CALGARY, ALBERTA -- (Marketwire) -- 07/22/09 -- (Canadian dollars, except as noted)
This news release contains "forward-looking information and statements" within the meaning of applicable securities laws. For a full disclosure of the forward-looking information and statements and the risks to which they are subject, see the "Cautionary Statement Regarding Forward-Looking Information and Statements" later in this news release.
Precision Drilling Trust (the "Trust" or "Precision") reported a 51% revenue increase and a 67% rise in earnings before interest, taxes, depreciation and amortization and foreign exchange ("EBITDA") for the second quarter of 2009 over the second quarter of 2008. Revenue for the second quarter of 2009 totaled $210 million compared to $139 million for the same period in 2008. EBITDA was $59 million for the second quarter of 2009, an increase of $24 million over the second quarter of 2008. The increase in revenue and EBITDA is due to the acquisition in December 2008 of Grey Wolf, Inc ("Grey Wolf"), an onshore drilling contractor in the United States with 123 rigs including two in Mexico. Precision reported net earnings of $57 million or $0.22 per diluted unit for the quarter ended June 30, 2009, an increase of $35 million or 164% compared to $22 million or $0.16 per diluted unit in the second quarter of 2008. Earnings in the second quarter of 2009 were reduced by a $43 million increase in finance charges. Earnings were increased in the quarter by a $74 million foreign exchange gain, or after-tax $0.20 per diluted unit. Net earnings per unit were impacted by the 119% increase in units outstanding in the one-year period ending June 30, 2009.
For the six months ended June 30, 2009, net earnings were $115 million or $0.50 per diluted unit, a decrease of $13 million or 10% compared to $128 million or $0.95 per diluted unit for the first half of 2008. Net earnings decreased due to increased financing charges and lower utilization rates throughout North America partially offset by growth in Precision's rig fleet in the United States. Rig utilization days for the first six months of 2009 were 23% higher than the same period of 2008 due to growth in Precision's United States operations. EBITDA for the first half of 2009 totaled $229 million, a 25% increase from $183 million for the first half of 2008.
"Precision's second quarter results were achieved against the back drop of historically low utilization during Canadian spring break-up and the apparent bottoming of customer demand in the United States" stated Kevin Neveu, President and Chief Executive Officer. "Under these challenging market conditions, I appreciate the exceptional efforts of our people delivering cost reductions and successfully integrating the Grey Wolf acquisition while reinforcing our promise of high performance, high value services to our customers.
"We are pleased to have completed our financing activities during the quarter. Through a combination of equity, debt and cash generation activities, we have paid off and eliminated our bridge facility, reduced total debt, significantly reduced annual interest expense and removed financing uncertainties. We believe Precision has sufficient financial capacity and liquidity to operate through a prolonged downturn. Further net debt reduction remains a top priority going forward.
"Low Canadian activity levels experienced during the first quarter continued right through the second quarter and resulted in second quarter utilization levels at a record low. Precision's Canadian results were bolstered by a strong contract presence in the north eastern British Columbia shale plays. While these shale plays represent a significant development opportunity, early indications for the third quarter suggest Canadian activity will remain depressed with a diminishing likelihood of a meaningful recovery this year.
"The activity collapse in the United States drilling market which started last year and persisted through the first quarter of 2009 appears to have troughed in the second quarter. However due to rig oversupply, day rate pressure will persist in many areas of the market for some time to come. Our term contract position provides Precision with a solid base of activity, somewhat insulating us from full spot market exposure. Precision was able to build on its reputation for high performance services with six new term contracts signed during the second quarter for existing rigs. These rigs will be deployed to the Marcellus shale play in late 2009 and 2010. This is a very important development as we believe Precision's high performance, high value capabilities are ideally suited for all North American shale gas opportunities, but especially so for the challenging logistics of Pennsylvania.
