earnings in the third quarter of 2009
were reduced by a $27 million increase in finance charges. Earnings
were increased in the quarter by a $63 million foreign exchange
gain, or after-tax $0.19 per diluted unit. Net earnings per unit
were impacted by the 119% increase in units outstanding in the
one-year period ending September 30, 2009.
For the nine months ended September 30, 2009, net earnings were
$187 million or $0.75 per diluted unit, a decrease of $24 million
or 11% compared to $210 million or $1.56 per diluted unit for the
first nine months of 2008. Net earnings decreased due to increased
financing charges and lower utilization rates throughout North
America partially offset by growth in Precision's rig fleet in the
United States. Earnings were supported by high-margin term customer
contracts and a $105 million foreign exchange gain, or after-tax
$0.36 per diluted unit, but these favourable factors did not
entirely offset lower earnings from the sharp reduction in
equipment utilization and customer pricing compared to 2008
results. Rig utilization days for the first nine months of 2009
were 4% higher than the same period of 2008 due to growth in
Precision's United States operations. EBITDA for the first nine
months of 2009 totaled $314 million, a 4% increase from $302
million for the first nine months of 2008.
On a sequential basis, third quarter 2009 revenue increased by
21% over the second quarter. The increase was attributed to higher
rig activity due to seasonality in Canada, demand for services on
oil wells and early indications that drilling for natural gas may
have bottomed in the second quarter. EBITDA margin as a percentage
of revenue increased 6% over the second quarter due to the
influence of higher rig activity and high margin term contracts
partially offset by lower customer pricing on new work. During the
quarter 61% of overall drilling rig utilization days were generated
from term contracts with term contract utilization day
concentration in Canada at 42%, the United States at 78% and Mexico
at 100%.
"Precision, and for that matter the North American land drilling
industry, entered the third quarter with the lowest utilization and
customer demand levels of the decade." stated Kevin Neveu,
President and Chief Executive Officer. "Precision's third quarter
financial results demonstrate our ability to generate solid EBITDA
margins, complete new rig build programs on schedule and on budget,
and reduce spending quickly to conserve cash. Precision is poised
to exploit market opportunities as industry fundamentals
strengthen. The business trough that we, and the industry, are
working our way through has reinforced Precision's focus on our
Target Zero safety vision, integration of systems and processes in
our expanded United States operation and the execution of our 2009
business plan. These results reinforce our promise of high
performance, high value services to our customers.
"There was an increase in working rigs in both Canada and the
U.S. during the third quarter. In Canada, coming out of the spring
break up, Precision returned rigs to work and currently has 60
drilling rigs working. Precision believes that we have reached a
bottom in Canadian activity. One of the reasons for this belief is
that Canadian customers are interested in locking in today's
depressed day rates for the upcoming winter drilling season. While
we have experienced a seasonal pick-up in Canada and are encouraged
by customer demand in response to higher oil prices and certain
shale play opportunities, it is far too early to make the call for
a meaningful recovery.
"In the U.S., we have seen a very gradual increase in the rigs
working over the third quarter. Precision is earning revenue on 75
rigs today, which includes 65 working and 10 idle rigs that are
being paid at contracted rates. Precision's very strong term
contract position anchored our third quarter results. However due
to rig oversupply, day rate pressure persists in many areas of the
market. One of Precision's success stories is in the Marcellus
shale region in Pennsylvania in which Precision has been very
successful penetrating this rapidly growing market. A few months
ago we had two rigs working in this area, today we have eight rigs
working and are planning to be up to 12 rigs working in the next
six months. Also, we have completed negotiations with a major
exploration and development company to reactivate two rigs and
relocate two rigs to Northwest Louisiana and one additional rig has
been reactivated for North Texas. All five of these rigs are being
used for horizontal shale gas drilling. Precision's high
performance, high value capabilities are ideally suited for all
North American shale gas opportunities.
"Sustained improvement in North American drilling markets will
be driven by customer demand resulting from increases in the
underlying commodity price of natural gas. We believe that due to
the dramatic reduction in drilling activity, natural gas production
declines will accelerate in Canada and the United States. In
Canada, natural gas production is down 20% from its highs in 2007
and continues to decline. In the U.S., production declines are
becoming evident and by the end of 2009 natural gas production is
expected to be down by 5% to 10% on a year-over-year comparison.
These supply factors, coupled with improvements in the global
economy, should lead to strengthening natural gas prices and a need
to replace declining production through the drill bit. Precision
has the experienced personnel, geographically positioned high
performance rigs and the financial capacity to excel in the
eventual upturn" concluded Mr. Neveu.
SELECT FINANCIAL AND OPERATING INFORMATION
(stated in
thousands of
Canadian Three months ended Nine months ended
dollars, September 30, September 30,
except per % %
unit amounts) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue $253,337 $285,639 (11.3) $911,379 $766,842 18.8
EBITDA(1) 85,739 118,820 (27.8) 314,386 301,741 4.2
Net earnings 71,696 82,349 (12.9) 186,588 210,354 (11.3)
Cash provided
by operations 19,948 3,241 515.5 434,098 261,006 66.3
Capital
spending 14,198 75,457 (81.2) 179,443 130,269 37.7
Distributions
declared - 49,046 (100.0) 6,408 147,137 (95.6)
Net earnings
per unit: (2)
Basic 0.26 0.61 (57.4) 0.77 1.56 (50.6)
Diluted 0.25 0.61 (59.0) 0.75 1.56 (51.9)
Distributions
declared per unit - 0.39 (100.0) 0.04 1.17 (96.6)
Contract drilling
rig fleet 390 249 56.6 390 249 56.6
Drilling rig
utilization days:
Canada 4,653 10,048 (53.7) 14,634 25,422 (42.4)
United States 4,835 2,197 120.1 16,773 4,759 252.4
International 176 - nm 176 143 23.1
Service rig fleet 229 229 - 229 229 -
Service rig
operating hours 49,581 87,995 (43.7) 147,253 255,621 (42.4)
----------------------------------------------------------------------------
(1) EBITDA is a non-GAAP measure and is defined as earnings before interest,
taxes, depreciation and amortization and foreign exchange. See "NON-GAAP
MEASURES".
(2) Net earnings per basic and diluted unit have been adjusted to reflect
the rights offering completed in the second quarter of 2009. See note 10
to the unaudited consolidated financial statements.
nm - calculation not meaningful.
FINANCIAL POSITION AND RATIOS
(Stated in
thousands of
Canadian dollars, September 30, December 31, September 30,
except ratios) 2009 2008 2008
----------------------------------------------------------------------------
Working capital $ 279,201 $ 345,329 $ 192,670
Working capital
ratio 2.5 2.0 2.3
Long-term debt
(1) $ 795,560 $ 1,368,349 $ 231,784
Total long-term
financial
liabilities $ 822,554 $ 1,399,300 $ 238,900
Total assets $ 4,360,861 $ 4,833,702 $ 1,974,135
Long-term debt to
long-term debt
plus equity ratio 0.23 0.37 0.14
----------------------------------------------------------------------------
(1) Excludes current portion of long-term debt and is net of unamortized
debt issue costs.
During the first three quarters of 2009, Precision focused on
reducing debt levels and strengthening its capital structure and as
a result Precision took decisive steps to conserve cash and improve
Precision's financial position. Precision repaid long-term debt by
$479 million during the first three quarters of 2009 while
maintaining a strong working capital balance of $279 million at
September 30, 2009. Cash continues to be conserved through the
indefinite suspension of cash distributions to unitholders and cost
reduction measures that include personnel reductions and operating
facility consolidation. Planned upgrade capital expenditures on
existing equipment were significantly reduced and all of the new
Super Series rigs from the 18 rig 2008 build program have been
completed.
As announced for the second quarter of 2009, Precision entered
into a series of financing transactions that raised approximately
$380 million used to strengthen the Trust's balance sheet by
refinancing and restructuring debt incurred in the acquisition of
Grey Wolf. The financing transactions lowered the Trust's overall
debt level, reduced and provided certainty to an overall blended
interest rate of about 8% and right sized loan facilities to
provide liquidity to fund future requirements.
Revenue of $253 million in the third quarter of 2009 was 11%
lower than the prior year period. The decrease was due to the
impact of global economic conditions and low commodity prices that
led to a sharp reduction in drilling and servicing of oil and
natural gas wells. The decrease was partially mitigated by
Precision's 2008 expansion initiatives through organic and
acquisition growth in the United States onshore contract drilling
rig market. Precision marketed an average United States fleet of
160 drilling rigs during the third quarter of 2009 as compared to a
fleet of 24 drilling rigs in 2008. Revenue in Precision's Canadian
Contract Drilling Services division decreased 46% while revenue
declined 49% in the Canadian based Completion and Production
Services segment compared to the third quarter of 2008. The mix of
drilling rigs under term contracts and on complex well-to-well
programs supported relatively strong average rig day rate results
in the quarter.
The Trust reported EBITDA for the third quarter of $86 million
compared with $119 million for the third quarter of 2008. EBITDA is
not a recognized financial measure under Generally Accepted
Accounting Principles ("GAAP") as discussed in the section
"Non-GAAP Measures and Reconciliations" in this report. EBITDA
margin, calculated as EBITDA as a percentage of revenues, was 34%
for the third quarter of 2009 compared to 42% for the same period
in 2008. The 8% EBITDA margin decrease was attributable to
decreased customer pricing and lower overall utilization in both
operating segments offset by margin from idle but contracted rigs
in the United States and Canada. Consistent with the previous
quarter, Precision's term contract position with customers, a
highly variable operating cost structure and economies achieved
through vertical integration of the supply chain and maintenance
facilities served to limit the declines.
In the Contract Drilling Services segment Precision currently
markets 390 contract drilling rigs, including 226 in Canada, 161 in
the United States, three rigs in international locations and 96
drilling rig camps. Precision's Completion and Production Services
segment markets 229 service rigs, 29 snubbing units, 78 wastewater
treatment units and a broad mix of rental equipment.
