Precision Drilling(US:PDS)2020-07-24 00:43Financial Data and Key Metrics Changes - Precision Drilling reported an adjusted EBITDA of CAD 58 million for Q2 2020, a decrease of 28% compared to Q2 2019, primarily due to a sharp decline in drilling activity [12][10]. - The company expects cash savings for the year to reach up to CAD 150 million, an increase from the previous guidance of over CAD 100 million [10][11]. - As of June 30, 2020, the long-term debt position net of cash was CAD 1.275 billion, with total liquidity of approximately CAD 900 million [20]. Business Line Data and Key Metrics Changes - In the U.S., drilling activity averaged 30 rigs, a decrease of 25 rigs from Q1 2020, with daily operating margins of USD 15,198, an increase from Q1 [14]. - In Canada, drilling activity averaged 9 rigs, down 18 rigs from Q2 2019, with daily operating margins at CAD 9,042, an increase from Q2 2019 [15]. - The Completion and Production segment reported an adjusted EBITDA of negative CAD 1.2 million, down CAD 4 million compared to the prior year, impacted by a significant decline in well service activity [17]. Market Data and Key Metrics Changes - Internationally, drilling activity averaged 8 rigs, consistent with Q2 2020, with average day rates of USD 54,779, up from Q1 and the prior year [16]. - The company has maintained a strong market share in the Montney and Duvernay plays, reaching nearly 50% of the active fleet in those areas [31]. Company Strategy and Development Direction - The company is focusing on cost reduction and cash preservation, with a target of reducing fixed costs by 35% [10]. - Precision is leveraging its Alpha Technologies suite to enhance operational efficiency and drive market share growth [33][48]. - The company aims to generate free cash flow and maintain liquidity while reducing debt, with a long-term goal of CAD 700 million in debt reduction by 2022 [22]. Management's Comments on Operating Environment and Future Outlook - Management noted that the oil service sector has faced significant challenges, with customer demand and drilling activity sharply declining [27]. - There is cautious optimism as commodity prices recover, leading to improved customer sentiment and interest in technology [38]. - The company expects a muted seasonal rebound in Canada, with rig activity potentially moving towards the upper 20s by late Q3 [35]. Other Important Information - The company has reduced its capital expenditures for 2020 to CAD 48 million, a decrease of approximately 50% from initial guidance [18]. - Precision has been participating in the Canadian Emergency Wage Subsidy Program to retain jobs during the downturn [11]. Q&A Session Summary Question: What are the prospects for the acquisition of Canadian land drilling rigs? - Management indicated that free available capital for rig acquisitions is tight, making it hard to comment on another company's process [58]. Question: How is the traction with Alpha apps and technology adoption among customers? - Management noted that customers are increasingly using technology for remote operations, which has improved performance and efficiency [60]. Question: What are the prospects for idle rigs in the U.S.? - Management expressed confidence that customers would want to reactivate rigs if they have a drilling budget in 2021 [64]. Question: What is the expected working capital inflow for the second half of the year? - Management expects to convert an additional CAD 10 million to CAD 20 million in working capital by year-end [74]. Question: What is the company's strategy regarding debt repayment? - Management confirmed the intention to retire the 2021 notes fully by the end of the year, potentially using the credit facility for this purpose [107].