PDS - Earnings call transcript Q3 2020 | Precision Drilling Corporation

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Precision Drilling Corporation 2020 Third Quarter Results Conference Call and webcast. [Operator Instructions]. I would now like to introduce your host for today's conference call, Mr. Dustin Honing, Manager, Investor Relations and Corporate Development.

You may begin.

Dustin Honing

good and Kevin, you, afternoon, everyone. Thank Precision and webcast. to Drilling's Third Call Conference Earnings XXXX Quarter Welcome Participating the Ford, and Chief and today Neveu, Financial Executive Kevin on Chief Officer; call with and Carey Officer. Senior President are Vice me President reported release XXXX Precision third quarter Through our today, its news earlier results. otherwise these financial unless in Canadian are note, Please dollars figures indicated.

Some such news operating measures. and see our as release these comments additional earnings. will on to refer today our EBITDA of non-IFRS measures disclosure for financial Please financial

statements forward-looking We information results include these uncertainties Precision's over future turn results. these financial will operational providing statements expectations. for statements today's prospects. update forward-looking today With comments begin cause to will to and and filings regarding by risk results I'll and Carey. from Carey and will by our of regulatory discussing Please it caution third and call forward-looking outlook. an to then actual Our materially you, that could follow risks that see you other more differ our release factors. a our are Kevin quarter subject number on that, news

Carey Ford

you, Dustin. Thank

Our third progress out our including high our and and the of the quarter fleet reflect scale set and XXXX, free priorities operations. reducing results results beginning of through cash through leveraging execution at debt strategic flow on financial financial maximizing performance, high-value

assistance Absent for XXXX. $XX of The million adjusted North quarter of in have results would EBITDA during slight EBITDA and in in these million decrease million quarter $X decrease items, $XX international million adjusted severance of is in EBITDA $X included decrease a our in operations. quarter. quarter America, decreased adjusted Also the costs EBITDA the of activity payments. third and CEWS drilling Our been the sharp over from XX% third a primarily

to be guidance savings We and $XXX overhead in year XX% expect for G&A costs cash and are achieve track reduction a to comprised the on of our fixed of million.

the beginning achieve year. the We reduction annualized throughout to cash reduction cost and to of our in priorities We the in similar program QX $XX a million to program CEWS continue in and participate participation levels organization. recognized G&A Precision's the this in expect Cost be $X will in assistance from expect in at in QX. CEWS at provided QX. guidance million continued preservation

within economic As of payments. all supports wage the support a us this and by with offsetting allowed program activity has positions reminder, sectors government our Canadian expense economy to retain in organization several

this through have from of impacted averaged from of a X,XXX Although revenue Precision the X daily in by program support positively in government extend program operating higher drilling U.S., were costs amounts XXXX. to QX, IBC rigs USD XX,XXX, USD a they rigs the QX not XX June communicated QX In were turnkey to decrease XXXX, and of cost by absorption. margins has the will lower operating for the fixed announced quarter Daily margins QX. activity commitment a offset the due margins, provide. the decrease that

of revenue been than early versus per X,XXX USD X,XXX QX, and approximately USD operating in IBC, In addition, lower Absent daily from day have termination would termination QX. in turnkey, we QX. margins day recognized X impacts per early

per CEWS' $X,XXX last than have QX were increase $X,XXX of day CEWS an QX been drilling higher flat rigs, decrease would impact, be payments. per revenue supported to be we XX supported XX levels. a quarter averaged for For generally to QX rigs assistance XXXX. or strict QX operating with $X,XXX and by from margins per $X,XXX day, XXXX. operating on a the QX, activity expect margins in rigs IBC of from year. Canada, contracted focus were and Margins costs and the Absent Precision Daily day, by In margins

of quarter activity. For expect overhead burden absent activity Precision cost strict from to slightly last control day were our adjusted lower quarter consistent All current from With mix during during service be down day, through through down year, third was USD result our to negatively to the per XX.X% EBITDA QX by prior XX,XXX drilling X remain the financial as QX, industry active arising that the decline average segment, quarter. XXXX. and offsetting $X,XXX compared rig XXXX prior million, contracted was period. the hours quarter. and rates quarter. well year. performance the X EBITDA of activity than from approximately X up this current of rigs we expect Internationally, the we International year Adjusted $X.X QX XX% USD in lower rigs, averaged margins a from XXX CEWS from fewer impacted for the In in benefiting are C&P a

