CALGARY, ALBERTA, Oct. 22, 2009 (Marketwire) --
CALGARY, ALBERTA -- (Marketwire) -- 10/22/09 -- (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 revenue of $253 million for the third quarter of 2009, an 11% decrease from the third quarter of 2008. Earnings before interest, taxes, depreciation and amortization and foreign exchange ("EBITDA") were $86 million for the third quarter of 2009, a 28% decline from the third quarter of 2008. The decrease in revenue and EBITDA is due to significantly lower customer demand on an industry-wide basis, partially mitigated by Precision's 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 $72 million or $0.25 per diluted unit for the quarter ended September 30, 2009, a decrease of 13% compared to $82 million or $0.61 per diluted unit in the third quarter of 2008. Earnings in the third quarter of 2009 were reduced by a $27 million increase in finance charges. Earnings were increased in the quarter by a $63 million foreign exchange gain, or after-tax $0.19 per diluted unit. Net earnings per unit were impacted by the 119% increase in units outstanding in the one-year period ending September 30, 2009.
For the nine months ended September 30, 2009, net earnings were $187 million or $0.75 per diluted unit, a decrease of $24 million or 11% compared to $210 million or $1.56 per diluted unit for the first nine months 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. Earnings were supported by high-margin term customer contracts and a $105 million foreign exchange gain, or after-tax $0.36 per diluted unit, but these favourable factors did not entirely offset lower earnings from the sharp reduction in equipment utilization and customer pricing compared to 2008 results. Rig utilization days for the first nine months of 2009 were 4% higher than the same period of 2008 due to growth in Precision's United States operations. EBITDA for the first nine months of 2009 totaled $314 million, a 4% increase from $302 million for the first nine months of 2008.
On a sequential basis, third quarter 2009 revenue increased by 21% over the second quarter. The increase was attributed to higher rig activity due to seasonality in Canada, demand for services on oil wells and early indications that drilling for natural gas may have bottomed in the second quarter. EBITDA margin as a percentage of revenue increased 6% over the second quarter due to the influence of higher rig activity and high margin term contracts partially offset by lower customer pricing on new work. During the quarter 61% of overall drilling rig utilization days were generated from term contracts with term contract utilization day concentration in Canada at 42%, the United States at 78% and Mexico at 100%.
"Precision, and for that matter the North American land drilling industry, entered the third quarter with the lowest utilization and customer demand levels of the decade." stated Kevin Neveu, President and Chief Executive Officer. "Precision's third quarter financial results demonstrate our ability to generate solid EBITDA margins, complete new rig build programs on schedule and on budget, and reduce spending quickly to conserve cash. Precision is poised to exploit market opportunities as industry fundamentals strengthen. The business trough that we, and the industry, are working our way through has reinforced Precision's focus on our Target Zero safety vision, integration of systems and processes in our expanded United States operation and the execution of our 2009 business plan. These results reinforce our promise of high performance, high value services to our customers.
"There was an increase in working rigs in both Canada and the U.S. during the third quarter. In Canada, coming out of the spring break up, Precision returned rigs to work and currently has 60 drilling rigs working. Precision believes that we have reached a bottom in Canadian activity. One of the reasons for this belief is that Canadian customers are interested in locking in today's depressed day rates for the upcoming winter drilling season. While we have experienced a seasonal pick-up in Canada and are encouraged by customer demand in response to higher oil prices and certain shale play opportunities, it is far too early to make the call for a meaningful recovery.
"In the U.S., we have seen a very gradual increase in the rigs working over the third quarter. Precision is earning revenue on 75 rigs today, which includes 65 working and 10 idle rigs that are being paid at contracted rates. Precision's very strong term contract position anchored our third quarter results. However due to rig oversupply, day rate pressure persists in many areas of the market. One of Precision's success stories is in the Marcellus shale region in Pennsylvania in which Precision has been very successful penetrating this rapidly growing market. A few months ago we had two rigs working in this area, today we have eight rigs working and are planning to be up to 12 rigs working in the next six months. Also, we have completed negotiations with a major exploration and development company to reactivate two rigs and relocate two rigs to Northwest Louisiana and one additional rig has been reactivated for North Texas. All five of these rigs are being used for horizontal shale gas drilling. Precision's high performance, high value capabilities are ideally suited for all North American shale gas opportunities.
