Precision Drilling Corporation Announces Strong Third Quarter
Results CALGARY, Oct. 30 /PRNewswire-FirstCall/ -- Highlights CDN
$000's, except per share amounts (unaudited)
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Three months ended Nine months ended September 30, September 30,
2003 2002 % Change 2003 2002 % Change
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Financial Results Revenue $ 468,097 $ 363,669 28.7 $1,424,331
$1,226,600 16.1 Operating earnings(1) 63,174 20,371 210.1 189,331
134,547 40.7 Earnings from continuing operations 37,772 10,459
261.1 116,022 76,927 50.8 Net earnings 37,772 12,246 208.4 133,531
82,402 62.0 Diluted earnings per share: From continuing operations
0.68 0.19 257.9 2.10 1.41 48.9 After discontinued operations 0.68
0.22 209.1 2.42 1.51 60.3 Funds provided by continuing operations
93,260 22,872 307.7 244,720 146,870 66.6 Precision Drilling
Corporation ("Precision" or the "Corporation") today reports
earnings per share from continuing operations for the three months
ended September 30, 2003 of $0.68 compared to $0.19 in the same
quarter of 2002. Included in earnings from continuing operations
are costs of $816 ($0.01 per share) associated with business
rationalization initiatives. For the nine month period ended
September 30, 2003, earnings per share from continuing operations
was $2.10 compared to $1.41 for the same period in 2002 while gains
on disposal of discontinued operations resulted in a further
earnings per share of $0.32 for a total of $2.42 per share for the
nine month period ended September 30, 2003. Revenue of $468.1
million for the quarter increased by $104.4 million or 29% over the
same period in the prior year. The majority of this increase came
from the Corporation's Canadian operations. Activity levels in
Canada were strong in all of the Corporation's business segments.
Revenue from the Canadian Contract Drilling operation was up 53%
while Technology Services Canadian operations revenue was up by
44%. Contract Drilling revenue increased by 47% in the third
quarter compared to the same quarter last year. For the nine month
period, revenue has increased 21% from the prior year. In Canada,
the drilling rig fleet achieved 10,848 operating days for a 52%
utilization in the quarter compared to 6,944 operating days and a
34% utilization in the comparable quarter of the prior year. The
increase in rig operating days of 56% for the quarter and 33% for
the nine-month period follows overall industry activity. The
activity levels for the third quarter were up on the prior year due
to near perfect weather in July and August, improved commodity
pricing resulting in higher industry activity and the backlog of
work created by unfavorable weather in the second quarter. Average
day rates increased as a result of increased demand and strong
pricing on the spot market. Day rates in Canada are expected to
improve as anticipated activity reaches near record levels. In the
fourth quarter the Corporation will be adding two Super Single
Lights(TM), bringing the total rig fleet in Canada to 226. The
service rig fleet generated 110,447 operating hours in the third
quarter, up 19% from the same quarter last year. Average hourly
rates have increased 3% from the third quarter of 2002. As at
September 30, 2003 the Corporation was operating 239 service rigs,
down 3 from the same period in the prior year as two units were
deregistered and one unit was involved in an incident that has made
it inoperable. Activity levels in well servicing were up on the
comparable quarter last year due to ideal weather conditions,
increased drilling activity and strong commodity pricing, heavy oil
in particular. During the quarter the Corporation experienced an
increase in international drilling activity as the number of days
increased over the same quarter in 2002 by 41% to 972 days. The
increase in rig operating days was the result of increased drilling
activity in Latin America, as Venezuela recovers from the effects
of a general strike, and a one rig project in Asia Pacific. The
Corporation has entered into a second rig contract in Asia Pacific
and is mobilizing another rig to the Middle East. These rig
deployments, together with the increase in rigs working on the
Mexico integrated services contract from 7 to 10, will bring the
total drilling rigs working internationally to 19 and should result
in growth for international Contract Drilling. In the quarter,
revenue for Technology Services was 19% higher than the comparable
quarter of 2002. The most significant increase was realized in the
Canadian region where revenue increased $23.5 million (a 44%
increase over 2002) due to increased activity. Other areas with
significant growth in revenue were Mexico, with expansion outside
of the integrated services contract, and the Middle East, where the
Corporation has been successful in adding new contracts over the
past 12 months. Revenue for the quarter was contributed from Canada
at 40% (2002 - 36%), US 24% (2002- 24%) and International 36% (2002
- 40%). Operating earnings as a percentage of revenue improved
significantly from a loss of 5% in the third quarter of 2002 to
slightly better than break even. Depreciation expense increased as
a result of asset write downs, increased capital assets and a gain
on disposal of capital assets in 2002 of $4.1 million compared to a
gain on disposal in 2003 of $1.5 million. Total capital
expenditures in the Technology Services segment in the last twelve
months have been $216.6 million. As noted in the second quarter,
the business plan for Technology Services is being reviewed. This
process will be completed early in the fourth quarter and will
result in the identification of core and non core product lines.