improve of $X.X billion of the quarter QX, plan results by additional expansion. for expenditures will primarily The our a industry Canadian the Capital remains XX% infrastructure and the upgrade sustaining $X government's and the $XX of a million decrease in million program. rehabilitation abandonment site for XXXX capital We XXXX plan for $XX well capital increased expect and $XX guidance. beginning year work approximately and million, from is supported million, comprised activity result the were of and

contracts fourth average for quarter the of XX, of an of full had the contracts October XX XX average an year in for As hand and we XXXX.

sheet. balance the to Moving

through reduce USD free have through generation. redemptions We reduced primarily through continue have market levels net purchases. cash a open facility, credit balance to million $XXX overall by and note, levels, Year-to-date, both to debt we and our flexibility facility November XX preserve Of and flow debt repayment drawn reduce million our on provide absolute strong this in for we continued XXXX. to costs, debt interest revolving cash XXXX. utilized which matures We our

senior notes notes XXXX, As due XXX XXXX, million; XXX follows: XXX balances USD million. note as due were USD XX, million; of our October USD due notes and XXXX,

over position cash, debt of liquidity our net our was $XXX approximately long-term position million. and billion, XX, XXXX, As of $X.X September was total

EBITDA trailing to X.Xx, approximately cost XX-month our debt ratio debt is of X.X%. average is and net Our

is of the flow remainder top increasing on continue meet expect continue to the million goal not For year, this priority, the but and both capital working through activity Canada. expect opportunities from do incremental remains operations track remain and Liquidity longer-term look for cash release we'll this reduction remainder reduce debt in guidance depreciation an to we reduced now -- between February we free coverage And approximately to We a ratio for of share-based of expect the to as in to with be of $XX do covenants year, compliance $XX not for $XXX guidance U.S. to provided generating benefit XXXX expect leverage. expect our already and to $XX XXXX $XXX be we of and beginning million. debt to XXXX by We and all before expense. EBITDA million remain in XXXX, interest $XXX of million. This X.Xx. XXXX. million in our since compensation debt with of We the QX to have million over compares SG&A of

interest expect million of to the We approximately approximately an year run post expense forward have cash be $XX and QX. annual $XXX going for to rate million

XX% remain rate range. to to to taxes tax low to in effective our XX% Kevin. over the be cash call hand and the With expect that, I'll We

Kevin Neveu

that pandemic the at this our we towards to am XXXX strategic in Precision, industry. who oil in pleased the strong excellent and I'll very the in make began. And to strong crisis which took remarkable results the the continued it expected that several and thank financial XXXX I most rollout. have progress of now at about before cash and few whole commitment a were our produced. aggressive minutes. you, simply resulted have team work Alpha is have history see have dedication, Precision that free the Good to seems than and downturn the the better are people in the here gas worst the continue be we toughest Carey. longer-term for from do our to will results. not they who drilling afternoon, of on That to remind difficult while time, more we'll the the grinding and It you, progress and I'm have contracts, swift indications for Furthermore, modestly least clients actions may plans us. Well, rest option the well also We're address goals, the their this drive and from thank inquiring the at we behind requirements flow said, rig customers home, I pleased of results, like Precision, through beginning set downturn technology XXXX. of we increase operational their

are is during spending, our on maximizing scale optimized, our reducing results. these our reducing strategic that cash our and evident debt, aligned current to financial quarter. leveraging All driving cash is that and on are our What cash scale progress the costs, our entire leveraging our objectives made system and hands structure our as free focused very minimizing organization believe flow. I cost financial Regarding I want outflows, Precision generating in add efficiencies And limiting flow, fixed Carey is detailed, third free the we've of good efficiencies.