"Sustained improvement in North American 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 dramatic reduction in drilling activity, natural gas production declines will accelerate in Canada and the United States. In Canada, natural gas production is down 20% from its highs in 2007 and continues to decline. In the U.S., production declines are becoming evident and by the end of 2009 natural gas production is expected to be down by 5% to 10% on a year-over-year comparison. These supply factors, coupled with improvements 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
(stated in
thousands of
Canadian Three months ended Nine months ended
dollars, September 30, September 30,
except per % %
unit amounts) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue $253,337 $285,639 (11.3) $911,379 $766,842 18.8
EBITDA(1) 85,739 118,820 (27.8) 314,386 301,741 4.2
Net earnings 71,696 82,349 (12.9) 186,588 210,354 (11.3)
Cash provided
by operations 19,948 3,241 515.5 434,098 261,006 66.3
Capital
spending 14,198 75,457 (81.2) 179,443 130,269 37.7
Distributions
declared - 49,046 (100.0) 6,408 147,137 (95.6)
Net earnings
per unit: (2)
Basic 0.26 0.61 (57.4) 0.77 1.56 (50.6)
Diluted 0.25 0.61 (59.0) 0.75 1.56 (51.9)
Distributions
declared per unit - 0.39 (100.0) 0.04 1.17 (96.6)
Contract drilling
rig fleet 390 249 56.6 390 249 56.6
Drilling rig
utilization days:
Canada 4,653 10,048 (53.7) 14,634 25,422 (42.4)
United States 4,835 2,197 120.1 16,773 4,759 252.4
International 176 - nm 176 143 23.1
Service rig fleet 229 229 - 229 229 -
Service rig
operating hours 49,581 87,995 (43.7) 147,253 255,621 (42.4)
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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 consolidated financial statements.
nm - calculation not meaningful.
FINANCIAL POSITION AND RATIOS
(Stated in
thousands of
Canadian dollars, September 30, December 31, September 30,
except ratios) 2009 2008 2008
----------------------------------------------------------------------------
Working capital $ 279,201 $ 345,329 $ 192,670
Working capital
ratio 2.5 2.0 2.3
Long-term debt
(1) $ 795,560 $ 1,368,349 $ 231,784
Total long-term
financial
liabilities $ 822,554 $ 1,399,300 $ 238,900
Total assets $ 4,360,861 $ 4,833,702 $ 1,974,135
Long-term debt to
long-term debt
plus equity ratio 0.23 0.37 0.14
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(1) Excludes current portion of long-term debt and is net of unamortized
debt issue costs.
During the first three quarters of 2009, Precision focused on reducing debt levels and strengthening its capital structure and as a result Precision took decisive steps to conserve cash and improve Precision's financial position. Precision repaid long-term debt by $479 million during the first three quarters of 2009 while maintaining a strong working capital balance of $279 million at September 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 all of the new Super Series rigs from the 18 rig 2008 build program have been completed.
As announced for the second quarter of 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. The financing transactions lowered the Trust's overall debt level, reduced and provided certainty to an overall blended interest rate of about 8% and right sized loan facilities to provide liquidity to fund future requirements.
