(Canadian dollars) CALGARY, April 26 /PRNewswire-FirstCall/ --
Precision Drilling Trust ("Precision" or the "Trust") today reports
record results for the first quarter ended March 31, 2006 from its
continuing operations in Canada and the first full reporting
quarter as an income trust. Precision is also announcing plans to
expand contract drilling operations into the United States.
Earnings from continuing operations in the first quarter of 2006
were $224.2 million compared to $88.3 million for the comparable
quarter in 2005 and $120.9 million in the quarter ended December
31, 2005. Earnings from continuing operations increased by $1.08
per diluted unit or 152% to $1.79 in the first quarter of 2006
compared to $0.71 in 2005. The increase is attributable to a number
of factors including exceptionally strong customer demand,
favourable weather conditions and a lower effective tax rate due to
Precision's conversion to an income trust. Significant year over
year increases in equipment activity and pricing for both the
Contract Drilling Services and Completion and Production Services
segments resulted in increased earnings per diluted unit of $0.50
in the first quarter of 2006, which is 70% higher than the
comparable quarter in 2005. The lower effective tax rate added
$0.58 per diluted unit in the current quarter. Precision had a very
successful first quarter in 2006 as sequential quarterly momentum
associated with high oil and natural gas commodity prices realized
in 2005 carried over into the current year. During the first
quarter of 2006, oil prices remained strong while North American
Henry Hub natural gas spot prices ranged from a high of US$10.05
per Mmbtu to a low of US$6.50 per Mmbtu. Despite the softening of
natural gas prices, customers continue to aggressively pursue their
drilling and well servicing programs and Precision expects to
return to high seasonal activity levels once second quarter spring
breakup runs its course and road bans are lifted. Precision is
pleased to announce its strategic expansion into the United States
drilling market. "The U.S. market offers an opportunity for higher
year round utilization and strong customer demand," said Gene
Stahl, President and Chief Operating Officer. "More importantly,
there is a strong technical fit for Precision's equipment and
expertise in some key drilling markets in the U.S. and we feel the
time is right for Precision to take advantage of this opportunity."
Precision will initially provide one Super Single(R) rig under
contract to a customer in the second quarter of 2006 and will
commission construction of an additional five rigs to be delivered
over the next 12 to 18 months. Another five rigs will be built in
anticipation of demand from this market for completion by the
second quarter of 2008. "We believe this initiative will serve as
an initial platform for growth in the United States market and
represents an opportunity for Precision to demonstrate its
capabilities," added Stahl. These new U.S. rigs will be rated to
approximately 3,200 metres (10,000 feet) and will represent the
next generation of Precision's Super Single(R). Based on current
planning and rig specifications, Precision is expecting these
initiatives to require capital expenditures of approximately $115
million with an estimated 25% of this amount to be incurred during
2006. The first quarter of 2006 is highlighted by numerous
operational and financial developments, including: - In its first
full quarter as an income trust, Precision announced distributions
to unitholders of $0.27 per month per unit for aggregate cash
distributions declared of $101.6 million or $0.81 per unit; -
Long-term debt increased by $127.8 million during the quarter to
$224.6 million as at March 31, 2006. The increase is associated
with funding requirements for payment of prior year income taxes
payable; - Working capital increased by $234.9 million during the
quarter to $387.7 million as at March 31, 2006 as record activity
in the quarter increased accounts receivable to $597.1 million,
further strengthening Precision's positive net debt position; - Rig
delivery under our planned fleet expansion program of 19 rigs is
proceeding on schedule. Two Super Single(R) rigs were delivered in
the fourth quarter of 2005. In the first quarter of 2006, three
rigs were commissioned: one 4,000 metre electric triple and two
Super Single(R) rigs. The remaining 14 rigs - six electric triple
and eight Super Single(R) rigs - are expected to be completed at a
steady pace through the first quarter of 2007; and - An additional
four rigs are being built for customers in Canada. Two new Super
Singles(R) have been contracted with delivery expected in the
second quarter of 2007 and two 4,000 metre electric triple rigs
have been contracted and are under construction, with delivery
expected in the fourth quarter of 2006. The previously announced
$285 million capital expenditure program has been increased by an
estimated $145 million for U.S. expansion and construction of
additional rigs for the Canadian market. The revised capital
expenditure program is estimated to be $430 million, with $330
million to be incurred during 2006 and the remaining $100 million
over the following 18 months. For the current year, sustaining
capital expenditures to upgrade and maintain Precision's existing
equipment and infrastructure remain at an estimated $120 million.