current rigs, in fixed look the torque we triple of With as activity never need no nominal Precision's will believe to activity with quarters. earnings operational and we build better and increases with can torque expenses. flow our we cost new earning G&A foreseeable forward rig increasing structure, capability strong. is the utilization free our profile As prospect cash only we has The to been that in and demonstrate improves coming

and, shareholder to Our achievable reduction long-term targets strong structured. debt generate importantly, ability are value well is our

priority, on to platform, third goal. technology to achieve leverage this our Alpha fully we our strategic Regarding remain track

write and Our and several creation while fixed and are captured our working Precision in technology value develop are are essentially variable we software, with end paying Precision's strategy on costs rig revenues apps, infrastructure, debug industry focuses the partners, support largely off development technology to in really achieved. out field this while partners among linked associated code downturn. the we to fully front The deployment the with spread and is of costs customer the the

key resources strategy the and our this see technology downturn. partners partnerships across have not as the been Our applied development impacted technology their by to

minutes me our Now take a to few let you on progress. AlphaApp update

to of hundreds algorithm. these actions related and decisions if various execute six not continue consistent with and that the to During process, producing construction processes, the commercial, repeatable, or With repeatable construction algorithms or sequences, controlled up every can manner field grow Most, are an control a wellbore for AlphaApps, efficient, set These in routine over. our all and program are a with customers. rig there drilling see dozen the a of to the over already repeat virtually as be and more through following drilling in more of always and opportunity crew our AlphaApps process universe to growing function the and the operation. activity customer testing, consistent, stages goal of cost lowest we AlphaApp well

to through value half customers next running our customer basis. our The operating cost is of to from AlphaApps. of website, delivering all our end cases, and delivering for XXXX, drilling currently E&P paying the of with several inarguable. super-spec earning a rigs the reducing for go partners. per double-digit for Precision detailing customer reducing X or our is even achieved super you and our using and customers rig well American studies is case American our successes our have we of I expect returns North see smallest our range our If customers Alpha. days on -- customer. percentage By majors private commercial In Alpha year, costs times to are you'll most will of midsized value fleet Alpha The fleet reductions Alpha Half

customer not these Now it's lower any want continue ways to of as technologies costs. will their cost unimaginable digital look that benefit they to the

us drive the will growth near-term for eventual drilling. land recovery position We expect share in Alpha our market continue well and to very

to I'll more XX muted to XX next with Canada, scheduled couple of our are midst Currently, turning have and weeks. the in Now rigs where fall activity. over of mobilize currently markets. running a we start seasonal the we in rebound

for further this Western optimistic change drive into approval as trend season, will we're expecting the announced XX to customers will customer even the January. seem just catalyst for the upper longer. activity our this still peaking point, winter of NOVA between but will weeks expansion positive At our in for but range a the few The it lot NGLs expect ago. Canada the can in constraints project to be demand quarter. XX XXs Precision, early It's Canadian Natural but We as and solves takeaway oil a recovery activity the sedimentary gas Gas later now a than drilling expectations and Transmission recently basin. to current our our takes more the -- XXXX

Montney our remain enjoys with Triple this previously we've also of As highly walking share Precision and market commented, industry-leading competitors from couple is best class. Duvernay Canada plays rational perspective, strong a Super fleet is rigs. region. This in the rig our a gas pad of market just due to in a competition which

Canada depressed. most, in Saskatchewan namely if are XXXX. oil be multi-well our our increasing expect will customers on cost. market rigs penetration reduce Alpha Alpha to of the not our oil Alpha with Cardium, even in The with well Viking, regions and Southern all, in capabilities Super All Triple -- running rigs as heavy remain explore I pads and the shallow of overall is Canada,

challenged. this pricing, advantage. with quarter scale oversupplied, the rigs deliver highly shallower rate our segment has and flow. modestly remains cash lows, a is activity second competitive competitive challenged solid free improved Precision's While from Even

from In the over course. industry this believe fleet, drilling And running investors. with segment oil capital unique continue generate the running will improve. we to share, market investment, only in Super fleet projects. our to restructuring our We lagged remain U.S., volatility rigs set. cash our already furthermore, over contractors are report guidance cannibalization the flow and In of a price expect I Overall, and rig is activity rationalization competitive need on some the X meantime, longer during as we runs can we market opportunity XX registered we a position scale, when little to expect XX provided strong But quarter improves. prices second when business Triple free of delayed for but Precision CAODC, Canadian X others Precision offers XX% that, in the its recover market are strong contractors. the And with very will the term, today industry today, substantial The our With benefit modestly stress on the and rigs our financial call. commodity strong quarter this while our has just the IBC. earnings the

XX which bring rigs the confirmed by activity year. the should We bookings, have near running end our up to of