These conclusions will guide future capital spending and
divestiture decisions and will form the basis for assessing the
carrying value of the Corporation's investment in Technology
Services or components thereof. The tool build for Technology
Services continues and tool deployment proceeds on a strategic
basis. Future investment is being directed to increasing available
tool sizes and expanding concurrent job capability. The Rental and
Production segment experienced an increase in revenue of 5% over
the prior year to $48.9 million. The segment's rental division
realized higher revenues due to increased rental days and a modest
increase in revenue per rental day driven by activity levels in
Canada. During the quarter the Corporation combined its 3 separate
rental operations to form one business unit in order to improve
upon customer convenience and streamline operations. (1) NON-GAAP
MEASURE Operating earnings is not a recognized measure under
Canadian generally accepted accounting principles (GAAP).
Management believes that in addition to net earnings, operating
earnings is a useful supplemental measure as it provides an
indication of the results generated by the Corporation's principal
business activities prior to consideration of how those activities
are financed or how the results are taxed in various jurisdictions.
Investors should be cautioned, however, that operating earnings
should not be construed as an alternative to net earnings
determined in accordance with GAAP as an indicator of Precision's
performance. Precision's method of calculating operating earnings
may differ from other companies and, accordingly, operating
earnings may not be comparable to measures used by other companies.
Certain statements contained in this press release, including
statements which are related to improvement in day rates in Canada,
growth in international Contract Drilling and future investments
and drilling activity and which may contain words such as
"anticipate", "could", "should", "expect", "believe", "will" and
similar expressions and statements relating to matters that are not
historical facts are forward- looking statements. Such
forward-looking 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 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, to which Precision is subject and other factors,
which are described in further detail in Precision's filings with
the Securities and Exchange Commission. Consolidated Statements of
Earnings and Retained Earnings CDN $000's, except per share amounts
(unaudited)
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Three months ended Nine months ended September 30, September 30,
2003 2002 2003 2002
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Revenue $ 468,097 $ 363,669 $1,424,331 $1,226,600 Expenses:
Operating 311,931 264,439 966,441 844,742 General and
administrative 38,331 38,211 106,991 116,085 Depreciation and
amortization 43,686 31,797 132,213 102,293 Research and engineering
13,309 8,990 30,954 25,278 Foreign exchange (2,334) (139) (1,599)
3,655
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404,923 343,298 1,235,000 1,092,053
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Operating earnings 63,174 20,371 189,331 134,547 Interest 8,545
8,722 26,945 26,182 Dividend income - - - (39) Gain on disposal of
investments (1,862) (1,000) (3,026) (1,000)
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Earnings before income taxes, non-controlling interest and
discontinued operations 56,491 12,649 165,412 109,404 Income taxes:
Current 5,028 23,696 37,945 64,362 Future 13,417 (21,825) 10,605
(32,943)
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18,445 1,871 48,550 31,419
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Earnings before non-controlling interest and discontinued
operations 38,046 10,778 116,862 77,985 Non-controlling interest
274 319 840 1,058
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Earnings from continuing operations 37,772 10,459 116,022 76,927
Gain on disposal of discontinued operations - - 17,460 -
Discontinued operations, net of tax - 1,787 49 5,475
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Net earnings 37,772 12,246 133,531 82,402 Retained earnings,
beginning of period 715,843 598,975 620,084 528,819
