Precision Drilling(PDS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q4 was $126 million, compared to $121 million in the prior year, while EBITDA before share-based compensation was $132 million versus $136 million in the previous year [5] - The company reported a net loss of $42 million for Q4, which included a non-cash charge of $67 million for decommissioning drilling rigs and another $17 million for drill pipe [6] - The net debt to adjusted EBITDA ratio at year-end was 1.2x, with a reduction in debt by CAD 101 million [3][14] Business Line Data and Key Metrics Changes - In Canada, average drilling activity was 66 active rigs, an increase from the previous year, with daily operating margins of CAD 14,132, down from CAD 14,559 [6][8] - In the U.S., the average active rig count was 37, with daily operating margins of $8,754, slightly up from $8,700 in the previous quarter [8] - Internationally, the average active rig count was seven, down from eight, with day rates averaging $53,505, an 8% increase from the prior year [9] Market Data and Key Metrics Changes - The Canadian market outlook is solid, supported by commodity prices and increased takeaway capacity, while the U.S. market is expected to remain flat with pockets of growth [21] - The company is actively pursuing opportunities in the Middle East, with plans to reactivate idle rigs and explore capital-efficient growth [22][23] Company Strategy and Development Direction - The company aims to drive revenue growth and deepen customer relationships, focusing on performance and efficiency across diverse North American basins [16][17] - Precision is positioned to capture demand through its fleet and technology, with a focus on capital-light initiatives and modular rig designs [20] - The company plans to continue its long-term deleveraging journey while increasing free cash flow allocated to shareholders [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Canadian market's resilience despite individual customer changes, noting strong demand for Super Series rigs [56] - The U.S. market is expected to see modest growth driven by performance differentiation, with ongoing discussions with customers in key basins [21][35] - The company is exploring international growth opportunities, particularly in Argentina, with a focus on performance and technology [23][47] Other Important Information - Capital expenditures for 2025 were CAD 263 million, with plans for CAD 245 million in 2026, focusing on sustaining and infrastructure [10][12] - The company expects to incur $2 million in one-time charges related to rig reactivations in Q1 [12] Q&A Session Summary Question: Context around Kuwait and rig demobilization - The company has six rigs in Kuwait, with four active and two idle, looking for opportunities to reactivate them [27][28] Question: Potential upside in U.S. rig count - Discussions are ongoing with customers in multiple basins, indicating modest growth opportunities driven by performance and efficiency [34][35] Question: U.S. margin guidance for Q1 - The guidance for U.S. margins is $8,000-$9,000 per day, with mixed pricing trends across operating segments [41][42] Question: MOU in Argentina - The MOU aims to explore opportunities in Argentina with an established partner, focusing on performance and technology [46][47] Question: Impact of customer changes on Canadian demand - The company has not seen a broad change in demand despite individual customer adjustments, maintaining a strong operational presence [56] Question: Rig upgrades and capital allocation - The capital plan is demand-driven, with a portion of upgrade capital already committed, focusing on opportunities in Canada and the U.S. [66][68]