"Sustained improvement in North America drilling markets will be driven by customer demand resulting from increases in the underlying commodity price of natural gas. We believe that due to the abrupt reduction in drilling activity, natural gas production declines will accelerate in Canada. United States natural gas production, which is showing initial signs of decline, should be significantly impacted in the near future. These supply factors, coupled with improvement in the global economy, should lead to strengthening natural gas prices and a need to replace declining production through the drill bit. Precision has the experienced personnel, geographically positioned high performance rigs and the financial capacity to excel in the eventual upturn" concluded Mr. Neveu.
SELECT FINANCIAL AND OPERATING INFORMATION
Three months ended June 30, Six months ended June 30,
(stated in thousands
of Canadian dollars,
except per % %
unit amounts) 2009 2008 Change 2009 2008 Change
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Revenue $ 209,597 $ 138,514 51.3 $ 658,042 $ 481,203 36.7
EBITDA(1) 59,260 35,574 66.6 228,647 182,921 25.0
Net earnings 57,475 21,739 164.4 114,892 128,005 (10.2)
Cash provided by
operations 212,554 200,458 6.0 414,150 257,765 60.7
Capital spending 88,436 29,201 202.9 157,416 51,366 206.5
Distributions
declared - 49,045 (100.0) 6,408 98,091 (93.5)
Net earnings per
unit: (2)
Basic 0.23 0.16 43.8 0.51 0.95 (46.3)
Diluted 0.22 0.16 37.5 0.50 0.95 (47.4)
Distributions
declared per unit $ - $ 0.39 (100.0) $ 0.04 $ 0.78 (94.9)
Contract drilling
rig fleet 388 248 56.5 388 248 56.5
Drilling rig
utilization days:
Canada 2,499 3,442 (27.4) 9,981 15,374 (35.1)
United States 4,529 1,403 222.8 11,938 2,562 366.0
International 182 57 219.3 362 143 153.1
Service rig fleet 229 223 2.7 229 223 2.7
Service rig
operating hours 32,818 55,631 (41.0) 97,672 167,626 (41.7)
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(1) EBITDA is a non-GAAP measure and is defined as earnings before interest,
taxes, depreciation and amortization and foreign exchange. See "NON-GAAP
MEASURES".
(2) Net earnings per basic and diluted unit have been adjusted to reflect
the rights offering completed in the second quarter of 2009. See note 10
to the unaudited financial statements.
FINANCIAL POSITION AND RATIOS
(Stated in thousands of June 30, December 31, June 30,
Canadian dollars, except ratios) 2009 2008 2008
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Working capital $ 253,663 $ 345,329 $ 88,295
Working capital ratio 2.6 2.0 1.8
Long-term debt (1) $ 868,933 $ 1,368,349 $ 104,948
Total long-term financial liabilities $ 893,769 $ 1,399,300 $ 113,671
Total assets $4,521,430 $ 4,833,702 $1,756,302
Long-term debt to long-term
debt plus equity ratio 0.24 0.37 0.07
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(1) Excludes current portion of long-term debt and is net of unamortized
debt issue costs.
During the first half of 2009, Precision remained focused on reducing debt levels and strengthening its capital structure and decisive steps were taken to conserve cash and improve Precision's financial position. Precision repaid long-term debt by $251 million during the quarter and working capital declined by $114 million to $254 million at June 30, 2009. Cash continues to be conserved through the indefinite suspension of cash distributions to unitholders and cost reduction measures that include personnel reductions and operating facility consolidation. Planned upgrade capital expenditures on existing equipment were significantly reduced and the remaining two new Super Series rigs from the 18 rig 2008 build program are near completion.
As announced on April 20, 2009, Precision entered into a series of financing transactions that raised approximately $380 million used to strengthen the Trust's balance sheet by refinancing and restructuring debt incurred in the acquisition of Grey Wolf. A summary of the financing transactions is set forth below:
- The Trust completed a transaction with Alberta Investment Management Corporation ("AIMCo"), pursuant to which AIMCo purchased by way of private placement:
-- $175 million aggregate principal amount of senior unsecured notes of Precision bearing interest at 10% per annum and having an eight-year life;
-- 35,000,000 Trust units at a subscription price of $3.00 per Trust unit for gross proceeds of $105 million; and
-- 15,000,000 purchase warrants of the Trust entitling AIMCo to acquire up to an additional 15,000,000 Trust units at a price of $3.22 per trust unit for a period of five years from the date of issue.