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Retained earnings, end of period $ 753,615 $ 611,221 $ 753,615 $
611,221
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Earnings per share from continuing operations: Basic $ 0.69 $ 0.19
$ 2.14 $ 1.44 Diluted $ 0.68 $ 0.19 $ 2.10 $ 1.41
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Earnings per share: Basic $ 0.69 $ 0.23 $ 2.46 $ 1.54 Diluted $
0.68 $ 0.22 $ 2.42 $ 1.51
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Common shares outstanding (000's) 54,639 53,944 54,639 53,944
Weighted average shares outstanding (000's) 54,514 53,923 54,334
53,599 Diluted shares outstanding (000's) 55,334 54,871 55,226
54,717 Consolidated Balance Sheets CDN $000's
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September December 30, 2003 31, 2002
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Assets (unaudited) Current assets: Cash $ 18,270 $ 17,315 Accounts
receivable 512,480 443,799 Income taxes recoverable 7,145 7,804
Inventory 111,972 132,909
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649,867 601,827 Property, plant & equipment, net of accumulated
depreciation 1,595,593 1,521,444 Intangibles, net of accumulated
amortization 67,579 72,380 Goodwill 537,692 546,921 Other assets
8,959 17,443
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$2,859,690 $2,760,015
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Liabilities & Shareholders' Equity Current liabilities: Bank
indebtedness $ 135,778 $ 95,321 Accounts payable and accrued
liabilities 248,543 268,568 Current portion of long-term debt
18,572 27,682
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402,893 391,571 Long-term debt 446,372 514,878 Future income taxes
324,771 318,547 Non-controlling interest 2,859 2,019 Shareholders'
equity: Share capital 929,180 912,916 Retained earnings 753,615
620,084
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1,682,795 1,533,000
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$2,859,690 $2,760,015
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Common shares outstanding (000's) 54,639 54,067 Common share
purchase options outstanding (000's) 3,542 4,119 Consolidated
Statements of Cash Flow CDN $000's (unaudited)
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Three months ended Nine months ended September 30, September 30,
2003 2002 2003 2002
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Cash provided by (used in): Continuing operations: Earnings from
continuing operations $ 37,772 $ 10,459 $ 116,022 $ 76,927 Items
not affecting cash: Depreciation and amortization 43,686 31,797
132,213 102,293 Gain on disposal of investments (1,862) (1,000)
(3,026) (1,000) Future income taxes 13,417 (21,825) 10,605 (32,943)
Non-controlling interest 274 319 840 1,058 Amortization of deferred
financing costs 321 323 965 971 Unrealized foreign exchange (gain)
loss on long-term debt (348) 2,799 (12,899) (436)
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Funds provided by continuing operations 93,260 22,872 244,720
146,870 Changes in non-cash working capital balances (84,386)
(11,465) (85,483) 16,785
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8,874 11,407 159,237 163,655
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Discontinued operations: Earnings from discontinued operations -
1,787 17,509 5,475 Items not affecting cash: Gain on disposal of
discontinued operations - - (17,460) - Depreciation and
amortization - 631 133 1,806 Future income taxes - 200 - 569
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Funds provided by discontinued operations - 2,618 182 7,850
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Investments: Business acquisitions - (3,050) (6,800) (3,050)
Purchase of property, plant and equipment (69,049) (59,971)
(237,432) (166,363) Purchase of intangibles - (63) (6) (2,149)
Proceeds on sale of property, plant and equipment 5,500 8,386
16,646 25,688 Proceeds on disposal of investments 2,960 1,872
10,580 1,872 Proceeds on disposal of investments discontinued
operations - - 67,274 - Investments 144 - (730) (147)
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(60,445) (52,826) (150,468) (144,149)
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Financing: Increase in long-term debt 35,980 24,507 80,940 34,626
Repayment of long-term debt (4,486) (5,994) (145,657) (92,439)