We to into expect XXXX. that momentum continue

up. contract a rates asks lock in very with signal that I trend are those As earlier, we is trying mentioned This as will are range, It shifting move But rebound. this to customer trend longer good us let a that be XXXX. both however, gas, customers seeing a into to don't expect to where with believe in we market hold that's XXXX market the well terms rates lower their customers recovery. and U.S. activity prices, commodity full and oil is, see in current if a modest clear, upwards. We activity

engaged market above -- will current during gain share will as We U.S. full to be success Precision to customers are multi-well we expect at help our time. a XX% The has pads been on to base. think share We AlphaApps reactivate rigs, continue I will XX% continue earlier development our that look range thinking in they customer and levels, market discussed in gains. the Alpha hard U.S. drive the across take our of and drilling will this capability this all

until occur recovers move global improving, mid-$XX prices the near So at will levels a to WTI. to and pre-pandemic commodity recovery range oil modestly industry while not for is rig least full demand demand upwards

We the their manufacturing that operational increase management, customers like commodity believe away. pad prices fiscal improve and highly enable generating will still of themes demonstrating drilling returning are focused flows, cash cash strong Higher and customers, Our cost on cash predominant free efficiency, discipline. to not while to wellbore are drilling our investors. customer ourselves, flow going

as Triple also rigs steady. our drilling to believe rigs, our contracts technology Kuwait Carey segment, and in to our Saudi Alpha combined provide value that investors. our customers international they Arabia to suite, Super need In said, with We our the will deliver continue remains with and their

idle activity office We some increased most are are rigs. The soon oil spec and by and to will idle return seeing provide opportunities expecting recovery to seeing mid-XXXX. be of the in But bidding slow early rigs a ultra international are be these the stronger likely to our our companies Kuwait, with we reactivated rigs in the we believe that market, reactivate three North on could national largely dependent as prices. are oil the should American

Turning business. to our service well

free the generate we pressures, customer anemic continued third the reclamation has of with scale customer lean a cost from billion years winter substantially in spending the during on to benefit structure more continue deployment our outlook improved initial to visibility Despite The and ago. we mean Canadian cash both the continue flow this couple competitive well program. segment and demand have and quarter. in put and of We place $X.X

was During Precision talked funding, our from projects, a on abandonment application receiving July and we quarter, up various various earnings about just successful for handful almost the third that's XXX approvals call.

industry-wide well deeply several of It's to a we number our solid well today, sector. activity to incremental about XX So jobs incremental workers. have And abandonments. field abandonments for this in rigs providing is quarter. us, program creating expect base of This the and challenged for working problem rigs all what addressing a climb later was service on this

positioning pandemic Precision So and capabilities the slowed very all to for and worked industry at all our a result deliver up, hard down the all to sustain all and for at world company value downturn, the of reopens. to call believe wrap remarkable to the to the through share the continues service to us stakeholders. business operator fronts, I of team firmly position the benefit have strong you for ultimately and Precision preserve of our inevitable on the work great for I'll through Thank rebound the your putting the questions. Precision contributing. us all now turn people in the back our a us when very the

Operator

[Operator Instructions].

with first Our Taylor Pickering, comes from Tudor, Holt. Zurcher question

Taylor Zurcher

My E&Ps least to the there lower a trend just leading-edge made, finally, some is And diverse sort type work shake to longer-term that bit in first And question customers towards these and leading basis. curious, bigger out? longer-term E&Ps? rates you the of the color in is right? on a Because it little of true any of likely Kevin, of array a rates for the on it's to of customer kind contracts higher about at that some your on I smaller spot U.S. I'm charge? Is of some lock market, shake is is bucket or going trying of wanting leading comment edge where that suspect than out any and a

Kevin Neveu

cut Yes. customers. first kind good cut downturn. activate they've discipline, rigs. a needed to of but the they on fiscal customers a first the it say, few Taylor, of seeing now during demonstrate all, more of -- of little Generally, diverse I'd they to kind We're than probably that deeper a address can mix realize the it's And still they of got part question.