- The Trust also completed a rights offering for proceeds of $103 million that allowed unitholders to purchase Trust units at a price of $3.00 per unit.
The financing transactions enabled the repayment of Precision's unsecured bridge facility loan of $296 million (US$235 million) which bore interest of 17% and allowed Precision's secured facilities to be fully syndicated and thereby provide certainty to the cost of debt.
The financing transactions, coupled with the Trust's February 2009 unit offering, substantially reduced Precision's blended interest rate to approximately 8.3%, reduced Precision's cash interest expense by approximately $70 million on an annual basis and reduced the Trust's overall leverage.
Revenue of $210 million in the second quarter was 51% higher than the prior year period. The increase was due to 2008 expansion initiatives through organic and acquisition growth in the United States onshore contract drilling rig market. Precision marketed an average United States fleet of 157 rigs during the second quarter of 2009 as compared to a fleet of 17 rigs in 2008 and quarterly revenue increased four-fold. Revenue in Precision's Canadian Contract Drilling Services segment decreased by 20% while revenue declined 46% in the Canadian based Completion and Production Services segment compared to the second quarter of 2008. The mix of drilling rigs under term contracts and on complex well-to-well programs supported relatively strong average rig day rate results in the quarter.
The Trust reported total EBITDA for the second quarter of $59 million compared with $36 million for the second quarter of 2008. EBITDA is not a recognized financial measure under Generally Accepted Accounting Principles ("GAAP") as discussed under "Non-GAAP Measures and Reconciliations" in this report. EBITDA margin, calculated as EBITDA as a percentage of revenues, was 28% for the second quarter of 2009 compared to 26% for the same period in 2008. The 2% EBITDA margin increase was attributable to higher revenue per operating day due to rig mix and margin from idle but contracted rigs in the United States offset by lower overall utilization in both operating segments. Consistent with the previous quarter, Precision's term contract position with customers, a highly variable operating cost structure and economies achieved through vertical integration of the supply chain and maintenance facilities served to limit the declines.
In the Contract Drilling Services segment Precision currently markets 388 contract drilling rigs, including 226 in Canada, 159 in the United States, three rigs in international locations and 99 drilling rig camps. Precision's Completion and Production Services segment markets 229 service rigs, 29 snubbing units, 76 wastewater treatment units and a broad mix of rental equipment.
During the quarter an average of 25 drilling rigs worked in Canada, 50 in the United States and two in Mexico totaling 77 rigs working. This compares with an average of 167 rigs working in the first quarter of 2009 and 48 rigs in the second quarter a year ago. Canadian drilling activity was subject to seasonal slowdowns and very weak customer demand in the second quarter during the spring break-up period.
The first half of 2009 continued to reflect a weak and declining global economy and resulting low energy commodity prices. While oil pricing has recovered somewhat during the quarter, there remains considerable demand uncertainty for both oil and natural gas and this has triggered very low underlying customer demand for the industry and Precision's oilfield services. Accordingly, these factors have eroded oilfield services activity levels for a third consecutive quarter as evidenced by minimal spot market opportunities, pricing declines and low equipment utilization.
At the end of the quarter these conditions persist as the fundamentals for natural gas continue to show weakness through record high storage levels in the United States. The supply capacity was delivered through drilling activity peaking in 2008 in many regions within the United States, including unconventional resource plays in Texas and Louisiana. A significant portion of these wells, and the associated gas production gains, are subject to high depletion rates and the recent steep decline in drilling is expected to eventually result in supply reductions.
Precision is focused on further diversification of its high performance, high value service offering when the market rebounds and as debt levels are reduced. Expansion of operations in the United States land drilling market provided second quarter growth in EBITDA and cash flow continuity that offsets the seasonal nature of Precision's oilfield service business in Canada.