Revenue of $253 million in the third quarter of 2009 was 11% lower than the prior year period. The decrease was due to the impact of global economic conditions and low commodity prices that led to a sharp reduction in drilling and servicing of oil and natural gas wells. The decrease was partially mitigated by Precision's 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 160 drilling rigs during the third quarter of 2009 as compared to a fleet of 24 drilling rigs in 2008. Revenue in Precision's Canadian Contract Drilling Services division decreased 46% while revenue declined 49% in the Canadian based Completion and Production Services segment compared to the third 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 EBITDA for the third quarter of $86 million compared with $119 million for the third quarter of 2008. EBITDA is not a recognized financial measure under Generally Accepted Accounting Principles ("GAAP") as discussed in the section "Non-GAAP Measures and Reconciliations" in this report. EBITDA margin, calculated as EBITDA as a percentage of revenues, was 34% for the third quarter of 2009 compared to 42% for the same period in 2008. The 8% EBITDA margin decrease was attributable to decreased customer pricing and lower overall utilization in both operating segments offset by margin from idle but contracted rigs in the United States and Canada. 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 390 contract drilling rigs, including 226 in Canada, 161 in the United States, three rigs in international locations and 96 drilling rig camps. Precision's Completion and Production Services segment markets 229 service rigs, 29 snubbing units, 78 wastewater treatment units and a broad mix of rental equipment.
During the quarter an average of 51 drilling rigs worked in Canada, 53 in the United States and two in Mexico totaling 106 rigs working. This compares with an average of 77 rigs working in the second quarter of 2009. Drilling activity was subject to very weak customer demand in the third quarter principally due to low gas prices.
The first three quarters of 2009 continued to reflect a weak global economy and resulting low energy commodity prices. While the economy has begun to show signs of stabilization and oil pricing has recovered somewhat, there remains considerable demand uncertainty for both oil and natural gas and this has triggered very low underlying customer demand for oilfield services.
At the end of the quarter these conditions persist as the fundamentals for natural gas continued to show weakness as a result of 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, especially 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 beginning to show in recently reported production levels.
During the quarter two new rigs were deployed in the United States while in Canada and internationally, there was no change in rig counts 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.
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 third quarter of 2009 AECO natural gas spot prices averaged $2.93 per MMBtu, a decrease of 62% over the third quarter 2008 average of $7.80 per MMBtu. In the United States, Henry Hub natural gas spot prices averaged US$3.15 per MMBtu in the third quarter of 2009 a decrease of 65% over the third quarter 2008 average of US$9.06 per MMBtu. West Texas Intermediate crude oil averaged US$68.18 per barrel during the quarter compared to US$118.68 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 $6.00 on Canadian and U.S. exchanges in the third quarter of 2009, compared to a range of about $7.50 to $13.00 in the same quarter of 2008.
Third quarter commodity prices and lasting effects from the global economic recession remain as harbingers for challenging conditions, despite recent economic stabilization. Difficult capital markets, a weakening United States currency and relatively low natural gas commodity prices continue to have a negative impact on the North American oilfield service industry. According to industry sources, as at October 9, 2009, the United States active land drilling rig count was down about 47% from the same period in the prior year while the Canadian drilling rig count was down about 49%.
Summary for the three months ended September 30, 2009:
- The integration of the Grey Wolf acquisition in the United States has proceeded on schedule with a new organizational structure and financial systems in place throughout the quarter. The roll-out of vertical business support through supply chain and equipment management was initiated during the quarter and the development of business scope and certain new processes will continue through the fourth quarter of 2009 and into 2010.
- Revenue was $253 million, a decrease of $32 million or 11% from the prior year quarter due to lower industry-wide customer demand and pricing for most of Precision's services.
- Operating earnings were $55 million, a decrease of $41 million or 42% from the third quarter in 2008. Operating earnings were 22% of revenue, compared to 34% in 2008. Operating earnings is not a recognized financial measure under GAAP as discussed in the section "Non-GAAP Measures and Reconciliations" in this report.
- Capital expenditures for the purchase of property, plant and equipment were $14 million in the third quarter, a decrease of $61 million over the same period in 2008, and included $10 million on expansionary capital initiatives and $4 million on the upgrade of existing assets. During the quarter two newly-built Super Series drilling rigs were added to the fleet under long-term customer contracts in the United States. This completes Precision's 2008 new rig build program and upgrade capital spending continues to be restricted at low levels to match with equipment utilization.