Upon completion of the expansion program in 2008, Precision will
have increased its drilling rig fleet to 261, with 250 rigs
operating in western Canada and 11 in the United States. This
represents a 13% increase over the year end 2005 fleet total of 230
rigs. With Precision's conversion to an income trust on November 7,
2005 and consistent with the December 31, 2005 year end financial
statement reporting, Precision Drilling Trust, as the successor in
interest to Precision Drilling Corporation, has been accounted for
as a continuity of interest. Accordingly, the consolidated
financial statements of Precision for the first quarter ended March
31, 2006 and comparables for the quarter ended March 31, 2005
reflect the financial position, results of operations and cash
flows as if Precision had always carried on the business formerly
carried on by Precision Drilling Corporation. Results of Continuing
Operations Revenue of $536.4 million and operating earnings of
$245.9 million in the first quarter of 2006 represented increases
of 40% and 61% respectively compared to the same period for 2005.
The increases are attributable to very strong industry demand
resulting in higher equipment utilization and higher pricing. For
the third successive quarter, all business units performed
exceptionally well and contributed to record quarterly results. The
variable per day and per hour operating cost escalations remained
well contained, within a 5% increase year over year. As a
percentage of revenue, strong pricing increased operating earnings
margins to 46% in the first quarter of 2006 versus 40% for the
first quarter of 2005. The Completion and Production Services
segment improved considerably in each of its well servicing, rental
and snubbing businesses. Well servicing in particular showed
strength with an hourly revenue rate increase of 22%. Precision's
continuing operations are reported in two segments. The Contract
Drilling Services segment contains the contract drilling rig, camp
and catering, oilfield supply, and manufacturing divisions. The
Completion and Production Services segment contains the service
rig, snubbing and rental divisions. Three Months Ended March 31,
2006 2005 % Change
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Contract Drilling Services: Number of drilling rigs (end of period)
233 229 1.7 Drilling operating days (excluding move days) 16,694
13,999 19.3 Drilling revenue per operating day $ 20,886 $ 18,545
12.6 Drilling rig operating day utilization 80% 68% Completion and
Productions Services: Number of service rigs (end of period) 237
239 (0.8) Service rig operating hours 165,591 139,674 18.6 Service
revenue per operating hour $ 732 $ 600 22.0 Service rig operating
hour utilization 77% 65%
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Exceptional first quarter earnings were the result of unprecedented
industry rig demand and near perfect weather conditions for
Precision's service offerings. The increase in activity for
Precision's equipment was in direct correlation to the rise in
industry activity. In Canada, industry drilling rig operating days
increased by approximately 23% to 55,974, industry well completions
increased by 21% to 6,178 wells and the available rig count
increased by 9% to approximately 779. For Precision, drilling
operating days and service rig operating hours in the first quarter
of 2006 increased by 19% over the same period in 2005. Cold weather
in late February and March extended the winter drilling season by
approximately two weeks and enabled Precision to close out the
quarter on a very positive note. Consistent with the momentum
carried over from 2005, the demand for Contract Drilling Services
during the first quarter of 2006 reached unprecedented levels, with
231 out of 233 drilling rigs active and all 92 camps utilized. The
16,694 drilling operating days for the quarter establishes a new
high for Precision, surpassing the 16,550 achieved in the first
quarter of 2001. At that time, Precision had 227 drilling rigs out
of an industry total of 611 whereas today Precision has 233 out of
an industry total of 779. Demand for Completion and Production
Services also hit record activity levels, with the service rig
fleet generating 165,591 operating hours for 77% utilization in the
first quarter, an increase of 19% over the prior year. The
improvement is a result of continuing strong demand, as customers
attempted to keep pace with new well completion work during the
quarter while keeping production maintenance for existing wells on
schedule. New well completions accounted for 45% of the service rig
operating hours in the first quarter, unchanged from 2005.