During the quarter an average of 51 drilling rigs worked in
Canada, 53 in the United States and two in Mexico totaling 106 rigs
working. This compares with an average of 77 rigs working in the
second quarter of 2009. Drilling activity was subject to very weak
customer demand in the third quarter principally due to low gas
prices.
The first three quarters of 2009 continued to reflect a weak
global economy and resulting low energy commodity prices. While the
economy has begun to show signs of stabilization and oil pricing
has recovered somewhat, there remains considerable demand
uncertainty for both oil and natural gas and this has triggered
very low underlying customer demand for oilfield services.
At the end of the quarter these conditions persist as the
fundamentals for natural gas continued to show weakness as a result
of record high storage levels in the United States. The supply
capacity was delivered through drilling activity peaking in 2008 in
many regions within the United States, especially unconventional
resource plays in Texas and Louisiana. A significant portion of
these wells, and the associated gas production gains, are subject
to high depletion rates and the recent steep decline in drilling is
beginning to show in recently reported production levels.
During the quarter two new rigs were deployed in the United
States while in Canada and internationally, there was no change in
rig counts as Precision continued to operate two drilling rigs in
Mexico and has one idle rig in Chile. Precision will be
opportunistic in deploying rigs to international markets with
moderate new capital investment requirements and contracts that
reward high value high performance services.
The industry and Precision have been experiencing declining
utilization as customer spending has been dramatically reduced
because of lower oil and natural gas commodity prices. For the
third quarter of 2009 AECO natural gas spot prices averaged $2.93
per MMBtu, a decrease of 62% over the third quarter 2008 average of
$7.80 per MMBtu. In the United States, Henry Hub natural gas spot
prices averaged US$3.15 per MMBtu in the third quarter of 2009 a
decrease of 65% over the third quarter 2008 average of US$9.06 per
MMBtu. West Texas Intermediate crude oil averaged US$68.18 per
barrel during the quarter compared to US$118.68 per barrel in the
same period in 2008. The one-year forward price for North American
natural gas was also lower, trading in a range of about $4.50 to
$6.00 on Canadian and U.S. exchanges in the third quarter of 2009,
compared to a range of about $7.50 to $13.00 in the same quarter of
2008.
Third quarter commodity prices and lasting effects from the
global economic recession remain as harbingers for challenging
conditions, despite recent economic stabilization. Difficult
capital markets, a weakening United States currency and relatively
low natural gas commodity prices continue to have a negative impact
on the North American oilfield service industry. According to
industry sources, as at October 9, 2009, the United States active
land drilling rig count was down about 47% from the same period in
the prior year while the Canadian drilling rig count was down about
49%.
Summary for the three months ended September 30, 2009:
- The integration of the Grey Wolf acquisition in the United
States has proceeded on schedule with a new organizational
structure and financial systems in place throughout the quarter.
The roll-out of vertical business support through supply chain and
equipment management was initiated during the quarter and the
development of business scope and certain new processes will
continue through the fourth quarter of 2009 and into 2010.
- Revenue was $253 million, a decrease of $32 million or 11%
from the prior year quarter due to lower industry-wide customer
demand and pricing for most of Precision's services.
- Operating earnings were $55 million, a decrease of $41 million
or 42% from the third quarter in 2008. Operating earnings were 22%
of revenue, compared to 34% in 2008. Operating earnings is not a
recognized financial measure under GAAP as discussed in the section
"Non-GAAP Measures and Reconciliations" in this report.
- Capital expenditures for the purchase of property, plant and
equipment were $14 million in the third quarter, a decrease of $61
million over the same period in 2008, and included $10 million on
expansionary capital initiatives and $4 million on the upgrade of
existing assets. During the quarter two newly-built Super Series
drilling rigs were added to the fleet under long-term customer
contracts in the United States. This completes Precision's 2008 new
rig build program and upgrade capital spending continues to be
restricted at low levels to match with equipment utilization.
- Financial charges were $29 million, an increase of $27 million
from the prior year. This increase is due to credit facilities
entered into during the fourth quarter 2008, however, this
quarter's charges are down from $45 million in the second quarter
of this year due to refinancing completed in the second
quarter.
- A significant portion of Precision's secured credit facilities
are denominated in US dollars. During the quarter Precision
recorded an unrealized foreign exchange gain of $67 million
primarily due to a weakening of the US dollar compared to the
Canadian dollar and the effect on the financial statement
translation of long-term monetary items.
- General and administrative costs were $25 million an increase
of $12 million from the prior year due primarily to growth in
Precision's United States operations, professional fees for
advisory services and accruals for unit based compensation plans
partially offset by personnel reductions and reduced discretionary
expenses.
- Average revenue per utilization day for contract drilling rigs
in the third quarter of 2009 compared to the same period per day
2008 increased to US$22,497 from US$20,577 in the United States and
from $15,296 in 2008 to $18,209 in 2009 for Canada. The increase in
the revenue rates for Canada principally reflects $9 million in
revenue generated from idle but contracted rigs associated with
term customer contracts. The increase in revenue rates in the
United States reflects the new rig mix associated with the
acquisition, including turnkey operations. These figures include
US$9 million in revenue generated from idle but contracted rigs
associated with term customer contracts. Turnkey revenue was US$6
million generated from 117 utilization days. Within Precision's
Completion and Production Services segment, average hourly rates
for service rigs were $614 in the third quarter of 2009 compared to
$604 in the second quarter of 2009 and $675 for the third quarter
of 2008.
- Average operating costs per utilization day for drilling rigs
increased in the third quarter of 2009 to US$12,692 from the prior
year third quarter of US$10,289 in the United States and increased
marginally in Canada from $8,351 to $8,822. Within Precision's
Completion and Production Services segment, average hourly
operating costs for service rigs were $438 in the third quarter of
2009 compared to $420 in the third quarter of 2008. Costs were
slightly higher on Canadian drilling rigs due to fixed costs and an
average deeper fleet working offset by cost saving initiatives
implemented during the first and second quarters. In the United
States the increase was also impacted by turnkey operations where
there is a larger scope of drilling costs that the drilling
contractor is responsible for providing, with a commensurate
increase in revenue.
Summary for the nine months ended September 30, 2009:
- Precision lowered its debt to capitalization ratio from 0.37
at December 31, 2008 to 0.23 at September 30, 2009 with debt
repayment of $479 million from proceeds through three equity raises
and cash flow from operations in the first three quarters of 2009.
As at September 30, 2009 Precision had a cash balance of $178
million and in combination with access to its US$260 million
revolving credit facility and $25 million operating line, Precision
continues to carry sufficient liquidity.
- Revenue was $911 million, an increase of $145 million or 19%
from the prior year due to growth in Precision's United States
operations offset by lower activity levels and lower customer
pricing.
- Operating earnings were $212 million, a decrease of $29
million or 12% from 2008. Operating earnings were 23% of revenue,
compared to 31% in 2008.
- Capital expenditures for the purchase of property, plant and
equipment were $179 million in the first three quarters of 2009, an
increase of $49 million over the same period in 2008, and included
$158 million on expansionary capital initiatives and $21 million on
the upgrade of existing assets. During the first nine months 16
newly-built Super Series drilling rigs were added to the fleet
under long-term customer contracts, seven in Canada and nine in the
United States.
- Financial charges were $113 million, an increase of $106
million from the prior year due to debt service and refinancing
costs associated with acquisition growth late in the fourth quarter
of 2008. With the refinancing accomplished in the first half of
this year, finance charges are expected to be lower in future
quarters.
- Bad debt expense was $12 million for the nine month period and
the allowance for doubtful accounts totaled $18 million.
Creditworthiness remains a high priority as low energy commodity
prices, especially natural gas, create financial hardship for
certain customers.
- A significant portion of Precision's secured credit facilities
are denominated in US dollars. During the first three quarters
Precision recorded an unrealized foreign exchange gain of $118
million primarily due to a weakening of the US dollar compared to
the Canadian dollar and the effect on the translation of long-term
monetary items.
- General and administrative costs were $75 million, an increase
of $26 million from the prior year due primarily to acquisition
growth in Precision's United States operations partially offset by
personnel reductions and reduced discretionary expenses.
OUTLOOK
The foundation for higher natural gas demand may be taking root
now as early fourth quarter economic indicators provide the basis
for stability and positive momentum. Commodity prices have improved
on signs that global economies are no longer contracting and
unemployment rates are stabilizing. Oil continues to trade well
above its 52 week lows and has been a positive development for
active rig counts in Canada and the United States. North American
spot gas pricing since September 30, 2009 has recovered to the
mid-four dollar range and the one year forward strip now trades at
about six dollars. These are positive trends for customer cash
flows and this may reflect an inflection point from gas demand
uncertainty to growing concern over lower North American gas
supply.
Currently, with the recession negatively impacting energy demand
and with increased onshore domestic production, the United States
natural gas storage levels are at a record high level surpassing
the high end of the five-year average range and as at October 9,
2009 were 14% higher than storage volumes a year ago. The increase
in United States natural gas production, concerns over declines in
industrial gas consumption and the prospect of higher liquefied
natural gas ("LNG") imports continues to overshadow lower Canadian
imports and the precipitous drop in active North American rigs
drilling for natural gas. At current drilling levels, Precision
expects the United States supply of natural gas to show significant
declines over the next twelve months as United States production
has begun to drop off according to the latest available data.
Subject to demand, this should lead to higher commodity prices and
support a recovery in drilling activity.