- Financial charges were $29 million, an increase of $27 million from the prior year. This increase is due to credit facilities entered into during the fourth quarter 2008, however, this quarter's charges are down from $45 million in the second quarter of this year due to refinancing completed in the second quarter.
- A significant portion of Precision's secured credit facilities are denominated in US dollars. During the quarter Precision recorded an unrealized foreign exchange gain of $67 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 $12 million from the prior year due primarily to growth in Precision's United States operations, professional fees for advisory services and accruals for unit based compensation plans partially offset by personnel reductions and reduced discretionary expenses.
- Average revenue per utilization day for contract drilling rigs in the third quarter of 2009 compared to the same period per day 2008 increased to US$22,497 from US$20,577 in the United States and from $15,296 in 2008 to $18,209 in 2009 for Canada. The increase in the revenue rates for Canada principally reflects $9 million in revenue generated from idle but contracted rigs associated with term customer contracts. The increase in revenue rates in the United States reflects the new rig mix associated with the acquisition, including turnkey operations. These figures include US$9 million in revenue generated from idle but contracted rigs associated with term customer contracts. Turnkey revenue was US$6 million generated from 117 utilization days. Within Precision's Completion and Production Services segment, average hourly rates for service rigs were $614 in the third quarter of 2009 compared to $604 in the second quarter of 2009 and $675 for the third quarter of 2008.
- Average operating costs per utilization day for drilling rigs increased in the third quarter of 2009 to US$12,692 from the prior year third quarter of US$10,289 in the United States and increased marginally in Canada from $8,351 to $8,822. Within Precision's Completion and Production Services segment, average hourly operating costs for service rigs were $438 in the third quarter of 2009 compared to $420 in the third quarter of 2008. Costs were slightly higher on Canadian drilling rigs due to fixed costs and an average deeper fleet working offset by cost saving initiatives implemented during the first and second quarters. In the United States the increase was also impacted by turnkey operations where there is a larger scope of drilling costs that the drilling contractor is responsible for providing, with a commensurate increase in revenue.
Summary for the nine months ended September 30, 2009:
- Precision lowered its debt to capitalization ratio from 0.37 at December 31, 2008 to 0.23 at September 30, 2009 with debt repayment of $479 million from proceeds through three equity raises and cash flow from operations in the first three quarters of 2009. As at September 30, 2009 Precision had a cash balance of $178 million and in combination with access to its US$260 million revolving credit facility and $25 million operating line, Precision continues to carry sufficient liquidity.
- Revenue was $911 million, an increase of $145 million or 19% 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 $212 million, a decrease of $29 million or 12% from 2008. Operating earnings were 23% of revenue, compared to 31% in 2008.
- Capital expenditures for the purchase of property, plant and equipment were $179 million in the first three quarters of 2009, an increase of $49 million over the same period in 2008, and included $158 million on expansionary capital initiatives and $21 million on the upgrade of existing assets. During the first nine months 16 newly-built Super Series drilling rigs were added to the fleet under long-term customer contracts, seven in Canada and nine in the United States.
- Financial charges were $113 million, an increase of $106 million from the prior year due to debt service and refinancing costs associated with acquisition growth late in the fourth quarter of 2008. With the refinancing accomplished in the first half of this year, finance charges are expected to be lower in future quarters.
- Bad debt expense was $12 million for the nine month period and the allowance for doubtful accounts totaled $18 million. Creditworthiness remains a high priority as low energy commodity prices, especially natural gas, create financial hardship for certain customers.
- A significant portion of Precision's secured credit facilities are denominated in US dollars. During the first three quarters Precision recorded an unrealized foreign exchange gain of $118 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 $75 million, an increase of $26 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.