I competitive I We're not is market rates our a really lock to that non-super it's into right today's discipline on just period. quite longer right very X So spec with and to X rig any The do see common call really level. trend. really contractors. in dealing tell see now. Certainly, We limited, get for mix or or at good would we lower by now. competition try opportunity X to the customers I think theme. that's don't rates want that an capture you

we is market. pricing we I pretty disciplined. remain demand a I we'll disciplined And continue good fairly strengthen, as think sitting it's to see now. this where So And about think feel

Taylor Zurcher

on my Fair the balance follow-up enough. And sheet. is

really you When on least retire debt term? generate to cash continuing continued the to draw at the debt sheet? in coming should You've comfortable Or balance incremental to are free be it to flow to the here, credit some progress. on further comes expect down down targets the paydown pay more the cash from additional facility near debt and from strong accelerate pay we or debt

Carey Ford

Taylor, Carey. it's

So just free and QX. that of cash every this happened capital expected lot working I benefit a in optionality. we for have quarter say quarter would before mentioned that last year to be we flow I positive that

quarter if operations, expect we'll are you likely free cash we'll for optionality next to We at cash the And one to so estimates revolver, use happen year, levers. and our look those next from of each balance in sheet flow have at then analyst situation it QX. and where pull on year, look the and every

Operator

Aaron with Securities. question TD comes from Next MacNeil

Aaron MacNeil

QX QX disclosures. flipping talk want said Obviously, sense year-to-date And a XX. you type forth know you us about factors other I don't that be length, XX your customer and you give it's and but think back contracts think you Just you I now QX had and between of might rates, term with or signed can helpful? to

Kevin Neveu

Kevin. it's Aaron, So

first leaning think contract And announcing have higher shorter we're We'd at a all, optionality we're think don't of a on X future. months I in that we lock the in rate. Right I rather be longer. or now, term lower end. rates towards in likely some will a

be I'd point haven't year, range. The X Typically, true. you of will X we towards those So it's are probably X-year pretty end the sure I'm in X-month, quite shorter not the average years. -- range. the

Aaron MacNeil

of That's consolidation companies relying in I'm bit third-party on E&Ps large among of X data but as Follow-up for were announced, involved recently Okay. previously quite January. working helpful. the me. U.S. those for and as a here, recently recently transactions X transactions been X you obviously There's

you all working for negatively spending relationships larger be market at might share today. comprise activity? that market as impacted percentage But of consider some a in your with And now the increasing of share concerned an your these entities some overall combined do of competitors? secondary not You're you companies to perspective, those your are any companies from of

Kevin Neveu

transaction. rigs and would not Anadarko. market we market of I Pad impact are look share. I those strong We performing had very Anadarko-Occidental with going affect our share. program, And don't cut Oxy rigs are well. the think to the likely have today. Certainly, their drilling The our did back the position go a running kind at transactions downturn rapid still

was a of So It the cutting their them a function I function think don't acquisition. of was that program.

look market employees today, that are transactions. we're the the buying in well these with don't transactions companies. both business we sold any right were being at our market we that the there, that but shifts think affect and companies also As now positioned that share are expect the the adversely from And

Carey Ford

add in Aaron. able that would Yes, of towards I terms our value our also being the proposition larger scale optimization E&P and lends efficiency really ourselves to and operation, players.

these bigger more the So be think the services. attractive that we to some get, of companies they will Precision

Aaron MacNeil

you. Got

on think for Typically, this Okay. they'll as priorities it Last you you'll debt kind relates to maybe execution technology year? you of more CapEx, provide a focused your outlook. you reduction, and them? in priorities December release do next when different But strategic operational And strategic priorities, you terms from year, think or of your January. question do me, your early be materially XXXX the for

Kevin Neveu

So long I is won't going couple year. come efficiency, comment our on probably work front for our tell the path also any at priority is effectiveness, years. but next holders I and going run the The list ever anywhere leveraging would equity our reducing reduction debt operational That's news around for -- lose value more not a in in our to equity least certainly time. for a debt we'll answer that to I'd in you that what off not not future, to the of be for few improving operational But is, our attention scale. later years.

Operator

Our next Kurt comes question from with Hallead RBC.

