Precision Drilling(US:PDS)2024-04-25 21:24Financial Data and Key Metrics Changes - Net earnings for the quarter were $37 million or $2.53 per share, marking the seventh consecutive quarter of positive earnings for the company [3] - Funds provided by operations and cash provided by operations were $118 million and $66 million, respectively, with margins in the U.S. and Canada exceeding guidance due to stronger-than-expected pricing and improved cost performance [3] - Adjusted EBITDA for the quarter was $143 million, driven by strong drilling activity and improved pricing, although it included a share-based compensation charge of $23 million [28][115] Business Line Data and Key Metrics Changes - In the Canadian and U.S. markets, drilling activity averaged 73 rigs in Canada, an increase of 4 rigs from Q1 2023, while U.S. drilling activity averaged 38 rigs, a decrease of 7 rigs from the previous quarter [122][113] - The C&P segment's adjusted EBITDA was $19 million, up 7% year-over-year, influenced by a 28% increase in well service hours [4] - The company expects international EBITDA to increase approximately 50% from 2023 to 2024 due to rig activations completed last year [4] Market Data and Key Metrics Changes - The international average day rates were $52,808, reflecting a 2% increase from the prior year due to rig mix [122] - The company has seen a 40% activity growth in the Middle East, with eight rigs currently running [8] - Customer demand for Super Triples is expected to exceed supply, with plans to mobilize additional capacity from the U.S. back to Canada early next year [31] Company Strategy and Development Direction - The company is focused on reducing debt by $600 million between 2022 and 2026, aiming for a normalized leverage level below 1x [123] - The technology strategy emphasizes collaboration with industry partners for product R&D while focusing on field deployment [7] - The company is prioritizing shareholder returns, planning to allocate 25% to 35% of free cash flow before principal payments directly to shareholders [5] Management's Comments on Operating Environment and Future Outlook - Management noted that while the U.S. outlook is similar to peers, customer conversations are increasingly focused on oil rather than gas, with a positive sentiment despite weak natural gas prices [19][126] - The company expects a rebound in demand driven by LNG export facilities commencing operations later this year [125] - Management expressed confidence in maintaining strong margins and day rates across the business, with expectations for continued growth opportunities in Canada and the Middle East [116] Other Important Information - The company has achieved $16 million of the projected $20 million in annual synergies from the CWC acquisition [114] - Capital expenditures for the quarter were $56 million, with a full-year capital plan of $195 million [114] - The company is experiencing strong safety execution and excellent rig efficiency, contributing to disciplined cost management [116] Q&A Session Summary Question: Could you define how you calculate free cash flow? - Free cash flow is calculated as EBITDA less interest and CapEx, which is available for debt reduction and share buybacks [35] Question: Can you provide insights on customer conversations regarding oil versus gas? - Conversations are predominantly focused on oil, with a significant interest in high-technology rigs and consolidation among vendor groups [37] Question: What is the outlook for rig count in Canada and the U.S.? - The Canadian rig count is expected to trend towards the mid-60s by the end of June and into the 70s in July, while the U.S. rig count remains stable with some potential for incremental additions [45][70] Question: How does the company view pricing pressure in the current market? - Pricing pressure is considered minimal at this point, with management confident in maintaining margins despite market fluctuations [43][93] Question: What are the expected costs to prepare idle rigs for operation? - The range of costs to prepare idle rigs is estimated between $6 million to $12 million for each rig [66]