Besides new rig deployments in the quarter, no existing rigs were moved for customers between Canada and the United States. Outside Canada and the United States, there was no change in activity as Precision continued to operate two drilling rigs in Mexico and has one idle rig in Chile. Precision will be opportunistic in deploying rigs to international markets with moderate new capital investment requirements and contracts that reward high value high performance services.
Summary for the three months ended June 30, 2009:
- The integration of the Grey Wolf acquisition in the United States has proceeded on schedule with implementation of a new organizational structure and financial systems. The roll-out of vertical business support through supply chain and equipment management is well underway for implementation during the second half of 2009.
- Revenue was $210 million, an increase of $71 million or 51% from the prior year quarter due to growth in Precision's United States operations offset by seasonally lower activity levels in Precision's Canadian operations and lower customer pricing for most of Precision's services.
- Operating earnings were $31 million, an increase of $9 million or 40% from the second quarter in 2008. Operating earnings were 15% of revenue, compared to 16% in 2008.
- Capital expenditures for the purchase of property, plant and equipment were $90 million in the second quarter, an increase of $59 million over the same period in 2008, and included $86 million on expansionary capital initiatives and $4 million on the upgrade of existing assets. During the quarter eight newly-built Super Series drilling rigs were added to the fleet under long-term customer contracts, three in Canada and five in the United States.
- Financial charges were $45 million, an increase of $43 million from the prior year due to credit facilities entered into during the fourth quarter 2008 as a result of acquisition growth in the United States contract drilling market.
- A significant portion of Precision's secured credit facilities are denominated in US dollars. During the quarter Precision recorded a foreign exchange gain of $74 million primarily due to a weakening of the US dollar compared to the Canadian dollar and the effect on the financial statement translation of long-term monetary items.
- General and administrative costs were $25 million an increase of $8 million from the prior year due primarily to growth in Precision's United States operations partially offset by personnel reductions and reduced discretionary expenses.
- Bad debt expense was $4 million as the allowance for doubtful accounts was increased to $19 million. Credit worthiness remains a high priority as low energy commodity prices are creating financial hardship for certain customers.
- Average revenue per utilization day for contract drilling rigs in the second quarter of 2009 compared to the same period in 2008 increased to US$24,817 per day from US$22,006 per day in the United States and from $15,924 in 2008 to $18,335 for Canada. The increase in revenue rates for the second quarter in the United States reflects the new rig mix associated with the acquisition, including turnkey operations. These figures include US$17 million in revenue generated from idle but contracted rigs associated with term customer contracts and US$6 million in revenue from early contract terminations on two rigs. Turnkey revenue was US$9 million generated from 142 utilization days. Within Precision's Completion and Production Services segment, average hourly rates for service rigs were $604 in the second quarter of 2009 compared to $731 in the first quarter of 2009 and $649 for the second quarter of 2008.
- Average operating costs per utilization day for drilling rigs increased in the second quarter of 2009 to US$14,405 per day from the prior year second quarter of US$10,331 per day in the United States and decreased marginally in Canada from $10,685 to $10,573. Within Precision's Completion and Production Services segment, average hourly operating costs for service rigs were $507 in the second quarter of 2009 compared to $453 in the second quarter of 2008. Costs were slightly lower on Canadian drilling rigs due to cost saving initiatives implemented in the quarter. Other cost escalations were primarily attributable to deeper capacity drilling rig mix and lower equipment activity to allocate fixed costs. In the United States the increase was also impacted by turnkey operations where there is a larger scope to drilling costs that the drilling contractor is responsible for providing, with a commensurate increase in revenue.
Summary for the six months ended June 30, 2009:
- Precision lowered its debt to capitalization ratio from 0.37 to 0.24 with debt repayment of $472 million from proceeds through three equity raises in the first half of 2009 and cash flow from operations. As at June 30, 2009 Precision had a cash balance of $180 million and in combination with access to its US$260 million revolving credit facility, Precision continues to carry ample liquidity.
- Revenue was $658 million, an increase of $177 million or 37% from the prior year due to growth in Precision's United States operations offset by lower activity levels and lower customer pricing.