Accordingly, both operating segments reported significant quarterly
revenue increases year over year. Completion and Production
Services increased revenue by 45% while Contract Drilling Services
increased by 37%. The improvement in Completion and Production
Services is attributable to a 52% increase in the rental division
due to strong industry activity and demand for ancillary equipment,
pricing strength in the service rig division and standby revenue in
the snubbing division. Leveraged by higher revenue rates, operating
costs were lower as a percentage of revenue despite crew wage rate
increases and associated personnel costs. Operating expenses
declined from 49% of revenue in the first quarter of 2005 to 45% in
2006. Equipment repair and maintenance expenses were lower on a per
day and per hour basis as scheduled costs were spread over a higher
activity level relative to last year. The general wage rate
increase of approximately 7% that went into effect October 1, 2005
is the primary factor in daily and hourly cost increases for the
current quarter. Further, the operational efficiency and
procurement savings provided by Precision's consumable supply and
manufacturing and repair businesses served to control the pace of
industry cost escalations. With 233 drilling rigs and 237 service
rigs operating within the Western Canada Sedimentary Basin, this
infrastructure support provided Precision with economic leverage.
General and administrative costs for the first quarter amounted to
$22.9 million, an increase of $3.1 million over the same period in
2005. As a percentage of revenue, general and administrative costs
fell to 4.3% from 5.2%. Depreciation expense in the first quarter
of 2006 amounted to $24.9 million, an increase of $3.5 million or
17% over the same period in 2005. The increase is attributable to
the rise in equipment utilization during the quarter as rig assets
are depreciated by the unit of production method. Interest expense
of $2.8 million declined by 76% in 2006 compared to the first
quarter of 2005, and is attributable to the repayment of long-term
debt in October 2005. The Trust's effective income tax rate on
first quarter earnings from continuing operations before income
taxes was 8% in 2006 compared to 38% in 2005. The decrease in the
tax rate is primarily a result of the conversion to an income trust
which has the effect of shifting all or a portion of the income tax
burden of the Trust to its unitholders. Distribution Policy of the
Trust With Precision Drilling Corporation's conversion to an income
trust effective November 7, 2005, the Trust adopted a policy of
making monthly cash distributions to unit holders. Pursuant to the
Trust Indenture, distributions may be reduced, increased or
suspended entirely depending on the operations of Precision and the
performance of its assets. The actual cash flow available for
distribution to holders of Trust units and holders of Exchangeable
LP units is a function of numerous factors, including Precision's:
- financial performance; - debt covenants and obligations; -
working capital requirements; - maintenance and expansion capital
expenditure requirements for the purchase of property, plant and
equipment; and - number of units outstanding. During the first
quarter of 2006 the Trust declared monthly cash distributions of
$0.27 for each of the units outstanding, including Exchangeable LP
units, for total distributions of $101.6 million. Throughout the
2006 first quarter there were 125,461,303 Trust and Exchangeable LP
units outstanding. Key factors for consideration in determining
actual cash flow available for distribution, in a historical
context, is disclosed within the consolidated statements of cash
flow. The increase or decrease in cash is shown for each of the
operating, investing and financing activities undertaken by the
Trust. - Within operating activities, first quarter 2006 cash
provided by continuing operations was $46.2 million. Adjusted for
changes in non-cash working capital balances of $203.5 million,
funds of $249.7 million were provided by operations; and - Within
investing activities, the purchase of property, plant and equipment
("PPE") during the first quarter of 2006 was $49.0 million.
Purchases included $32.3 million for expansion capital expenditures
to grow and expand Precision's underlying asset base and $16.7
million for maintenance capital expenditures to sustain and upgrade
existing PPE. The oilfield service industry in Canada can be
extremely cyclical as commodity price fluctuations can be
compounded by seasonal trends. Accordingly, there could be a wide
fluctuation in financial performance from quarter to quarter, year
over year and quarterly results should not be annualized.