With low equipment utilization, the competitive pressure on all
of Precision's service offerings remains, resulting in lower rates
for services. In the United States there has been a recent leveling
of rigs working and a seasonal increase in rigs working in Canada
though significantly lower than the second half of 2008. Precision
expects these low levels of utilization to persist into the fourth
quarter of 2009 and potentially longer depending on natural gas
prices. Customers have provided very little visibility regarding
their oilfield service plans and expenditures beyond the fourth
quarter of 2009. Precision expects EBITDA and EBITDA as a
percentage of revenue to continue to decline from first half 2009
levels, though fourth quarter Canadian levels should be higher than
third quarter 2009 levels as rigs return to service for certain
winter only drilling programs.
Precision continues to carry a strong portfolio of long-term
customer contracts that help mitigate the effects of the current
downturn. Precision expects to have an average of approximately 80
rigs under day work term contract in North America in the fourth
quarter of 2009 and an average of 72 for the first quarter of 2010.
These term contract totals include 10 rigs in the United States
that are currently not working but receiving margin revenue from
customers. In Canada, term contracted drilling rigs generate about
200 to 250 utilization days a year due to the seasonal nature of
well access whereas in the United States Precision expects about
350 utilization days in most regions.
For all of 2009, Precision expects to have an average of
approximately 94 rigs under term contract, with 55 rigs contracted
in the United States, 37 in Canada and two in Mexico. For 2010,
Precision's current position is to have an average of approximately
34 rigs in Canada under term contract and 28 in the United States
and one in Mexico, for a total of 63 for the full year. For the
calendar year of 2011, Precision expects an average of
approximately 36 rigs to be generating revenue under existing term
contracts, with 19 of these in Canada and 17 in the United States.
Precision's long-term contracts continue to be honoured by its
customers although in some cases, term revisions have been
negotiated within original economic terms or paid out.
Precision expects to keep non-expansion capital expenditures at
low levels during 2009. Capital expenditures totaled $179 million
in the first nine months of 2009 and are expected to be
approximately $210 million for the full year, with approximately
$40 million for upgrade capital and $170 million for previously
committed expansion capital. The expansion capital was primarily
for 16 new rigs placed into service in 2009 pursuant to completion
of the 2008 new rig build program.
Despite the persistence of near term challenges, the future of
the global oil and gas service industry remains promising. For
Precision, growth in the United States has positioned its rig fleet
in most of the onshore growth basins in North America and this is
expected to provide an opportunity to demonstrate its value to
customers through delivery of high performance, high value services
that deliver low customer well costs and strong relative margins to
Precision.
SEGMENTED FINANCIAL RESULTS
Precision's operations are reported in two segments. The
Contract Drilling Services segment includes the drilling rig, camp
and catering, oilfield supply, and manufacturing divisions. The
Completion and Production Services segment includes the service
rig, snubbing, rental, and wastewater treatment divisions.
Three months ended Nine months ended
(stated in September 30, September 30,
thousands of % %
Canadian dollars) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue:
Contract Drilling
Services $216,391 $212,567 1.8 $791,496 $547,938 44.4
Completion and
Production
Services 38,738 76,701 (49.5) 127,303 228,980 (44.4)
Inter-segment
eliminations (1,792) (3,629) 50.6 (7,420) (10,076) 26.4
----------------------------------------------------------------------------
$253,337 $285,639 (11.3) 911,379 $766,842 18.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings: (1)
Contract Drilling
Services $ 60,484 $ 79,389 (23.8) $221,536 $203,252 9.0
Completion and
Production
Services 4,536 21,604 (79.0) 17,411 64,277 (72.9)
Corporate and
other (9,659) (4,971) (94.3) (27,110) (26,347) (2.9)
----------------------------------------------------------------------------
$ 55,361 $ 96,022 (42.3) $211,837 $241,182 (12.2)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
(stated in
thousands of Three months ended Nine months ended
Canadian dollars, September 30, September 30,
except where % %
noted) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue $216,391 $212,567 1.8 $791,496 $547,938 44.4
Expenses:
Operating 117,200 112,121 4.5 439,513 288,559 52.3
General and
administrative 13,097 5,850 123.9 43,440 17,310 151.0
----------------------------------------------------------------------------
EBITDA (1) 86,094 94,596 (9.0) 308,543 242,069 27.5
Depreciation 25,610 15,207 68.4 87,007 38,817 124.1
----------------------------------------------------------------------------
Operating
earnings (1) $ 60,484 $ 79,389 (23.8) $ 221,536 $203,252 9.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings
as a percentage
of revenue 28.0% 37.3% 28.0% 37.1%
Drilling rig
revenue per
utilization
day in
Canada (2) $ 18,209 $ 15,296 19.0 $ 18,398 $ 15,882 15.8
Drilling rig
revenue per
utilization
day in the
United
States (2) US$ 22,497 US$ 20,577 9.3 US$ 24,344 US$ 21,541 13.0
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
(2) Includes revenue from idle but contracted rig days and/or rig contract
lump sum payouts.
Canadian onshore drilling Three months ended September 30,
statistics: (1) 2009 2008
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling rigs
(end of period) 226 865 220 879
Drilling rig operating days
(spud to release) 4,232 16,406 9,008 38,898
Drilling rig operating day
utilization 20% 21% 44% 48%
Number of wells drilled 584 2,004 1,444 5,270
Average days per well 7.2 8.2 6.2 7.4
Number of metres drilled (000s) 891 3,046 1,786 6,826
Average metres per well 1,525 1,520 1,237 1,295
Average metres per day 210 186 198 175
----------------------------------------------------------------------------
Canadian onshore drilling Nine months ended September 30,
statistics: (1) 2009 2008
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling rigs
(end of period) 226 865 220 879
Drilling rig operating days
(spud to release) 13,103 53,017 22,578 98,683
Drilling rig operating day
utilization 21% 22% 36% 41%
Number of wells drilled 1,666 5,909 3,307 11,964
Average days per well 7.9 9.0 6.8 8.2
Number of metres drilled
(000s) 2,487 8,482 4,334 16,060
Average metres per well 1,493 1,435 1,310 1,342
Average metres per day 190 160 192 163
----------------------------------------------------------------------------
(1) Canadian operations only.
(2) Canadian Association of Oilwell Drilling Contractors ("CAODC"),
Precision and Nickle's Daily Oil Bulletin - excludes non-CAODC
rigs and non-reporting CAODC members.
United States onshore
drilling statistics: (3) 2009 2008
Precision Industry(4) Precision Industry(4)
----------------------------------------------------------------------------
Average number of active
land rigs for quarters ended:
March 31 82 1,287 13 1,712
June 30 50 885 15 1,797
September 30 53 936 24 1,910
Year to date 61 1,036 17 1,806
----------------------------------------------------------------------------
(3) United States lower 48 operations only.
(4) Baker Hughes rig counts.
In the Contract Drilling Services segment, revenue for the third
quarter of 2009 increased by 2% to $216 million while EBITDA
decreased by 9% to $86 million compared to the same period in 2008.
The increase in revenue was due to acquisition growth in December,
2008. The decline in EBITDA was due to lower rig utilization days
in Canada. Activity in North America was impacted by lower customer
demand due to continued low natural gas and oil prices. Drilling
rig revenue per utilization day in Canada was up 19% over the prior
year due to a greater percentage of contracted rig days compared to
prior year, revenue from idle but contracted rigs and
proportionately more activity from the Super Triple and Super
Single rigs which typically receive a day rate premium. During the
quarter 42% of Precision's utilization days in Canada and 78% of
the utilization days in the United States were generated from rigs
under term contract. In the United States the average drilling
utilization day rates for Precision remained relatively strong due
to term contracted rigs and margin contributions from idle but
contracted rigs. As at the end of the quarter in the United States
there were 38 drilling rigs working under term contracts and
another 10 idle but contracted rigs where Precision was receiving
the margin payment only.
Drilling rig utilization days (spud to rig release plus move
days) in Canada during the third quarter of 2009 were 4,653 a
decrease of 54% compared to 10,048 in 2008. Drilling rig activity
for Precision in the United States was 120% higher than the same
quarter of 2008 due to the acquisition in December, 2008. In the
prior year quarter, Precision did not have any drilling rigs
operating internationally compared to 176 utilization days in the
current quarter from operations in Mexico.
Precision's camp and catering division experienced an activity
decrease of 60% over the prior year third quarter as demand for
base camp and traditional rig camps fell with the overall decline
in oilfield service activity in western Canada.
Operating expenses were 54% of revenue for the quarter compared
to 53% for the prior year quarter. Operating costs for the quarter
were marginally higher than the prior year due to fixed costs and a
deeper fleet on average offset by cost containment measures.
Despite the significant drop in activity and increased pressure
on day rates, EBITDA margins in contract drilling were only
slightly lower than prior year due to term contracts, management
control over costs and efforts to minimize the erosion of drilling
rig day rates.
Depreciation in the Contract Drilling Services segment increased
from the prior year due to the increase in activity in the United
States and the increase in carrying value of rigs to fair market
value on acquisition. The segment applies the unit of production
method in calculating rig depreciation expense.
SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES
(stated in
thousands of Three months ended Nine months ended
Canadian dollars, September 30, September 30,
except where % %
noted) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue 38,738 76,701 (49.5) 127,303 228,980 (44.4)
Expenses:
Operating 27,790 45,831 (39.4) 90,318 137,825 (34.5)
General and
administrative 2,698 2,643 2.1 7,169 7,935 (9.7)
----------------------------------------------------------------------------
EBITDA: (1) 8,250 28,227 (70.8) 29,816 83,220 (64.2)
Depreciation 3,714 6,623 (43.9) 12,405 18,943 (34.5)
----------------------------------------------------------------------------
Operating
earnings (1) 4,536 21,604 (79.0) 17,411 64,277 (72.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings
as a percentage
of revenue 11.7% 28.2% 13.7% 28.1%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Nine months ended
Canadian well September 30, September 30,
servicing % %
statistics: 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Number of service
rigs (end of
period) 229 229 - 229 229 -
Service rig
operating hours 49,581 87,995 (43.7) 147,253 255,621 (42.4)
Service rig
operating hour
utilization 24% 42% 24% 41%
----------------------------------------------------------------------------
Service rig revenue
per operating
hour $ 614 $ 675 (9.0) $ 664 $ 699 (5.0)
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
In the Completion and Production Services segment, revenue for
the third quarter decreased by 49% from 2008 to $39 million while
EBITDA declined by 71% to $8 million. The decrease in revenue and
EBITDA is attributed to the decline in industry activity as
customers reduced spending in response to sharply lower oil and
natural gas commodity prices.
