• Revenue Growth: Year-over-year growth in revenue.
• Adjusted EBITDA: $142 million, including a $200,000 share-based compensation recovery.
• Net Earnings: $39 million or $2.77 per share.
• Debt Reduction: $49 million during the quarter, $152 million year-to-date.
• Share Purchases: $17 million during the quarter, $50 million year-to-date.
• Capital Spending Plan: Increased from $195 million to $210 million for 2024.
• Funds Provided by Operations: $130 million.
• Cash Provided by Operations: $80 million.
• Canadian Margins: $12,877, lower than guidance due to rig mix.
• US Daily Operating Margins: $10,888, expected to decrease to approximately $9,500 in Q4.
• International Average Day Rates: $47,223 USD, a decrease of 8% from the prior year.
• Long-term Debt Position: Approximately $775 million net of cash.
• Total Liquidity Position: Approximately $510 million excluding letters of credit.
• Net Debt to Adjusted EBITDA Ratio: Approximately 1.4 times, expected to be 1.3 times by year-end.
• Depreciation Guidance for 2024: Approximately $300 million.
• Cash Interest Expense for 2024: Approximately $70 million.
• SG&A for 2024: Approximately $100 million before share-based compensation expense.

• Warning! GuruFocus has detected 5 Warning Sign with PDS.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Precision Drilling Corp (NYSE:PDS) reported strong year-over-year growth in revenue, adjusted EBITDA, and net earnings for the third quarter.
• The company reduced its debt by $49 million during the quarter and $152 million year-to-date, reaching the low end of its target range.
• Precision Drilling Corp (NYSE:PDS) plans to reduce debt by $600 million between 2022 and 2026, with approximately $190 million remaining.
• The company is increasing its 2024 capital spending plan to fund multiple contracted rig upgrades and take advantage of purchasing in-demand drill pipe.
• Precision Drilling Corp (NYSE:PDS) has achieved a leverage level below one times net debt, positioning it for opportunistic high-value investments and increased shareholder returns.

Negative Points

• Margins for Canada were lower than guidance due to rig mix, with increased demand for super single and double rigs.
• International average day rates decreased by 8% from the prior year due to non-billable utilization days for a rig undergoing certification.
• Drilling activity in the U.S. averaged 35 rigs in Q3, a decrease of one rig from the previous quarter.
• Daily operating margins in Q3 were essentially flat from Q2, with expectations for a slight decrease in Q4.
• The U.S. market remains constrained by volatile oil prices, soft natural gas prices, customer consolidation, and annual budget exhaustion.

Q & A Highlights

Q: Can you expand on the potential shortage of super triples in Canada due to Canadian LNG? A: Kevin Neveu, President and CEO, explained that the demand for rigs might increase by 2 to 5 rigs as LNG Canada begins operations. The exact magnitude is uncertain, but the demand is expected to rise as the first shipments are anticipated by the end of the second quarter in 2025.

Q: How should we think about free cash flow conversion in 2025, considering potential upgrades for super single rigs? A: Carey Ford, CFO, stated that upgrades are modular and typically cost between $1 to $3 million. These won't significantly impact the capital allocation plan, and the 2025 plan will likely resemble 2024, focusing on debt reduction and share purchases.

Q: Are the seven new contracts sufficient to maintain the rig count in the mid-30s, or will they add to the current count? A: Kevin Neveu indicated that while there is churn in uncontracted rigs, the range could be from low to mid-30s to low 40s early next year. Commodity price stability will influence this range, but it shouldn't dramatically impact capital or free cash flow plans.

Q: When do you expect US drilling margins to bottom? A: Carey Ford mentioned that margins might have already bottomed, but further industry rig count weakness could affect them. Precision's margins are higher for super triple 1500 rigs compared to the average, and stability is expected in the coming quarters.

Q: What is the outlook for international bids, and have there been any changes in potential signings? A: Kevin Neveu noted that while some rigs in Saudi Arabia were suspended, Precision's rigs remain operational. OPEC's production constraints mean additional rigs are not needed currently, but future needs may increase as constraints are lifted.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.