Kurt Hallead

positive your constructive was today, one with call on conference of on commentary. U.S. talked that part the earlier visibility drilling Kevin, front the of early about to Obviously, also some out some had I specific into it's the pretty peers momentum XXXX. commentary

some generally direction it So the in market the the of agreement in overall U.S. there's like sounds

competitor suggested day. comment came pricing you out other And that was to effectively looking that with was good think front. discipline that on a day $XX,XXX I pretty rates north a this pretty stick said what consistent somewhere that the of were

backdrop, out So maybe and go there's with Kevin, of some the a activity. marketplace that put see drilling the expect little same consolidated level the anxious you having of a contractors, general market I discipline in and maybe bit not into improvement getting year, that in some know rigs some a drilling market we out these some to of as next about dynamics. too back concerns idle fairly out maybe overall into as the you'd

don't gauge I And could discussions discussions the activity? both how around kind of some know, of give So of your having in with that? been and what magnitude you kind you've you improved customers, do insights of of what us -- terms pace potential

Kevin Neveu

a QX think we're -- is or answer conference obviously But public quite customers right I Kurt, are even right the quite into that few now handful competitors generally, the X top actually, a Lots of talking now, We're a kind our a to complex. there customers. and drilling of that's call customers. little different talking from large the of contractors. we're few fall to X just seeing or

be So rigs up of conversation. technology And to psi, super-spec development against all that pad racking any They're walking, contractors. all we're are drilling going smaller in the X,XXX These large really programs. is systems. are every coming single not

not that's going So -- have the there to that are that aren't many those conversations. drilling contractors simply other

So are the quite -- with competitors dealing it's disciplined. we're

quite well We other the each proposition. each know our we in value think marketplace. I have

up a are result share, of we investors and ends drive focused share on a our things being all less drive to market for I EBITDA little but doing. returns think we're and looking

Kurt Hallead

sounds That good. Okay.

market, kind assess in market? forward, So that. consolidation context any the Canadian the overall than the try the foresee the of drilling kind going right? player biggest the in you of the bigger I you can to do possibility get mean, additional of Canadian opportunity How market, how do of in you're unlikely

Kevin Neveu

said in have another. like of rigs or one bit they -- now. rationalization to going it's XX% a a There's U.S. We X that It's drillers. think active I way right Canada be there's their in

cannibalized become phase is the rigs think get I nonmarketable. that eventually first

either companies sell scale. to create I think few to you may someone see small some a trying

larger even this period So kind in I driving through of recovery Canada. public don't you companies early in think this or downturn consolidation see

I good cash We plan about. and XX don't positions kind strong, maximize think than that market we in contractors know the don't need to we that larger drilling companies of Certainly, do. to flow. they I have other feel anything have are in Canada. pretty the free But Canadian do

needs it now right says market Our X.

I out. the that's play way think things

Basin. basin rigs. the of that our automation mature, Super There's If making a have look deep I program. and technology probably where right that's the think just contractors And we're Triple Montney, running Duvernay only right the that's sustained you and at we're money Deep most now, contractor now really three

So I compete. going I smaller that kind can scale of to have trying to going problem have. of may the the the or you think asset will competition drive scale. the think a then doesn't scale end at see and lower solve -- some who set And of that to those liability companies smaller technology people But consolidation, they're gap is create

Carey Ford

of that or one next of the look step time XXXX forward. were consolidating very large frame, going other X transaction was there And Kurt, kind in add But to consolidating the I'll transaction. XXXX X that's kind down there and

said, lot Kevin as there's to a So deals. there more been haven't come. of probably But

Operator

[Operator Instructions].

next question with Stifel. from comes Cole Pereira Our

Cole Pereira

with how might a from minimal some have going can the conversations gas, heard you spending of call strength of WTI an how those dynamics some and commentary about maybe it, kind recent CapEx in producers, out in see gas the you some just U.S. all in we've of XXXX? hits, of of activity $XX. around standpoint With So clients been playing your lot NYMEX until oil talk U.S. growth

Kevin Neveu

Cole. Sure,

call, our kind then, about expected be just gas. by the conference driven activity up a today, we're gas you increase rigs this our was has it -- to back largely in running QX to from even year. we XX look talked even of earlier I back bit mix I If where think little think moved With

rigs by seeing And year. we've pick the have So between of a clearly, of gas. the U.S. I oil the this up in kind driven move end of early been couple we'll now and yet think been

for additions X/X XXXX trough, rig of from what think I'd oil. most the probably So in see say I X/X we'll gas,