Service rig activity declined 44% from the prior year period,
with the service rig fleet generating 49,581 operating hours in the
third quarter of 2009 compared with 87,995 hours in 2008 for
utilization of 24% and 42%, respectively. The reduction was a
result of lower service rig demand due to decreased drilling
activity and spending on production maintenance of existing wells.
New well completions accounted for 23% of service rig operating
hours in the third quarter compared to 32% in the same quarter in
2008. Well completions in Canada in the third quarter were down 50%
- 60% from the same quarter in 2008.
Average service rig revenue per operating hour decreased $61
over the prior year which along with labour cost increases of about
$25 per operating hour during the fourth quarter of 2008 negatively
impacted EBITDA margin.
Higher variable operating expenses, fixed costs spread over a
lower activity base and lower revenue rates led to an increase in
operating expenses as a percent of revenue from 60% in the third
quarter of 2008 to 72% for the same period in 2009. Operating costs
per operating hour increased over the comparable period in 2008 due
primarily to increased wages and lower activity.
Depreciation in the Completion and Production Services segment
in the third quarter of 2009 was 44% lower than the prior year
period due to lower equipment utilization.
SEGMENT REVIEW OF CORPORATE AND OTHER
Corporate and other expenses increased by 94% to $10 million in
the third quarter of 2009 compared to $5 million in the same period
of 2008. The increase was primarily associated with the integration
of the expanded United States operations and the quarterly
revaluation of unit based incentive compensation expense.
OTHER ITEMS
Net financing charges of $29 million for the third quarter of
2009 were $27 million higher than the prior year. Included in
financing charges is $7 million for the amortization of deferred
financing costs. Interest in the quarter was $22 million and
reflected reduced debt levels that resulted from the refinancing
activities in the second quarter. The increase in interest expense
is attributable to higher long-term debt associated with the
acquisition of Grey Wolf. During the second quarter, Precision
entered into interest rate agreements that effectively fixed the
overall effective interest rate at current levels on approximately
83% of the term debt in the secured credit facility for the
remaining term and scheduled debt repayment.
The Trust's effective tax rate on earnings before income taxes
for the first nine months of 2009 was 9% compared to 12% for the
same period in 2008.
At September 30, 2009 Precision reported goodwill of $772
million of which $488 million relates to the United States contract
drilling business unit. With specific reference to goodwill
impairment, Precision will continue to monitor the business climate
for a significant adverse change from December 31, 2008 and will
test for impairment at the end of 2009.
LIQUIDITY AND CAPITAL RESOURCES
During the third quarter the balance sheet strengthened as $59
million in operating cash inflow was used to fund a $39 million
change in working capital, $10 million in net capital spending and
$8 million in long-term debt reduction and financing costs.
Liquidity remains sufficient as Precision reported a cash balance
of $178 million and the US$260 million loan revolver in our Secured
Loan Facility remains undrawn except for US$28 million in
outstanding letters of credit as at September 30, 2009. In addition
to the Secured Facility, Precision has a $25 million operating
facility which is utilized for working capital management and the
issuance of letters of credit.
In connection with the 2008 acquisition of Grey Wolf, a
subsidiary of the Trust entered into a new senior secured credit
facility (the "Secured Facility") with a syndicate of lenders that
is guaranteed by the Trust and was comprised of term loans and a
revolving facility (the "Revolver"). Precision also entered into an
unsecured bridge facility with certain of the lenders (the
"Unsecured Facility" and, together with the Secured Facility, the
"Credit Facilities") that was also guaranteed by the Trust. The
Credit Facilities funded the cash portion of the acquisition and
refinanced the pre-closing Precision bank debt and certain
pre-closing debt obligations of Grey Wolf.
On February 18, 2009 the Trust issued 46 million Trust units at
US$3.75 per unit for gross proceeds of $217 million and proceeds
net of fees and expenses of $209 million. The proceeds were used to
repurchase the outstanding convertible notes assumed in conjunction
with the Grey Wolf acquisition. All of the note holders with the
exception of US$10,000 exercised the repurchase option.
In April, Precision announced a series of financing transactions
that raised approximately $380 million which was used to strengthen
the Trust's balance sheet by refinancing and restructuring the debt
incurred in the acquisition of Grey Wolf. The financing
transactions enabled the repayment and retirement of Precision's
Unsecured Facility loans of $296 million (US$235 million) which
bore interest at 17% and allowed Precision's Secured Facility to be
fully syndicated and thereby provide certainty to the cost of debt.
Precision issued $175 million of unsecured notes with an eight-year
life requiring no principal payments for the first five years, and
reduced the available Revolver capacity to US$260 million in
conjunction with the closing of these financing transactions.
The financing transactions, coupled with the Trust's February
2009 unit offering, reduced Precision's blended interest rate to
approximately 8.3%, reduced Precision's cash interest expense by
approximately $70 million on an annual basis and reduced the
Trust's overall leverage.
The terms of the documents governing the Secured Facility
contain provisions that in the event of default or in a liquidation
scenario ensure the lenders have priority as to payment over the
unitholders in respect to the assets and income of the Trust and
its subsidiaries. Amounts due and owing to the lenders under the
Secured Facility must be paid before any distributions can be made
to unitholders. This relative priority of payments could result in
a temporary or permanent interruption of distributions to
unitholders.
As at September 30, 2009, approximately $815 million was
outstanding under the Secured Facility and $175 million was
outstanding under the unsecured notes.
During the nine months of 2009 the Trust generated cash from
continuing operations of $434 million and issued Trust units for
net proceeds of $413 million. The cash generated was used to
purchase property plant and equipment net of disposal proceeds and
related non-cash working capital of $189 million, repay long-term
debt of $479 million, pay additional finance charges of $22
million, and make cash distributions to unitholders of $27 million
leaving a cash increase at September 30, 2009 of $130 million
offset by a $14 million foreign exchange loss on holding foreign
cash.
During the third quarter of 2009, working capital increased by
$25 million to $279 million as Precision realized higher activity
and corresponding operating results in the current quarter compared
to the second quarter of 2009.
DISTRIBUTIONS
Precision converted to an income trust in 2005 as the Canadian
tax rules of the day allowed the market to place a higher value for
unitholders on the flow-through structure than the traditional
corporate structure. In light of legislated and proposed changes,
the oilfield service sector outlook and resulting financial
operating performance and loan covenants the Trust continues to
examine whether the current structure is optimal for Precision's
business strategy and in the best interests of unitholders.
On February 9, 2009 the Trust announced the suspension of cash
distributions for an indefinite period. The suspension of cash
distributions was taken in response to lower financial operating
performance at the start of 2009 and allowed Precision to increase
debt repayment capability and balance sheet strength.
In calculating distributable cash, Precision made the following
adjustments to cash provided by continuing operations:
- Deducted the purchase of property, plant and equipment for
upgrade capital as the minimum reinvestment required to maintain
current operating capacity;
- Deducted the purchase of property, plant and equipment for
expansion initiatives to grow capacity;
- Added the proceeds on the sale of property, plant and
equipment capital which are incidental transactions occurring
within the normal course of operations; and
- Deducted long-term incentive plan changes as an unfunded
liability resulting from the operating activities in the current
period.
A quarterly two-year reconciliation of distributable cash from continuing
operations follows:
(Stated in thousands of
Canadian dollars, except 2008 2009
per diluted unit amounts)
----------------------------------------------------------------------------
Quarters ended December 31 March 31 June 30 September 30
----------------------------------------------------------------------------
Cash provided by
continuing operations $ 82,904 $ 201,596 $ 212,554 $ 19,948
Deduct:
Purchase of property,
plant and equipment for
upgrade capital (30,506) (13,760) (4,040) (4,020)
Purchase of property
plant and equipment for
expansion initiatives (68,804) (61,162) (86,283) (10,178)
Add:
Proceeds on the sale of
property, plant and
equipment 5,115 5,942 1,887 2,428
----------------------------------------------------------------------------
Standardized distributable
cash (1) (11,291) 132,616 124,118 8,178
Unfunded long-term incentive
plan compensation (559) 2,524 (442) 4,786
----------------------------------------------------------------------------
Distributable cash from
continuing operations $ (11,850) $ 135,140 $ 123,676 $ 12,964
----------------------------------------------------------------------------
Cash distributions
declared $ 53,522 $ 6,408 $ - $ -
----------------------------------------------------------------------------
Per diluted unit information:
Cash distributions
declared $ 0.39 $ 0.04 $ - $ -
Standardized distributable
cash (1) (2) $ (0.08) $ 0.63 $ 0.48 $ 0.03
Distributable cash from
continuing operations
(1) (2) $ (0.08) $ 0.64 $ 0.48 $ 0.05
----------------------------------------------------------------------------
(Stated in thousands of
Canadian dollars, except
per diluted unit amounts) 2007 2008
----------------------------------------------------------------------------
Quarters ended December 31 March 31 June 30 September 30
----------------------------------------------------------------------------
Cash provided by
continuing operations $ 78,474 $ 57,307 $ 200,458 $ 3,241
Deduct:
Purchase of property,
plant and equipment
for upgrade capital (9,241) (2,814) (8,864) (17,270)
Purchase of property plant
and equipment for expansion
initiatives (28,264) (20,654) (22,480) (58,187)
Add:
Proceeds on the sale of
property, plant and
equipment 1,236 1,303 2,143 1,879
----------------------------------------------------------------------------
Standardized distributable
cash (1) 42,205 35,142 171,257 (70,337)
Unfunded long-term incentive
plan compensation (1,817) 469 (2,166) 93
----------------------------------------------------------------------------
Distributable cash from
continuing operations $ 40,388 $ 35,611 $ 169,091 $ (70,244)
----------------------------------------------------------------------------
Cash distributions
declared $ 69,166 $ 49,046 $ 49,045 $ 49,046
----------------------------------------------------------------------------
Per diluted unit
information:
Cash distributions
declared $ 0.55 $ 0.39 $ 0.39 $ 0.39
Standardized distributable
cash (1)(2) $ 0.31 $ 0.26 $ 1.27 $ (0.52)
Distributable cash from
continuing operations
(1) (2) $ 0.30 $ 0.26 $ 1.25 $ (0.52)
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
(2) Distributable cash calculations per diluted unit have been
adjusted to reflect the rights offering completed in the second
quarter of 2009.