- Operating earnings were $156 million, an increase of $11 million or 8% from 2008. Operating earnings were 24% of revenue, compared to 30% in 2008.
- Capital expenditures for the purchase of property, plant and equipment were $165 million in the first half of 2009, an increase of $110 million over the same period in 2008, and included $147 million on expansionary capital initiatives and $18 million on the upgrade of existing assets. During the first six months 14 newly-built Super Series drilling rigs were added to the fleet under long-term customer contracts, seven in Canada and seven in the United States.
- Financial charges were $84 million, an increase of $79 million from the prior year due to debt service and refinancing costs associated with acquisition growth late in the fourth quarter of 2008.
- A significant portion of Precision's secured credit facilities are denominated in US dollars. During the first half of the year Precision recorded a foreign exchange gain of $42 million primarily due to a weakening of the US dollar compared to the Canadian dollar and the effect on the translation of long-term monetary items.
- General and administrative costs were $50 million, an increase of $14 million from the prior year due primarily to acquisition growth in Precision's United States operations partially offset by personnel reductions and reduced discretionary expenses.
The industry and Precision have been experiencing declining utilization as customer spending has been dramatically reduced because of lower oil and natural gas commodity prices. For the second quarter of 2009 AECO natural gas spot prices averaged $3.46 per MMBtu, a decrease of 66% over the second quarter 2008 average of $10.22 per MMBtu. In the United States, Henry Hub natural gas spot prices averaged US$3.70 per MMBtu in the second quarter of 2009 a decrease of 67% over the second quarter 2008 average of US$11.37 per MMBtu. West Texas Intermediate crude oil averaged US$59.69 per barrel during the quarter compared to US$124.29 per barrel in the same period in 2008. The one-year forward price for North American natural gas was also lower, trading in a range of about $4.50 to $5.50 on Canadian and U.S. exchanges in the second quarter of 2009, compared to a range of about $9.00 to $13.00 in the same quarter of 2008.
OUTLOOK
The global economic recession, the tight and high-cost capital markets and low oil and natural gas commodity prices continue to have a negative impact on the oilfield service industry. The drilling sector in both Canada and the United States experienced a period of significant decline in utilization. According to industry sources, as at July 10, 2009, the United States active land drilling rig count was down about 52% from the same period in the prior year while the Canadian drilling rig count was down about 57%.
With the decrease in utilization, the competitive pressure on all of Precision's service offerings intensified resulting in lower rates for services. In the United States there has been a recent leveling of rigs working and a seasonal increase in rigs working in Canada though significantly lower than the third quarter of 2008. Precision expects these low levels of utilization to persist into the third quarter of 2009 and potentially longer depending on natural gas prices. Customers have provided very little visibility for oilfield services in the fourth quarter of 2009. Precision expects EBITDA and EBITDA as a percentage of revenue to continue to decline from first half 2009 levels, though third quarter Canadian levels should be higher than second quarter 2009 levels as rigs are returned to service.
Precision has a strong portfolio of long-term customer contracts that help mitigate the effects of the current downturn. Precision expects to have an average of approximately 88 rigs under day work term contract in North America in the third quarter of 2009 and an average of 79 for the fourth quarter of 2009. These term contract totals include 17 rigs in the United States that are currently not working but receiving margin revenue from customers. In Canada, term contracted drilling rigs generate about 200 to 250 utilization days a year due to the seasonal nature of well access whereas in the United States Precision expects about 350 utilization days in most regions.
For all of 2009, Precision expects to have an average of approximately 92 rigs under term contract, with 56 rigs contracted in the United States, 34 in Canada and 2 in Mexico. For 2010, Precision expects to have an average of approximately 27 rigs in Canada under term contract and 32 in the United States and Mexico, for a total of 59 for the full year. For the calendar year of 2011, Precision expects an average of approximately 34 rigs to be generating revenue under existing term contracts, with 15 of these in Canada and 19 in the United States. Precision's long-term contracts continue to be honoured by its customers and in some cases, term revisions have been negotiated within original economic terms. During the second quarter, Precision added six new term contracts for existing rig deployment expected during the second half of 2009 and early 2010 in the Marcellus shale play in the United States.