OUTLOOK
The foundation for higher natural gas demand may be taking root now as early fourth quarter economic indicators provide the basis for stability and positive momentum. Commodity prices have improved on signs that global economies are no longer contracting and unemployment rates are stabilizing. Oil continues to trade well above its 52 week lows and has been a positive development for active rig counts in Canada and the United States. North American spot gas pricing since September 30, 2009 has recovered to the mid-four dollar range and the one year forward strip now trades at about six dollars. These are positive trends for customer cash flows and this may reflect an inflection point from gas demand uncertainty to growing concern over lower North American gas supply.
Currently, 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 high end of the five-year average range and as at October 9, 2009 were 14% higher than storage volumes a year ago. The increase in United States natural gas production, concerns over declines in industrial gas consumption and the prospect of higher liquefied natural gas ("LNG") imports continues to overshadow lower Canadian imports and the precipitous drop in active North American rigs drilling for natural gas. At current drilling levels, Precision expects the United States supply of natural gas to show significant declines over the next twelve months as United States production has begun to drop off according to the latest available data. Subject to demand, this should lead to higher commodity prices and support a recovery in drilling activity.
With low equipment utilization, the competitive pressure on all of Precision's service offerings remains, 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 second half of 2008. Precision expects these low levels of utilization to persist into the fourth quarter of 2009 and potentially longer depending on natural gas prices. Customers have provided very little visibility regarding their oilfield service plans and expenditures beyond 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 fourth quarter Canadian levels should be higher than third quarter 2009 levels as rigs return to service for certain winter only drilling programs.
Precision continues to carry 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 80 rigs under day work term contract in North America in the fourth quarter of 2009 and an average of 72 for the first quarter of 2010. These term contract totals include 10 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 94 rigs under term contract, with 55 rigs contracted in the United States, 37 in Canada and two in Mexico. For 2010, Precision's current position is to have an average of approximately 34 rigs in Canada under term contract and 28 in the United States and one in Mexico, for a total of 63 for the full year. For the calendar year of 2011, Precision expects an average of approximately 36 rigs to be generating revenue under existing term contracts, with 19 of these in Canada and 17 in the United States. Precision's long-term contracts continue to be honoured by its customers although in some cases, term revisions have been negotiated within original economic terms or paid out.
Precision expects to keep non-expansion capital expenditures at low levels during 2009. Capital expenditures totaled $179 million in the first nine months 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 was primarily for 16 new rigs placed into service in 2009 pursuant to completion of the 2008 new rig build program.
Despite the persistence of near term challenges, the future of the global oil and gas service industry remains promising. For Precision, growth in the United States has positioned its rig fleet in most of the onshore growth basins in North America and this is expected to provide 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 Nine months ended
(stated in September 30, September 30,
thousands of % %
Canadian dollars) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue:
Contract Drilling
Services $216,391 $212,567 1.8 $791,496 $547,938 44.4
Completion and
Production
Services 38,738 76,701 (49.5) 127,303 228,980 (44.4)
Inter-segment
eliminations (1,792) (3,629) 50.6 (7,420) (10,076) 26.4
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$253,337 $285,639 (11.3) 911,379 $766,842 18.8
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Operating earnings: (1)
Contract Drilling
Services $ 60,484 $ 79,389 (23.8) $221,536 $203,252 9.0
Completion and
Production
Services 4,536 21,604 (79.0) 17,411 64,277 (72.9)
Corporate and
other (9,659) (4,971) (94.3) (27,110) (26,347) (2.9)
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$ 55,361 $ 96,022 (42.3) $211,837 $241,182 (12.2)
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(1) Non-GAAP measure. See "NON-GAAP MEASURES".