Year ended
(stated in thousands of Nine months ended Nine months ended December 31,
Canadian dollars) September 30, 2009 September 30, 2008 2008
----------------------------------------------------------------------------
Cash provided by
continuing operations(A) $ 434,098 $ 261,006 $ 343,910
----------------------------------------------------------------------------
Net earnings (B) $ 186,588 $ 210,354 $ 302,730
----------------------------------------------------------------------------
Distributions declared© $ 6,408 $ 147,137 $ 224,688
----------------------------------------------------------------------------
Excess of cash provided by
continuing operations over
distributions declared(A-C) $ 427,690 $ 113,869 $ 119,222
----------------------------------------------------------------------------
Excess of net earnings
from operating activities
over distributions declared
(B-C) $ 180,180 $ 63,217 $ 78,042
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Precision has initiated a number of cost reduction and cash
generation plans designed to strengthen its capability to reduce
net long-term debt and improve its underlying credit quality and
capital structure. The near-term management strategy involves
retaining funds from available distributable cash to repay debt and
fund required capital expenditures and finance working capital
needs. Planned asset growth will generally be financed through
existing debt facilities or cash retained from continuing
operations.
QUARTERLY FINANCIAL SUMMARY
(Stated in thousands of Canadian dollars, except per unit amounts)
2008 2009
----------------------------------------------------------------------------
Quarters ended December 31 March 31 June 30 September 30
----------------------------------------------------------------------------
Revenue $ 335,049 $ 448,445 $ 209,597 $ 253,337
EBITDA (1) 134,795 169,387 59,260 85,739
Net earnings: 92,376 57,417 57,475 71,696
Per basic unit (2) 0.67 0.30 0.23 0.26
Per diluted unit (2) 0.66 0.27 0.22 0.25
Cash provided by
continuing operations 82,904 201,596 212,554 19,948
Distributions declared $ 77,551 $ 6,408 $ - $ -
----------------------------------------------------------------------------
2007 2008
----------------------------------------------------------------------------
Quarters ended December 31 March 31 June 30 September 30
----------------------------------------------------------------------------
Revenue $ 248,726 $ 342,689 $ 138,514 $ 285,639
EBITDA (1) 103,351 147,347 35,574 118,820
Net earnings: 89,329 106,266 21,739 82,349
Per basic unit (2) 0.66 0.79 0.16 0.61
Per diluted unit (2) 0.66 0.79 0.16 0.61
Cash provided by
continuing operations 78,474 57,307 200,458 3,241
Distributions declared $ 99,348 $ 49,046 $ 49,045 $ 49,046
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
(2) Net earnings per basic and diluted unit have been adjusted to reflect
the rights offering completed in the second quarter of 2009.
NON-GAAP MEASURES
Precision uses certain measures that are not recognized under
Canadian generally accepted accounting principles to assess
performance and believes these non-GAAP measures provide useful
supplemental information to investors. Following are the non-GAAP
measures Precision uses in assessing performance.
EBITDA
Management believes that in addition to net earnings, EBITDA as
derived from information reported in the Consolidated Statements of
Earnings and Retained Earnings (Deficit) is a useful supplemental
measure as it provides an indication of the results generated by
Precision's principal business activities prior to consideration of
how those activities are financed, the impact of foreign exchange,
how the results are taxed, how funds are invested or how non-cash
depreciation and amortization charges affect results.
The following table provides a reconciliation of net earnings
under GAAP, as disclosed in the Consolidated Statement of Earnings
and Retained Earnings (Deficit), to EBITDA.
Three months ended Nine months ended
September 30, September 30,
(Stated in thousands
of Canadian dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
EBITDA $ 85,739 $ 118,820 $ 314,386 $ 301,741
Add (deduct):
Depreciation and
amortization (30,378) (22,798) (102,549) (60,559)
Foreign exchange 63,486 2,626 105,055 3,751
Financing charges (29,396) (2,288) (112,947) (6,571)
Income taxes (17,755) (14,011) (17,357) (28,008)
----------------------------------------------------------------------------
Net earnings $ 71,696 $ 82,349 $ 186,588 $ 210,354
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings
Management believes that in addition to net earnings, operating
earnings as reported in the Consolidated Statements of Earnings and
Retained Earnings (Deficit) is a useful supplemental measure as it
provides an indication of the results generated by Precision's
principal business activities prior to consideration of how those
activities are financed, the impact of foreign exchange or how the
results are taxed. Operating earnings as calculated by Precision
was changed in the year and it now excludes the effects of foreign
exchange. The revised calculation is a better reflection of results
from operations without consideration as to how results were
impacted by foreign exchange.
The following table provides a reconciliation of net earnings
under GAAP, as disclosed in the Consolidated Statement of Earnings
and Retained Earnings (Deficit), to operating earnings.
Three months ended Nine months ended
September 30, September 30,
(Stated in thousands of Canadian
dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
Operating earnings $ 55,361 96,022 $ 211,837 241,182
Add (deduct):
Foreign exchange 63,486 2,626 105,055 3,751
Financing charges (29,396) (2,288) (112,947) (6,571)
Income taxes (17,755) (14,011) (17,357) (28,008)
----------------------------------------------------------------------------
Net earnings $ 71,696 82,349 $ 186,588 210,354
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Standardized distributable cash, distributable cash from
continuing operations, standardized distributable cash per diluted
unit and distributable cash from continuing operations per diluted
unit.
Management believes that in addition to cash provided by
continuing operations, standardized distributable cash and
distributable cash from continuing operations are useful
supplemental measures. They provide an indication of the funds
available for distribution to unitholders after consideration of
the impacts of capital expenditures and long-term unfunded
contractual obligations.
Precision's method of calculating these non-GAAP measures may
differ from other entities and, accordingly, may not be comparable
to measures used by other entities. Investors should be cautioned
that these measures should not be construed as an alternative to
measures determined in accordance with GAAP as an indicator of
Precision's performance.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND
STATEMENTS
Certain statements contained in this report, including
statements that contain words such as "could", "should", "can",
"anticipate", "estimate", "propose", "plan", "expect", "believe",
"will", "may" and similar expressions and statements relating to
matters that are not historical facts constitute "forward-looking
information" within the meaning of applicable Canadian securities
legislation and "forward-looking statements" within the meaning of
the "safe harbor" provisions of the United States Private
Securities Litigation Reform Act of 1995 (collectively,
"forward-looking information and statements").
In particular, forward-looking information and statements
include, but are not limited to: natural gas production is expected
to be down by the end of 2009; positive trends for customer cash
flows may reflect an inflection point; expectations that the United
States supply of natural gas will show significant declines leading
to increased demand for drilling; low levels of utilization may
persist; Precision's expectations as to the number of rigs running
and the number of term contracts that exist and may be honoured;
and that Precision's fleet has been positioned in growth basins
expected to provide eventual opportunity.
These forward-looking information and statements are based on
certain assumptions and analysis made by the Trust in light of its
experience and its perception of historical trends, current
conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However,
whether actual results, performance or achievements will conform to
the Trust's expectations and predictions is subject to a number of
known and unknown risks and uncertainties which could cause actual
results to differ materially from the Trust's expectations. Such
risks and uncertainties include, but are not limited to:
fluctuations in the price and demand for oil and natural gas;
fluctuations in the level of oil and natural gas exploration and
development activities; fluctuations in the demand for well
servicing, contract drilling and ancillary oilfield services; the
effects of seasonal and weather conditions on operations and
facilities; the existence of competitive operating risks inherent
in well servicing, contract drilling and ancillary oilfield
services; general economic, market or business conditions; changes
in laws or regulations, including taxation, environmental and
currency regulations; the lack of availability of qualified
personnel, management or other key inputs; currency exchange
fluctuations; and other unforeseen conditions which could impact
the use of services supplied by Precision.