As part of its ongoing net debt reduction plan, Precision expects to keep capital expenditures at low levels during 2009. Capital expenditures totaled $165 million in the first half of 2009 and are expected to be approximately $210 million for the full year, with approximately $40 million for upgrade capital and $170 million for previously committed expansion capital. The expansion capital is for 16 new rigs to be placed into service in 2009 with the completion of the 2008 Super Series new build program of which 14 were completed by the end of the second quarter.
With the recession negatively impacting energy demand and with increased onshore domestic production, the United States natural gas storage levels are at a record high level surpassing the five-year range as at July 10, 2009 and 26% higher than storage volumes a year ago. The increase in United States natural gas production, concerns over the declines in industrial gas consumption and the prospect of higher liquefied natural gas ("LNG") imports has overshadowed lower Canadian imports and the drop in active North American rigs drilling for natural gas. Precision expects the United States supply of natural gas to show significant declines in the near future as United States production has begun to level off according to the latest available data. Subject to demand, this should provide for higher commodity prices and support a recovery in drilling activity.
Despite the near term challenges, the future of the global oil and gas service industry remains promising. For Precision, 2009 represents an opportunity to demonstrate its value to customers through delivery of high performance, high value services that deliver low customer well costs and strong relative margins to Precision.
SEGMENTED FINANCIAL RESULTS
Precision's operations are reported in two segments. The Contract Drilling Services segment includes the drilling rig, camp and catering, oilfield supply, and manufacturing divisions. The Completion and Production Services segment includes the service rig, snubbing, rental, and wastewater treatment divisions.
Three months ended June 30, Six months ended June 30,
(stated in thousands % %
of Canadian dollars) 2009 2008 Change 2009 2008 Change
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Revenue:
Contract Drilling
Services $ 185,226 $ 93,006 99.2 $ 575,105 $ 335,371 71.5
Completion and
Production
Services 25,590 47,559 (46.2) 88,565 152,279 (41.8)
Inter-segment
eliminations (1,219) (2,051) 40.6 (5,628) (6,447) 12.7
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$ 209,597 $ 138,514 51.3 $ 658,042 $ 481,203 36.7
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Operating earnings: (1)
Contract Drilling
Services $ 43,520 $ 23,816 82.7 $ 161,052 $ 123,863 30.0
Completion and
Production
Services (681) 8,810 (107.7) 12,875 42,673 (69.8)
Corporate and other (11,801) (10,446) (13.0) (17,451) (21,376) 18.4
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$ 31,038 $ 22,180 39.9 $ 156,476 $ 145,160 7.8
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(1) Non-GAAP measure. See "NON-GAAP MEASURES".
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
Three months ended June 30, Six months ended June 30,
(stated in thousands
of Canadian dollars, % %
except where noted) 2009 2008 Change 2009 2008 Change
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Revenue $ 185,226 $ 93,006 99.2 $ 575,105 $ 335,371 71.5
Expenses:
Operating 106,208 55,133 92.6 322,313 176,438 82.7
General and
administrative 12,064 5,615 114.9 30,343 11,460 164.8
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EBITDA (1) 66,954 32,258 107.6 222,449 147,473 50.8
Depreciation 23,434 8,442 177.6 61,397 23,610 160.0
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Operating
earnings (1) $ 43,520 $ 23,816 82.7 $ 161,052 $ 123,863 30.0
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Operating earnings
as a percentage of
revenue 23.5% 25.6% 28.0% 36.9%
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Drilling rig revenue
per utilization
day in Canada $ 18,335 $ 15,924 15.1 $ 18,487 $ 16,265 13.7
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Drilling rig revenue
per utilization
day in the United
States (2) US$24,817 US$22,006 12.8 US$25,079 US$22,365 12.1
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(1) Non-GAAP measure. See "NON-GAAP MEASURES".