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES
(stated in
thousands of Three months ended Nine months ended
Canadian dollars, September 30, September 30,
except where % %
noted) 2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
Revenue $216,391 $212,567 1.8 $791,496 $547,938 44.4
Expenses:
Operating 117,200 112,121 4.5 439,513 288,559 52.3
General and
administrative 13,097 5,850 123.9 43,440 17,310 151.0
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EBITDA (1) 86,094 94,596 (9.0) 308,543 242,069 27.5
Depreciation 25,610 15,207 68.4 87,007 38,817 124.1
----------------------------------------------------------------------------
Operating
earnings (1) $ 60,484 $ 79,389 (23.8) $ 221,536 $203,252 9.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings
as a percentage
of revenue 28.0% 37.3% 28.0% 37.1%
Drilling rig
revenue per
utilization
day in
Canada (2) $ 18,209 $ 15,296 19.0 $ 18,398 $ 15,882 15.8
Drilling rig
revenue per
utilization
day in the
United
States (2) US$ 22,497 US$ 20,577 9.3 US$ 24,344 US$ 21,541 13.0
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "NON-GAAP MEASURES".
(2) Includes revenue from idle but contracted rig days and/or rig contract
lump sum payouts.
Canadian onshore drilling Three months ended September 30,
statistics: (1) 2009 2008
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling rigs
(end of period) 226 865 220 879
Drilling rig operating days
(spud to release) 4,232 16,406 9,008 38,898
Drilling rig operating day
utilization 20% 21% 44% 48%
Number of wells drilled 584 2,004 1,444 5,270
Average days per well 7.2 8.2 6.2 7.4
Number of metres drilled (000s) 891 3,046 1,786 6,826
Average metres per well 1,525 1,520 1,237 1,295
Average metres per day 210 186 198 175
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Canadian onshore drilling Nine months ended September 30,
statistics: (1) 2009 2008
----------------------------------------------------------------------------
Precision Industry(2) Precision Industry(2)
----------------------------------------------------------------------------
Number of drilling rigs
(end of period) 226 865 220 879
Drilling rig operating days
(spud to release) 13,103 53,017 22,578 98,683
Drilling rig operating day
utilization 21% 22% 36% 41%
Number of wells drilled 1,666 5,909 3,307 11,964
Average days per well 7.9 9.0 6.8 8.2
Number of metres drilled
(000s) 2,487 8,482 4,334 16,060
Average metres per well 1,493 1,435 1,310 1,342
Average metres per day 190 160 192 163
----------------------------------------------------------------------------
(1) Canadian operations only.
(2) Canadian Association of Oilwell Drilling Contractors ("CAODC"),
Precision and Nickle's Daily Oil Bulletin - excludes non-CAODC
rigs and non-reporting CAODC members.
United States onshore
drilling statistics: (3) 2009 2008
Precision Industry(4) Precision Industry(4)
----------------------------------------------------------------------------
Average number of active
land rigs for quarters ended:
March 31 82 1,287 13 1,712
June 30 50 885 15 1,797
September 30 53 936 24 1,910
Year to date 61 1,036 17 1,806
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(3) United States lower 48 operations only.
(4) Baker Hughes rig counts.
In the Contract Drilling Services segment, revenue for the third quarter of 2009 increased by 2% to $216 million while EBITDA decreased by 9% to $86 million compared to the same period in 2008. The increase in revenue was due to acquisition growth in December, 2008. The decline in EBITDA was due to lower rig utilization days in Canada. Activity in North America was impacted by lower customer demand due to continued low natural gas and oil prices. Drilling rig revenue per utilization day in Canada was up 19% over the prior year due to a greater percentage of contracted rig days compared to prior year, revenue from idle but contracted rigs and proportionately more activity from the Super Triple and Super Single rigs which typically receive a day rate premium. During the quarter 42% of Precision's utilization days in Canada and 78% 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 and margin contributions from idle but contracted rigs. As at the end of the quarter in the United States there were 38 drilling rigs working under term contracts and another 10 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 third quarter of 2009 were 4,653 a decrease of 54% compared to 10,048 in 2008. Drilling rig activity for Precision in the United States was 120% higher than the same quarter of 2008 due to the acquisition in December, 2008. In the prior year quarter, Precision did not have any drilling rigs operating internationally compared to 176 utilization days in the current quarter from operations in Mexico.
Precision's camp and catering division experienced an activity decrease of 60% over the prior year third 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 54% of revenue for the quarter compared to 53% for the prior year quarter.