Consequently, all of the forward-looking information and
statements made in this report are qualified by these cautionary
statements and there can be no assurance that the actual results or
developments anticipated by the Trust will be realized or, even if
substantially realized, that they will have the expected
consequences to, or effects on, the Trust or its business or
operations. Readers are therefore cautioned not to place undue
reliance on such forward-looking information and statements. Except
as may be required by law, the Trust assumes no obligation to
update publicly any such forward-looking information and
statements, whether as a result of new information, future events
or otherwise.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
(Stated in thousands of Canadian dollars) 2009 2008
----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 177,529 $ 61,511
Accounts receivable 266,307 601,753
Income tax recoverable 8,612 13,313
Inventory 9,108 8,652
----------------------------------------------------------------------------
461,556 685,229
Income tax recoverable (note 4) 58,055 58,055
Property, plant and equipment, net of
accumulated depreciation 3,065,370 3,243,213
Intangibles 3,681 5,676
Goodwill 772,199 841,529
----------------------------------------------------------------------------
$ 4,360,861 $ 4,833,702
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 138,992 $ 270,122
Distributions payable - 20,825
Current portion of long-term debt (note 5) 43,363 48,953
----------------------------------------------------------------------------
182,355 339,900
Long-term liabilities 26,994 30,951
Long-term debt (note 5) 795,560 1,368,349
Future income taxes 700,016 770,623
----------------------------------------------------------------------------
1,704,925 2,509,823
----------------------------------------------------------------------------
Contingencies (note 9)
Unitholders' equity:
Unitholders' capital (note 3) 2,770,708 2,355,590
Contributed surplus 3,223 998
Retained earnings (deficit) 132,112 (48,068)
Accumulated other comprehensive income (note 6) (250,107) 15,359
----------------------------------------------------------------------------
2,655,936 2,323,879
----------------------------------------------------------------------------
$ 4,360,861 $ 4,833,702
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT)
(UNAUDITED)
(Stated in thousands of Three months ended Nine months ended
Canadian dollars, except per September 30, September 30,
unit amounts)
2009 2008 2009 2008
----------------------------------------------------------------------------
Revenue $ 253,337 $ 285,639 $ 911,379 $ 766,842
Expenses:
Operating 143,059 154,323 522,411 416,308
General and administrative 24,539 12,496 74,582 48,793
Depreciation and amortization 30,378 22,798 102,549 60,559
Foreign exchange (63,486) (2,626) (105,055) (3,751)
Finance charges (note 8) 29,396 2,288 112,947 6,571
----------------------------------------------------------------------------
Earnings before income taxes 89,451 96,360 203,945 238,362
Income taxes: (note 4)
Current 5,216 2,121 13,380 6,818
Future 12,539 11,890 3,977 21,190
----------------------------------------------------------------------------
17,755 14,011 17,357 28,008
----------------------------------------------------------------------------
Net earnings 71,696 82,349 186,588 210,354
Retained earnings (deficit),
beginning of period 60,416 (96,196) (48,068) (126,110)
Distributions declared - (49,046) (6,408) (147,137)
----------------------------------------------------------------------------
Retained earnings (deficit),
end of period $ 132,112 $ (62,893) $ 132,112 $ (62,893)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per unit: (note 10)
Basic $ 0.26 $ 0.61 $ 0.77 $ 1.56
Diluted $ 0.25 $ 0.61 $ 0.75 $ 1.56
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three months ended Nine months ended
(Stated in thousands of September 30, September 30,
Canadian dollars)
2009 2008 2009 2008
----------------------------------------------------------------------------
Net earnings $ 71,696 $ 82,349 $ 186,588 $ 210,354
Unrealized loss recorded on
translation of assets and
liabilities of
self-sustaining operations
denominated in foreign
currency (154,590) - (265,466) -
----------------------------------------------------------------------------
Comprehensive income (loss) $ (82,894) $ 82,349 $ (78,878) $ 210,354
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
(Stated in thousands of
Canadian dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
Cash provided by (used in):
Operations:
Net earnings $ 71,696 $ 82,349 $ 186,588 $ 210,354
Adjustments and other items
not involving cash:
Long-term compensation plans 4,786 93 2,914 1,790
Depreciation and amortization 30,378 22,798 102,549 60,559
Future income taxes 12,539 11,890 3,977 21,190
Amortization of debt issue
costs and debt settlement 7,056 - 30,119 -
Foreign exchange on
long-term monetary items (67,321) (23) (118,319) (40)
Changes in non-cash working
capital balances (39,186) (113,866) 226,270 (32,847)
----------------------------------------------------------------------------
19,948 3,241 434,098 261,006
Investments:
Business acquisitions - (15,519) - (15,519)
Purchase of property, plant and
equipment (14,198) (75,457) (179,443) (130,269)
Proceeds on sale of property,
plant and equipment 2,428 1,879 10,257 5,325
Change in income tax recoverable - - - (55,148)
Changes in non-cash working
capital balances 1,741 7,598 (20,147) 10,669
----------------------------------------------------------------------------
(10,029) (81,499) (189,333) (184,942)
Financing:
Increase in long-term debt - 126,836 408,893 220,517
Repayment of long-term debt (6,567) - (887,605) (108,559)
Financing costs on long-term
debt (674) - (21,628) -
Distributions paid - (49,046) (27,233) (167,258)
Issuance of trust units, net of
issue costs (533) - 413,223 -
Change in non-cash working
capital balances (431) - - -
Change in bank indebtedness - - - (14,115)
----------------------------------------------------------------------------
(8,205) 77,790 (114,350) (69,415)
----------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents (4,164) - (14,397) -
----------------------------------------------------------------------------
Change in cash and cash
equivalents (2,450) (468) 116,018 6,649
Cash and cash equivalents,
beginning of period 179,979 7,117 61,511 -
----------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 177,529 $ 6,649 $ 177,529 $ 6,649
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
Notes to Consolidated Financial Statements (UNAUDITED)
(Tabular amounts are stated in thousands of Canadian dollars
except unit numbers)
1. Basis of Presentation
These interim financial statements for Precision Drilling Trust
(the "Trust") were prepared using accounting policies and methods
of their application consistent with those used in the preparation
of the Trust's consolidated audited financial statements for the
year ended December 31, 2008 except as noted below. These interim
financial statements conform in all material respects to the
requirements of generally accepted accounting principles in Canada
for annual financial statements with the exception of certain note
disclosures. As a result, these interim financial statements should
be read in conjunction with the Trust's consolidated audited
financial statements for the year ended December 31, 2008.
Effective January 1, 2009 the Trust adopted new Canadian
accounting standards relating to goodwill and intangible assets
(Section 3064). This new section establishes standards for the
recognition, measurement, presentation and disclosure of goodwill
and intangible assets. The new section did not have an impact on
the consolidated financial statements.
Precision has a combination of equity based incentive
compensation plans outstanding, some of which are settled in trust
units and others that are settled in cash. Compensation cost
associated with equity settled plans is recorded at fair value and
expensed over the instruments vesting period. Under Precision's
option plan the fair value of the option grant 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.
Forfeitures are estimated on the date of grant. Under the
non-management director trust unit plan the fair value is based on
the trading price of a Precision unit on the date of grant.
Compensation cost associated with cash settled compensation plans
is recorded at intrinsic value over the instruments vesting period.
Intrinsic value is determined by the unit price at the period end
applied to the units that have vested under the plan. The
associated liability is included in accounts payable or long-term
liabilities as appropriate.
2. Seasonality of Operations
The Trust has operations that are carried on in Canada which
represent approximately 38% (2008 - 85%) of consolidated total
assets as at September 30, 2009 and 45% (2008 - 86%) of
consolidated revenue for the nine months ended September 30, 2009.
The ability to move heavy equipment in Canadian oil and natural gas
fields is dependent on weather conditions. As warm weather returns
in the spring, the winter's frost comes out of the ground rendering
many secondary roads incapable of supporting the weight of heavy
equipment until they have thoroughly dried out. The duration of
this "spring break-up" has a direct impact on the Trust's activity
levels. In addition, many exploration and production areas in
northern Canada are accessible only in winter months when the
ground is frozen hard enough to support equipment. The timing of
freeze up and spring break-up affects the ability to move equipment
in and out of these areas. As a result, late March through May is
traditionally the Trust's slowest time.
3. Unitholders' Capital
(a) Authorized
- unlimited number of voting Trust units
- unlimited number of voting exchangeable LP units
(b) Units issued:
Trust units Number Amount
----------------------------------------------------------------------------
Balance, December 31, 2008 160,042,065 $ 2,353,843
Issued for cash on February 18, 2009 46,000,000 217,281
Issued on retraction of exchangeable LP units 32,021 369
Issued pursuant to private placement 35,000,000 70,181
Issued upon the exercise of rights on
June 4, 2009 34,441,950 103,326
Unit issue costs, net of related tax effect of
$1.9 million - (10,489)
----------------------------------------------------------------------------
275,516,036 $ 2,734,511
Warrants issued pursuant to private placement - 34,819
----------------------------------------------------------------------------
Balance September 30, 2009 275,516,036 $ 2,769,330
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exchangeable LP units Number Amount
----------------------------------------------------------------------------
Balance, December 31, 2008 151,583 $ 1,747
Redeemed on retraction of exchangeable LP units (32,021) (369)
----------------------------------------------------------------------------
Balance September 30, 2009 119,562 $ 1,378
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Summary Number Amount
----------------------------------------------------------------------------
Trust units 275,516,036 $ 2,769,330
Exchangeable LP units 119,562 1,378
----------------------------------------------------------------------------
Unitholders' capital 275,635,598 $ 2,770,708
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(c) Warrants:
On April 22, 2009 the Trust issued 15,000,000 purchase warrants
pursuant to a private placement. Each warrant is exercisable into a
unit of the Trust at a price of $3.22 per trust unit for a period
of five years from the date of issue.
4. Income Taxes
Currently, the Trust incurs taxes to the extent that there are
certain provincial capital taxes or state franchise taxes, as well
as taxes on any taxable income, of its underlying subsidiaries.
Future income taxes arise from the differences between the
accounting and tax basis of the Trust's and its subsidiaries'
assets and liabilities.