Issuance of common shares on exercise of options 6,115 1,826 16,264
21,851 Change in bank indebtedness 21,275 15,360 40,457 19,491
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58,884 35,699 (7,996) (16,471)
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Increase (decrease) in cash 7,313 (3,102) 955 10,885 Cash,
beginning of period 10,957 27,218 17,315 13,231
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Cash, end of period $ 18,270 $ 24,116 $ 18,270 $ 24,116
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SEGMENT INFORMATION CDN $000's (unaudited)
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Three months ended Contract Technology Rental and Corporate
September 30, Drilling Services Production and Other Total
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2003 Revenue $ 227,490 $ 191,748 $ 48,859 $ - $ 468,097 Operating
earnings (loss) 62,236 713 9,247 (9,022) 63,174 Research and
engineering - 13,309 - - 13,309 Depreciation and amortization
19,961 19,455 3,072 1,198 43,686 Total assets 1,342,054 1,260,539
174,117 82,980 2,859,690 Goodwill 257,531 251,589 28,572 - 537,692
Capital expenditures 32,798 27,609 2,269 6,373 69,049
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2002 Revenue $ 154,457 $ 161,569 $ 46,384 $ 1,259 $ 363,669
Operating earnings (loss) 27,327 (7,840) 6,582 (5,698) 20,371
Research and engineering - 8,990 - - 8,990 Depreciation and
amortization 14,397 13,028 3,268 1,104 31,797 Total assets
1,279,871 1,084,803 236,983 71,945 2,673,602 Goodwill 257,531
250,045 37,801 - 545,377 Capital expenditures(x) 10,530 44,307
3,237 1,960 60,034
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Nine months ended Contract Technology Rental and Corporate
September 30, Drilling Services Production and Other Total
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2003 Revenue $ 701,884 $ 560,135 $ 162,312 $ - $1,424,331 Operating
earnings (loss) 186,551 (5,772) 31,857 (23,305) 189,331 Research
and engineering - 30,954 - - 30,954 Depreciation and amortization
58,234 61,048 9,364 3,567 132,213 Total assets 1,342,054 1,260,539
174,117 82,980 2,859,690 Goodwill 257,531 251,589 28,572 - 537,692
Capital expenditures(x) 62,794 148,817 9,463 16,364 237,438
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2002 Revenue $ 581,137 $ 494,756 $ 149,448 $ 1,259 $1,226,600
Operating earnings (loss) 145,188 (15,782) 26,055 (20,914) 134,547
Research and engineering - 25,278 - - 25,278 Depreciation and
amortization 46,427 42,704 9,932 3,230 102,293 Total assets
1,279,871 1,084,803 236,983 71,945 2,673,602 Goodwill 257,531
250,045 37,801 - 545,377 Capital expenditures(x) 29,534 121,329
14,947 2,702 168,512
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(x)excludes business acquisitions Canadian Drilling Operating
Statistics Nine months ended September 30, 2003 2002
--------------------------------------------------------- Market
Market Industry Share Industry Share Precision (x) % Precision (x)
% --------------------------------------------------------- Number
of drilling rigs 224 654 34.3 223 642 34.7 Number of operating days
(spud to release) 31,094 91,830 33.9 23,379 67,602 34.6 Wells
drilled 6,128 15,137 40.5 4,497 10,835 41.5 Average days per well
5.1 6.1 5.2 6.2 Metres drilled (000's) 6,265 15,899 39.4 4,508
11,453 39.4 Average metres/day 201 173 193 169 Average metres/well
1,022 1,050 1,002 1,057 Rig utilization rate (%) 50.6 51.7 38.2
38.5 (x) excludes non-CAODC rigs A conference call to review the
third quarter 2003 results has been scheduled for 12:00 noon MST on
Thursday, October 30, 2003. The conference call dial-in number is
1-800-814-4853. A live webcast will be accessible at
http://www.precisiondrilling.com/ by selecting Investor Relations.
Precision, headquartered in Calgary, Alberta, Canada, is the
largest Canadian integrated oilfield and industrial services
contractor. Precision Drilling Corporation is listed on The Toronto
Stock Exchange under the trading symbol "PD" and on the New York
Stock Exchange under the trading symbol "PDS". DATASOURCE:
Precision Drilling Corporation CONTACT: Dale E. Tremblay, Senior
Vice President Finance and Chief Financial Officer, Telephone:
(403) 716-4500, Fax: (403) 264-0251; website:
http://www.precisiondrilling.com/
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