(2) Includes revenue from idle but contracted rig days and rig contract lump
sum payouts.
Three months ended June 30,
--------------------------------------------------
Canadian drilling statistics: (1) 2009 2008
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Precision Industry(2) Precision Industry(2)
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Number of drilling rigs
(end of period) 226 868 228 886
Drilling rig operating days
(spud to release) 2,272 8,367 3,066 15,744
Drilling rig operating day
utilization 11% 11% 15% 19%
Number of wells drilled 289 782 413 1,568
Average days per well 7.9 10.7 7.4 10.0
Number of metres
drilled (000s) 504 1,274 602 2,444
Average metres per well 1,744 1,629 1,457 1,559
Average metres per day 222 152 196 155
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Six months ended June 30,
--------------------------------------------------
Canadian drilling statistics: (1) 2009 2008
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Precision Industry(2) Precision Industry(2)
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Number of drilling rigs
(end of period) 226 868 228 886
Drilling rig operating
days (spud to release) 8,871 36,611 13,570 61,082
Drilling rig operating
day utilization 22% 23% 32% 38%
Number of wells drilled 955 3,753 1,863 6,694
Average days per well 9.3 9.8 7.3 9.1
Number of metres
drilled (000s) 1,596 5,315 2,548 9,234
Average metres per well 1,671 1,416 1,368 1,379
Average metres per day 180 145 188 151
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(1) Canadian operations only.
(2) CAODC and Precision - excludes non-CAODC rigs and non-reporting CAODC
members.
In the Contract Drilling Services segment, revenue for the second quarter of 2009 increased by 99% to $185 million while EBITDA increased by 108% to $67 million compared to the same period in 2008. The increase in revenue and EBITDA was due to acquisition growth in December, 2008. Activity in North America was impacted by lower customer demand due to continued low natural gas and oil prices. Lower industry activity levels were offset by the growth and term contract positioning of Precision's rig fleet. Drilling rig revenue per utilization day in Canada was up 15% over the prior year due to a greater percentage of contracted rig days compared to prior year and proportionately more activity from the Super Triple and Super Single(TM) rigs which typically receive a day rate premium. During the quarter 57% of Precision's utilization days in Canada and 79% of the utilization days in the United States were generated from rigs under term contract. In the United States the average drilling utilization day rates for Precision remained relatively strong due to term contracted rigs, the lump sum payments associated with the early termination of two rig contracts and margin contributions from idle but contracted rigs. As at the end of the quarter in the United States there were 40 drilling rigs working under term contracts and another 17 idle but contracted rigs where Precision was receiving the margin payment only.
Drilling rig utilization days (spud to rig release plus move days) in Canada during the second quarter of 2009 were 2,499, a decrease of 27% compared to 3,442 in 2008. Drilling rig activity for Precision in the United States was 223% higher than the same quarter of 2008 due to the acquisition in December, 2008. In the prior year quarter Precision had one drilling rig working in Latin America and realized a total of 57 utilization days as compared to 182 utilization days in the current quarter from operations in Mexico.
Precision's camp and catering division experienced an activity decrease of 44% over the prior year second quarter as demand for base camp and traditional rig camps fell with the overall decline in oilfield service activity in western Canada.
Operating expenses were 57% of revenue for the quarter compared to 59% for the prior year quarter. The decrease was due to proportionately higher activity in the United States than Canada where activity in the second quarter is impacted by spring break-up. On a per day basis, operating costs for the drilling rig division in Canada were 1% lower than the prior year quarter due to cost containment measures. Operating costs percentage in the United States was marginally higher due to rig mix, an additional provision for bad debts of about $4 million and higher state commodity taxes.
Despite the drop in activity and increased pressure on day rates, EBITDA margins in contract drilling improved from prior year due to term contracts, management control over costs and efforts to minimize the erosion of drilling rig day rates.
Depreciation in the Contract Drilling Services segment increased from the prior year due to the increase in activity in the United States and the increase in carrying value of rigs to fair market value on acquisition.