The provision for income taxes differs from that which would be
expected by applying statutory Canadian income tax rates. A
reconciliation of the difference at September 30 is as follows:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
----------------------------------------------------------------------------
Earnings before income taxes $ 89,451 $ 96,360 $ 203,945 $ 238,362
Federal and provincial statutory
rates 29% 30% 29% 30%
----------------------------------------------------------------------------
Tax at statutory rates $ 25,941 $ 28,908 $ 59,144 $ 71,509
Adjusted for the effect of:
Non-deductible expenses 1,644 288 6,372 549
Non-taxable gains (16,206) (501) (18,752) (959)
Income taxed at lower rates (1,388) - (36,812) -
Income to be distributed to
unitholders, not
subject to tax in the Trust (202) (17,000) (2,525) (48,569)
Other 7,966 2,316 9,930 5,478
----------------------------------------------------------------------------
Income tax expense $ 17,755 $ 14,011 $ 17,357 $ 28,008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Effective income tax rate 20% 15% 9% 12%
----------------------------------------------------------------------------
The Trust received Notices of Reassessment in 2008 from a
provincial taxing authority related to certain subsidiaries'
taxation years ending in 2001 through 2004. As a result of the
notices, the Trust was required to pay $37.7 million in taxes and
$20.4 million in assessed interest. The reassessments relate to the
treatment of interest in certain provincial tax filings. The Trust
is in the process of challenging these reassessments. The Trust
anticipates that the dispute will not be resolved within one year
and has recorded the amount paid as a long-term receivable. No
amounts related to the $58.1 million in reassessments have been
expensed.
5. Long-Term Debt
September 30, December 31,
2009 2008
----------------------------------------------------------------------------
Secured facility:
Term Loan A $ 330,727 $ 489,215
Term Loan B 484,005 489,840
Revolving credit facility - 107,981
Unsecured facility - 168,352
Unsecured senior notes 175,000 -
Unsecured convertible notes:
3.75% notes (US$137.5 million) - 168,413
Floating rate notes (US$124.8 million) - 152,801
----------------------------------------------------------------------------
989,732 1,576,602
Less net unamortized debt issue costs (150,809) (159,300)
----------------------------------------------------------------------------
838,923 1,417,302
Less current portion (43,363) (48,953)
----------------------------------------------------------------------------
$ 795,560 $ 1,368,349
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At September 30, 2009 the amount drawn under the Term Loan A
facility consisted of US$288.3 million (December 31, 2008 -
US$381.1 million) denominated in US dollars and $21.7 million
(December 31, 2008 - $22.5 million) denominated in Canadian
dollars. The Term Loan B facility is denominated in US dollars and
as at September 30, 2009 US$451.4 million (December 31, 2008 -
US$400 million) was outstanding.
During the second quarter Precision entered into an interest
rate swap arrangement to fix the libor rate at 1.7% on US$250
million of the Term A-1 facility (with scheduled reductions in the
balance through September 2013 to match the reduction in principal
balances) and paid US$2.1 million for an interest rate cap of 3.25%
on US$350 million of the Term B facilities (with scheduled
reductions in the balance through December 2013). The net amount
owing under the interest rate derivative contracts is settled
quarterly. At September 30, 3009 the fair value of these interest
rate derivative contracts was estimated to be nominal.
During the second quarter, Precision fully repaid and cancelled
the outstanding balance of the unsecured facility and completed
syndication of the secured facility.
On April 22, 2009, the Trust completed a private placement of
$175 million principal amount of 10% senior unsecured notes (the
"Senior Notes"). which have an eight-year term, with one-third of
the initial outstanding principal amount payable on each of the
6th, 7th and 8th anniversaries of the closing date of the private
placement. The Senior Notes are unsecured and have been guaranteed
by the Trust and each subsidiary of the Trust that guaranteed the
secured facility. The terms of the Senior Notes contain customary
negative and affirmative covenants and events of default.
During the first quarter, holders of 3.75% Notes and Floating
Rate Notes representing US$137.5 million and US$124.8 million,
respectively accepted the purchase offer made pursuant to change in
control provisions in the indenture agreements governing the notes.
Precision was required to purchase these notes on March 24, 2009 at
the principal balance plus accrued interest.
For the twelve month periods ended September 30,
----------------------------------------------------------------------------
2010 $ 43,363
2011 60,858
2012 74,252
2013 78,716
2014 557,543
Thereafter 175,000
----------------------------------------------------------------------------
6. Accumulated Other Comprehensive Income
----------------------------------------------------------------------------
Balance, December 31, 2008 $ 15,359
Unrealized foreign currency translation loss (265,466)
----------------------------------------------------------------------------
Balance, September 30, 2009 $ (250,107)
----------------------------------------------------------------------------
7. Unit Based Compensation Plans
(a) Option plan:
During the second quarter the Trust implemented a unit option
plan under which a combined total of 11,103,500 options to purchase
units are reserved to be granted to employees. Of the amount
reserved, 1,922,200 options have been granted. Under this plan, the
exercise price of each option equals the fair market of the option
at the date of grant determined by the weighted average trading
price for the five days preceding the grant. The options vests over
a period of three years from the date of grant as employees render
continuous service to the Trust and have a term of seven years.
A summary of the status of the equity incentive plan as at
September 30, 2009 is presented below:
Options Range of Weighted
Outstanding exercise price average Options
exercise price exercisable
----------------------------------------------------------------------------
Outstanding as
at December 31,
2008 -
Granted 1,922,200 $ 5.22 - 5.85 $ 5.64 -
Forfeitures (26,500) $ 5.31 - 5.85 $ 5.38
----------------------------------------------------------------------------
Outstanding as
at September 30,
2009 1,895,700 $ 5.22 - 5.85 $ 5.65 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The per unit weighted average fair value of the unit options
granted during 2009 was $2.54 estimated on the grant date using the
Black-Scholes option pricing model with the following assumption:
average risk-free interest rate 2%, average expected life of four
years and expected volatility of 56%. Included in net earnings for
the three and nine months ended September 30, 2009 is an expense
for Unit based compensation of $0.9 million and $1.1 million,
respectively.
(b) Officers and Employees
During the second quarter Precision introduced two new unit
based incentive plans to replace the Performance Saving Plan and
the Long-Term Incentive Plan. Under the Restricted Trust Unit
incentive plan units granted to eligible employees vest annually
over a three year term. Vested units are automatically paid out in
cash in the first quarter of the year following vesting at a value
determined by the fair market value of the units as at December 31
of the vesting year. Under the Performance Trust Unit incentive
plan units granted to eligible employees vest at the end of a three
year term. Vested units are automatically paid out in cash in first
quarter following the vested term at a value determined by the fair
market value of the units at December 31 of the vesting year and
based on the number of performance units held multiplied by a
performance factor that ranges from zero to two times. The
performance factor is based on Precision's returns compared to a
peer group. Included in net earnings for the three and nine months
ended September 30, 2009 is an expense of $2.9 million (2008 -
$nil) and $5.3 million (2008 - $nil), respectively.
Certain liabilities under the Performance Savings Plan continue
to exist as eligible participants were able to elect to receive a
portion of their annual performance bonus in the form of deferred
trust units ("DTUs"). These notional units are redeemable in cash
and are adjusted for each distribution to unitholders by issuing
additional DTUs based on the weighted average trading price on the
Toronto Stock Exchange for the five days immediately following the
ex-distribution date. All DTUs must be redeemed within 60 days of
ceasing to be an employee of Precision or by the end of the second
full calendar year after receipt of the DTUs. A summary of the DTUs
outstanding under this unit based incentive plan is presented
below:
Deferred Trust Units Outstanding
----------------------------------------------------------------------------
Balance, December 31, 2008 83,435
Issued, including as a result of distributions 211,156
Redeemed on employee resignations and withdrawals (17,156)
----------------------------------------------------------------------------
Balance, September 30, 2009 277,435
----------------------------------------------------------------------------
As at September 30, 2009 $2.0 million is included in accounts
payable and accrued liabilities for outstanding DTUs. Included in
net earnings for the three and nine months ended September 30, 2009
is an expense of $0.5 million (2008 - $0.9 million expense
recovery) and $0.8 million (2008 - $0.2 million), respectively.
The Trust has a Unit Appreciation Rights ("UAR") plan. Under the
plan eligible participants were granted UAR's that entitle the
rights holder to receive cash payments calculated as the excess of
the market price over the exercise price per unit on the exercise
date. The exercise price of the UAR is reduced by the aggregate
unit distributions paid or payable on Trust units from the grant
date to the exercise date. The UAR's vest over a period of five
years and expire ten years from the date of grant. No amounts
relating to the UAR plan have been recorded as compensation expense
or accrued liability as at September 30, 2009 as the intrinsic
value of the awards is nil.
(c) Executive
In 2007 the Trust instituted a Deferred Signing Bonus Unit Plan
for its Chief Executive Officer. Under the plan 178,336 notional
DTUs were granted on September 1, 2007. The units are redeemable
one-third annually beginning September 1, 2008 and are settled for
cash based on the Trust unit trading price on redemption. The
number of notional DTUs is adjusted for each distribution to
unitholders by issuing additional notional DTUs based on the
weighted average trading price on the Toronto Stock Exchange for
the five days immediately following the ex-distribution date. As at
September 30, 2009 $0.5 million is included in accounts payable and
accrued liabilities for the outstanding DTUs. Included in net
earnings for the three and nine months ended September 30, 2009 is
an expense of $0.2 million (2008 - $1.5 million expense recovery)
and an expense recovery of $0.4 million (2008 - $1.0 million
expense), respectively.
(d) Non-management directors
In 2007 a deferred trust unit plan was established for
non-management directors. Under the plan fully vested deferred
trust units are granted quarterly based upon an election by the
non-management director to receive all or a portion of their
compensation in deferred trust units. Distributions to unitholders
declared by the Trust prior to redemption are reinvested into
additional deferred trust units on the date of distribution. These
deferred trust units are redeemable into an equal number of Trust
units any time after the director's retirement. A summary of
deferred trust units outstanding under this unit based incentive
plan is presented below:
Number
Outstanding
----------------------------------------------------------------------------
Balance, December 31, 2008 54,543
Granted 199,065
Issued as a result of distributions 2,051
----------------------------------------------------------------------------
Balance, September 30, 2009 255,659
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Included in net earnings for the three and nine months ended
September 30, 2009 as unit based compensation with a corresponding
increase in contributed surplus, is $262,000 (2008 - $256,000) and
$1.1 million (2008 - $691,000), respectively.
