Precision Drilling(US:PDS)2024-03-04 22:26Financial Performance - In 2023, Precision generated cash provided by operations of $501 million, a 111% increase over 2022 due to higher activity in Canada and improved North America day rates[18]. - In 2023, the company generated revenue of $1,937.9 million, a 19.8% increase from $1,617.2 million in 2022[77]. - Adjusted EBITDA for 2023 was $611.1 million, representing a 96.1% increase compared to $311.6 million in 2022, with an adjusted EBITDA margin of 31.5%[77]. - Revenue from Contract Drilling Services was $1,704 million in 2023, a 19% increase compared to 2022, driven by higher North American revenue per utilization day rates[106]. - Adjusted EBITDA for 2023 was $631 million, up from $398 million in 2022, primarily due to stronger North American revenue per utilization day and higher Canadian drilling activity[109]. - Canadian drilling revenue was $701 million, a 26% increase from 2022, with a 3% rise in drilling rig activity and a 23% increase in average revenue per utilization day[114]. - Revenue from Completion and Production Services was $241 million, a 29% increase compared to 2022, driven by increased well service activity and stronger hourly service rates[119]. - Net earnings for the fourth quarter were $147 million, or $10.42 per share, compared to $3 million, or $0.27 per share, in Q4 2022[126]. Debt Management - The company reduced debt by $152 million in 2023 and plans to reduce debt by another $150 million to $200 million in 2024, aiming for a sustained Net Debt to Adjusted EBITDA ratio below 1.0 times by the end of 2025[20]. - Ended the year with a Net Debt to Adjusted EBITDA ratio of approximately 1.4 times, with a target of below 1.0 times by the end of 2025[39]. - The company had a total long-term debt of $914.83 million, down from $1.09 billion in 2022[177]. - The company recognized an income tax recovery of $23 million in 2023, compared to an income tax expense of $20 million in 2022[95]. - Finance charges decreased to $83 million in 2023 from $88 million in 2022, attributed to a lower debt balance despite higher variable interest rates[90]. Operational Highlights - Precision's Completion and Production Services segment consisted of 183 registered service rigs at the end of 2023, including 173 in Canada and 10 in the U.S.[35]. - The acquisition of CWC Energy Services Corp. in Q4 2023 increased Precision's marketed service rig count by 36% year over year[17]. - Approximately 75% of Precision's Super Triple fleet is equipped with AlphaTM technologies, enhancing drilling performance and cost efficiencies[18]. - The company achieved a 34% year-over-year increase in Completion and Production Services' Adjusted EBITDA due to the integration of High Arctic Energy Services assets[17]. - Increased Canadian drilling rig utilization days and well servicing rig operating hours, maintaining a leading position in Canada[39]. - The service rig operating hours increased by 18.4% in 2023 compared to 2022, reflecting higher service rig activity[78]. - The average number of drilling rigs under term contracts in 2023 was 62, with utilization days from these contracts accounting for approximately 50% of total contract drilling utilization days[67]. Strategic Initiatives - Precision's strategic priorities for 2023 included maximizing free cash flow and strengthening financial position through debt repayments, all of which were successfully delivered[38]. - The company plans to allocate 25% to 35% of free cash flow before debt repayments to shareholder returns in 2024[20]. - The company expects capital spending in 2024 to be $195 million, with $155 million allocated for maintenance and $40 million for expansion and upgrades[74]. - The company plans to reduce debt by $150 million to $200 million in 2024 and aims for a net debt to adjusted EBITDA ratio below 1.0 times by the end of 2025[75]. Market Conditions - The U.S. active land rig count declined by approximately 21% throughout 2023, but drilling demand is expected to improve in the second quarter of 2024[71]. - In Canada, drilling activity is anticipated to remain high in 2024 due to strong oil prices and increased hydrocarbon export capacity, particularly with the Trans Mountain oil pipeline expansion[70]. - Commodity prices have been negatively affected by increased production, OPEC+ decisions, recession concerns, and a strengthening U.S. dollar[196]. - The volatility in oil and natural gas prices has led to decreased exploration and drilling activities, impacting demand for services[198]. - Intense price competition in the contract drilling industry could erode profit margins and affect revenue[201]. - The cyclical nature of contract drilling has resulted in periods of low demand and excess rig supply, impacting financial performance[202]. - The company faces risks related to regulatory, tax, royalty, and environmental uncertainties in Canada and the U.S.[197]. Capital Expenditures - Capital expenditures for property, plant, and equipment were $227 million in 2023, an increase of $42 million from 2022, with $64 million allocated for expansion and upgrades[91]. - Capital expenditures in 2023 totaled $227 million, with a focus on expansion and upgrade capital[151]. Shareholder Returns - Renewed Normal Course Issuer Bid (NCIB) for share repurchases, allowing purchases of up to 10% of the public float[39]. - The company repurchased and canceled 123,100 common shares for $10 million during 2024[173]. - The company’s share price on the TSX was $71.96 at year-end 2023, down from $103.71 in 2022[177].