Seasonally, the first quarter is usually the most active and
prosperous as winter ground conditions typically allow complete
access to well locations. In the second quarter, spring weather
softens ground conditions and can slow oilfield service activity
dramatically. Subject to dry weather, activity resumes and will
typically gain momentum in the third and fourth quarters. Certain
statements contained in this press release, including statements
related to Precision's planned capital expenditures and planned
expansion into the U.S. and statements that contain words such as
"anticipate", "could", "should", "may", "expect", "believe", "will"
and similar terms are not historical facts and constitute
"forward-looking information" within the meaning of Canadian
Securities Laws and "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking information
and statements involve known and unknown risks and uncertainties
which may cause the actual results, performance or achievements of
Precision to be materially different from any future results,
performances or achievements expressed or implied by such
forward-looking statements. Such factors include fluctuations in
the market for oil and natural gas and related products and
services; competition; political and economic conditions in
countries in which Precision does business; the demand for services
provided by Precision; changes in laws and regulations, including
environmental regulations, to which Precision is subject and other
factors, which are described in further detail in Precision's
filings with Canadian securities regulators and the United States
Securities and Exchange Commission. CONSOLIDATED STATEMENTS OF
EARNINGS AND RETAINED EARNINGS (DEFICIT) Three Months Ended March
31 CDN $000's, except per unit/share amounts (unaudited) 2006 2005
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Revenue $ 536,408 $ 383,407 Expenses: Operating 242,653 189,533
General and administrative 22,891 19,794 Depreciation and
amortization 24,900 21,369 Foreign exchange 55 (309)
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290,499 230,387
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Operating earnings 245,909 153,020 Interest expense 2,777 11,539
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Earnings from continuing operations before income taxes 243,132
141,481 Income taxes: Current 18,364 44,025 Future 585 9,175
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18,949 53,200
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Earnings from continuing operations 224,183 88,281 Discontinued
operations, net of tax - 50,237
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Net earnings 224,183 138,518 Retained earnings (deficit), beginning
of period (303,284) 1,041,683 Distributions (101,623) -
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Retained earnings (deficit), end of period $ (180,724) $ 1,180,201
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Earnings per unit/share from continuing operations: Basic $ 1.79 $
0.72 Diluted $ 1.79 $ 0.71
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Earnings per unit/share: Basic $ 1.79 $ 1.13 Diluted $ 1.79 $ 1.11
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Trust units/shares outstanding (000's) 125,461 122,660 Weighted
average units/shares outstanding (000's) 125,461 122,314 Diluted
units/shares outstanding (000's) 125,461 124,876 CONSOLIDATED
BALANCE SHEETS March 31 December 31 CDN $ 000's (unaudited) 2006
2005
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Assets Current assets: Cash and cash equivalents $ - $ - Accounts
receivable 597,129 500,655 Inventory 7,796 7,035
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604,925 507,690 Property, plant and equipment, net of accumulated
depreciation 959,889 943,900 Intangibles, net of accumulated
amortization 443 465 Goodwill 266,827 266,827
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$ 1,832,084 $ 1,718,882
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Liabilities and Unitholders' Equity Current liabilities: Bank
indebtedness $ 13,822 $ 20,468 Accounts payable and accrued
liabilities 160,386 134,303 Income taxes payable 9,146 163,530
Distributions payable 33,875 36,635
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217,229 354,936 Long-term debt 224,602 96,838 Future income taxes
193,102 192,517 Unitholders' equity: Unitholders' capital 1,377,875
1,377,875 Deficit (180,724) (303,284)
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1,197,151 1,074,591
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$ 1,832,084 $ 1,718,882
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Trust units outstanding (000's) 125,461 125,461 CONSOLIDATED
STATEMENTS OF CASH FLOW Three Months Ended March 31 CDN $000's
(unaudited) 2006 2005
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Cash provided by (used in): Continuing operations: Earnings from
continuing operations $ 224,183 $ 88,281 Items not affecting cash:
Depreciation and amortization 24,900 21,369 Stock-based
compensation - 2,780 Future income taxes 585 9,175 Amortization of
deferred financing costs - 459 Unrealized foreign exchange gain on
long-term monetary items - 11 Changes in non-cash working capital
balances (203,476) (30,313)
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46,192 91,762 Discontinued operations: Funds provided by
discontinued operations - 82,914 Changes in non-cash working
capital balances of discontinued operations - (77,144)
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- 5,770 Investments: Purchase of property, plant and equipment
(49,031) (30,105) Purchase of intangibles - (20) Proceeds on sale
of property, plant and equipment 8,164 2,939 Purchase of property,
plant and equipment of discontinued operations - (42,855) Proceeds
on sale of property, plant and equipment of discontinued operations
- 5,573
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(40,867) (64,468) Financing: Increase in long-term debt 127,764 -
Repayment of long-term debt - (4) Distributions (104,383) -
Issuance of common shares on exercise of options - 22,491 Changes
in non-cash working capital balances (22,060) - Change in bank
indebtedness (6,646) -
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(5,325) 22,487 Increase in cash and cash equivalents - 55,551 Cash
and cash equivalents, beginning of period - 122,012
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Cash and cash equivalents, end of period $ - $ 177,563
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SEGMENT INFORMATION Three months ended March 31, 2006 Contract
Completion CDN $000's Drilling & Production Corporate
Inter-segment (unaudited) Services Services and Other Eliminations
Total
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Revenue $ 384,162 $ 156,638 $ - $ (4,392) $ 536,408 Operating
earnings 193,683 63,787 (11,561) - 245,909 Depreciation and
amortization 13,526 10,286 1,088 - 24,900 Total assets 1,268,052
517,397 46,635 - 1,832,084 Goodwill 172,440 94,387 - - 266,827
Capital expenditures 41,785 6,972 274 - 49,031
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Three months ended March 31, 2005 Contract Completion CDN $000's
Drilling & Production Corporate Inter-segment (unaudited)
Services Services and Other Eliminations Total
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Revenue $ 280,337 $ 108,264 $ - $ (5,194) $ 383,407 Operating
earnings 129,647 35,118 (11,745) - 153,020 Depreciation and
amortization 12,231 7,786 1,352 - 21,369 Total assets(1) 1,044,238
470,510 223,389 - 1,738,137 Goodwill 172,440 94,387 - - 266,827
Capital expenditures 16,518 7,051 6,536 - 30,105
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(1) excludes assets of discontinued operations CANADIAN DRILLING
OPERATING STATISTICS Three Months Ended March 31, 2006 2005
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Market Market Precision Industry(x) Share % Precision Industry(x)
Share %
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Number of drilling rigs 233 779 29.9 229 712 32.2 Number of
operating days (spud to release) 16,694 55,974 29.8 13,999 45,670
30.7 Wells drilled 2,302 7,429 31.0 2,162 6,184 35.0 Average days
per well 7.3 7.5 6.5 7.4 Metres drilled (000's) 2,815 8,897 31.6
2,566 7,357 34.9 Average metres/day 169 159 183 161 Average
metres/well 1,223 1,198 1,187 1,190 Rig utilization rate (%) 80.3
81.1 67.9 71.3 (x) Excludes non-CAODC rigs and non-reporting CAODC
members A conference call to review the quarter end results has
been scheduled for 12:00 noon MT on Wednesday, April 26, 2006. The
conference call dial-in number is 1-800-814-4861 or 416-644-3418. A
live webcast will be accessible at
http://www.precisiondrilling.com/ by selecting Investor Relations,
then Webcast. An archived recording of the conference call will be
available approximately one hour after completion of the call until
May 3, 2006 by dialing 1-877-289-8525 or 416-640-1917, passcode
21184628 followed by the number sign. Precision Drilling Trust is
Canada's largest energy services trust. Headquartered in Calgary,
Alberta, Canada, Precision is the leading provider of energy
services to the Canadian oil and gas industry. Precision provides
customers with access to an extensive fleet of contract drilling
rigs, services rigs, camps, snubbing units and rental equipment
backed by a comprehensive mix of technical support services and
skilled, experienced personnel. Precision is listed on the Toronto
Stock Exchange under the trading symbol "PD.UN" and in U.S. dollars
"PD.U" and on the New York Stock Exchange under the trading symbol
"PDS". DATASOURCE: Precision Drilling Trust CONTACT: Doug Strong,
Chief Financial Officer of Precision Drilling Corporation,
Administrator of Precision Drilling Trust, 4200, 150 - 6th Avenue
S.W., Calgary, Alberta, T2P 3Y7, Telephone (403) 716-4500, Fax
(403) 264-0251; website: http://www.precisiondrilling.com/
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