8. Finance Charges
The following table provides a summary of the finance
charges:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
----------------------------------------------------------------------------
Interest:
Long-term debt $ 21,794 $ 2,367 $ 80,262 $ 6,711
Other 635 12 2,856 111
Income (89) (91) (290) (251)
Amortization of debt issue costs 7,056 - 20,220 -
Loss on settlement of unsecured
facility (note 5) - - 9,899 -
----------------------------------------------------------------------------
Finance charges $ 29,396 $ 2,288 $ 112,947 $ 6,571
----------------------------------------------------------------------------
----------------------------------------------------------------------------
9. Contingencies
The business and operations of the Trust are complex and the
Trust 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
Trust's interpretation of relevant tax legislation and regulations.
The Trust's management believes that the provision for income tax
is adequate and in accordance with generally accepted accounting
principles and applicable legislation and regulations. However,
there are a number of tax filing positions that can still be the
subject of review by taxation authorities who may successfully
challenge the Trust's interpretation of the applicable tax
legislation and regulations, with the result that additional taxes
could be payable by the Trust and the amount owed, with estimated
interest but without penalties, could be up to $395 million,
including $58 million recorded as a long-term receivable.
10. Per Unit Amounts
The following tables reconcile the net earnings and weighted
average units outstanding used in computing basic and diluted
earnings per unit:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
----------------------------------------------------------------------------
Net earnings - basic $ 71,696 $ 82,349 $ 186,588 $ 210,354
Impact of assumed conversion of
convertible debt,
net of tax - - 1,723 -
----------------------------------------------------------------------------
Net earnings - diluted $ 71,696 $ 82,349 $ 188,311 $ 210,354
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average units outstanding 275,636 125,758 233,119 125,758
Effect of rights offering - 9,007 8,236 9,007
----------------------------------------------------------------------------
Weighted average units outstanding
- basic 275,636 134,765 241,355 134,765
Effect of trust unit warrants 7,335 - 4,227 -
Effect of stock options and other
equity compensation plans 218 36 155 27
Effect of convertible debt - - 5,195 -
Effect of rights offering - 3 456 2
----------------------------------------------------------------------------
Weighted average units outstanding
- diluted 283,189 134,804 251,388 134,794
----------------------------------------------------------------------------
----------------------------------------------------------------------------
11. Segmented Information
The Trust operates primarily in Canada and the United States, in
two segments; Contract Drilling Services and Completion and
Production Services. Contract Drilling Services includes drilling
rigs, procurement and distribution of oilfield supplies, camp and
catering services and manufacture, sale, and repair of drilling
equipment. Completion and Production Services includes service
rigs, snubbing units, wastewater treatment units, and oilfield
equipment rental.
Three months Completion
ended Contract and
September Drilling Production Corporate Inter-segment
30, 2009 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 216,391 $ 38,738 $ - $ (1,792) $ 253,337
Segment
profit
(loss) 60,484 4,536 (9,659) - 55,361
Depreciation
and
amortization 25,610 3,714 1,054 - 30,378
Total
assets 3,721,044 399,172 240,645 - 4,360,861
Goodwill 660,060 112,139 - - 772,199
Capital
expenditures 11,862 501 1,835 - 14,198
----------------------------------------------------------------------------
Three months Completion
ended Contract and
September Drilling Production Corporate Inter-segment
30, 2008 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 212,567 $ 76,701 $ - $ (3,629) $ 285,639
Segment profit
(loss) (1) 79,389 21,604 (4,971) - 96,022
Depreciation
and
amortization 15,207 6,623 968 - 22,798
Total assets 1,426,832 473,308 73,995 - 1,974,135
Goodwill 172,440 112,139 - - 284,579
Capital
expenditures 68,435 6,066 956 - 75,457
----------------------------------------------------------------------------
Nine months Completion
ended Contract and
September Drilling Production Corporate Inter-segment
30, 2009 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 791,496 $ 127,303 $ - $ (7,420) $ 911,379
Segment
profit
(loss) 221,536 17,411 (27,110) - 211,837
Depreciation
and
amortization 87,007 12,405 3,137 - 102,549
Total
assets 3,721,044 399,172 240,645 - 4,360,861
Goodwill 660,060 112,139 - - 772,199
Capital
expenditures 171,769 1,022 6,652 - 179,443
----------------------------------------------------------------------------
Nine months Completion
ended Contract and
September Drilling Production Corporate Inter-segment
30, 2008 Services Services and Other Eliminations Total
----------------------------------------------------------------------------
Revenue $ 547,938 $ 228,980 $ - $ (10,076) $ 766,842
Segment profit
(loss) (1) 203,252 64,277 (26,347) - 241,182
Depreciation
and
amortization 38,817 18,943 2,799 - 60,559
Total assets 1,426,832 473,308 73,995 - 1,974,135
Goodwill 172,440 112,139 - - 284,579
Capital
expenditures 113,247 15,247 1,775 - 130,269
----------------------------------------------------------------------------
(1) Amounts have been restated to effect the removal of foreign exchange
expense which is now excluded from the calculation of segment profit.
A reconciliation of segment profit to earnings from before income taxes is
as follows:
(Stated In Three months ended Nine months ended
thousands September 30, September 30,
of Canadian dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
Total segment profit $ 55,361 $ 96,022 $ 211,837 $ 241,182
Add (deduct):
Foreign exchange 63,486 2,626 105,055 3,751
Finance charges (29,396) (2,288) (112,947) (6,571)
----------------------------------------------------------------------------
Earnings before
income taxes $ 89,451 $ 96,360 $ 203,945 $ 238,362
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Trust's operations are carried on in the following geographic locations:
Three months
ended
September United Inter-segment
30, 2009 Canada States International Eliminations Total
----------------------------------------------------------------------------
Revenue $ 126,690 $ 120,872 $ 6,148 $ (373) $ 253,337
Total
assets 1,671,133 2,632,495 57,233 - 4,360,861
----------------------------------------------------------------------------
Three months
ended
September United Inter-segment
30, 2008 Canada States International Eliminations Total
----------------------------------------------------------------------------
Revenue $ 238,596 $ 47,152 $ 238 $ (347) $ 285,639
Total
assets 1,672,334 296,041 5,760 - 1,974,135
----------------------------------------------------------------------------
Nine months
ended
September United Inter-segment
30, 2009 Canada States International Eliminations Total
----------------------------------------------------------------------------
Revenue $ 410,987 $ 484,747 $ 18,627 $ (2,982) $ 911,379
Total
assets 1,671,133 2,632,495 57,233 - 4,360,861
----------------------------------------------------------------------------
Nine months
ended
September United Inter-segment
30, 2008 Canada States International Eliminations Total
----------------------------------------------------------------------------
Revenue $ 658,959 $ 104,885 $ 4,069 $ (1,071) $ 766,842
Total
assets 1,672,334 296,041 5,760 - 1,974,135
----------------------------------------------------------------------------
12. Financial Instruments
(a) Interest rate risk
As at September 30, 2009 approximately 83% of Precision's $990
million of long-term debt is subject to fixed interest rates after
taking into consideration the interest rate derivatives. As a
result, Precision is not exposed to significant fluctuations in
interest expense as a result of changes in interest rates. Applying
a 100 basis points change in interest rates to the long-term debt
balance at September 30, 2009, with all other variables held
constant, would impact earnings, on a go forward basis by
approximately $0.6 million.
(b) Liquidity risk
The following are the contractual maturities of the Trust's
long-term debt obligations as at September 30, 2009:
(Stated
in
thousands) 2009 2010 2011 2012 2013 Thereafter Total
----------------------------------------------------------------------------
Long-term
debt $ 6,567 $ 52,011 $ 60,858 $ 78,716 $ 239,434 $ 552,146 $ 989,732
Interest
on
long-term
debt (1) 20,684 80,434 76,188 71,566 65,946 69,527 384,345
----------------------------------------------------------------------------
Total $27,251 $132,445 $137,046 $150,282 $305,380 $ 621,673 $1,374,077
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Interest has been calculated based upon debt balances, interest rates
and foreign exchange rates in effect as at September 30, 2009.
2009 THIRD QUARTER RESULTS CONFERENCE CALL AND WEBCAST
Precision Drilling Trust has scheduled a conference call and
webcast to begin promptly at 12:00 Noon MT (2:00 p.m. ET) on
Thursday, October 22, 2009.
The conference call dial in numbers are 800-565-0813 or
416-695-6616.
A live webcast of the conference call will be accessible on
Precision's website at www.precisiondrilling.com by selecting
"Investor Centre", then "Webcasts". Shortly after the live webcast,
an archived version will be available for approximately 30
days.
An archived recording of the conference call will also be
available approximately one hour after the completion of the call
until October 29, 2009 by dialing 1-800-408-3053 or 416-695-5800,
pass code 1054784.
About Precision
Precision is a leading provider of safe, high performance energy
services to the North American oil and gas industry. Precision
provides customers with access to an extensive fleet of contract
drilling rigs, service rigs, camps, snubbing units, wastewater
treatment units and rental equipment backed by a comprehensive mix
of technical support services and skilled, experienced
personnel.
Precision is headquartered in Calgary, Alberta, Canada.
Precision is listed on the Toronto Stock Exchange under the trading
symbol "PD.UN" and on the New York Stock Exchange under the trading
symbol "PDS".
Contacts: David Wehlmann, Executive Vice President, Investor
Relations Precision Drilling Corporation, Administrator of
Precision Drilling Trust (403) 716-4575 (403) 716-4755 (FAX)
Precision Drilling Trust 4200, 150 - 6th Avenue S.W. Calgary,
Alberta T2P 3Y7 www.precisiondrilling.com
Grafico Azioni Precision Drilling (NYSE:PDS)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Precision Drilling (NYSE:PDS)
Storico
Da Lug 2023 a Lug 2024