Cole Pereira

helpful. That's you. Got

on Canada. Moving to

had price just with about work. a can think lower maybe is some quarter just you how QX, the just oil quote? oil of for the share some share on that you guys coring we firming sands market of the up great always have As And

Kevin Neveu

fired be It be on can later little see the a can slow, our as the seem in as customers decisions notice. We on they a could up couple first to be rigs bid bit of late to And delayed of those oil even be week if seems January. and starting days' might get better those waiting a -- season. to

be with could right Canada. So demand discussions oil shallow now, But the comments it's heavy -- prepared of kind now, even I pricing early plays right around seems January. Hence, far with place see change. out comments in other Typically, in break to could soft. year are separately. grouping or But those surge that my a the in later slow. We in this

the there's such oil that drilling. a of little in saw actually comment heavy We in season, start of almost been bit a year can winter early bump up a X-year a They this up bit bump that So carefully surprise us a know the by I production. to little had replace we commodity going that need January. even prices. throttle wells, but drill to they're with our customers But need caught to in gap

Cole Pereira

that's you. good color. Got Yes,

Kevin Neveu

to a commodity surge up more prices and building me of what's backside. oil happening little gaps and I'm I thinking comment but backlog time, And a going do when sustained for as bump there's when just that. bit, that that there just a is drilling period though, add that's creates a said larger drilling. be is rebound larger building. these drilling you and and on gas heavy of like stratification exploring drilling stop all of of oil And to the stop a Let

drilled. are wells those to So going get

next If drilled they year, but there if get a year, period be you don't year. will might this delay recovery through this larger get drilled we

Sorry long for the answer.

Cole Pereira

costs that would a in made if XX you you that a to say, makes fair of XX staying to Would that guys, that triple same sense? your much kind see No, Carey, it earlier to see be under change capital to you don't you range, in maintenance count, rig comment that's if great fixed that G&A. detail. of

Carey Ford

No.

levels. maintenance So with completely activity correlated be capital would

as maintenance day go $X,XXX with our see of would drilling rig we day. it $X,XXX, So proportionately a capital per up kind think of activity. And

Operator

from Our next Research. comes Gendron question Blake Wolfe with

Blake Gendron

so call I side. in misheard, frac earlier I the attrition hear phrase rig have but might didn't, mention on did Maybe you think on side the the an you prepared on remarks. on in and the it's but more typically we

to competitor and clearance the see of maybe do in you specs wondering design out going attrition Is to obsolescence? things super-spec contingent attrition and we business? and the Is as like is that's attrition how U.S., peers expect And just it construction in of it are floor continues the maybe on scale other manifesting important? side Just just it well how more equipment? Could more evolve? this obsolescence and presumably by

Kevin Neveu

it the Blake, super-spec we the is didn't the or what fleet. there really the guess upon no what age address even relevance of definition And of really or super makes I constitutes quality spec. agreed more complex,

For are sure, AC the in super U.S. all spec. I can of leading edge the guarantee not rigs that

a walking through X, walk AC those. It'll would a view system. right edge So super-spec leading speak directions. we spec, And for X-month Y in have X,XXX a have X,XXX digitally a and pumps rig, to system of I'll what now throw second. for Precision rig powered is that X,XXX horizontal horsepower is configured definition long-reach to will or drilling, an I'll be we'll pad psi. at you It do

minimis just can all make capital those is the century fleet. -- fleet de past When the but to Now tell that, back of checkmark look really I U.S. rigs do it of XXXX, of XXXX. you, amount a rigs that across turn AC of AC some meet for were not every of built you in rigs, our on back our the

So and the capacity. those probably in don't X-month racking have for rigs X,XXX pumps some of sure, psi

you upgrade rig the the the some plus where of age of guess I obsolete. obsolescence these could rigs technical So it for call cost probably some makes

But that months, U.S. We in not we'll done haven't downturn. certainly rig on in think do several that's the this analysis I something XXXX. through fleet

market got into might day higher day rig rate understand one rate like rig -- location the edge limitless. spec. It seem a of supply to there nearby the begins get a plays rigs meets is We've get the And does how up. leading rebound. away. fleet as that be we super-spec we the So We super not location basin no the looks that of is the a can can, sure, a than for

Carey Ford

about effectively well I constraints has I where new -- fleet have Yes. think, And rigs and keep idle Kevin's and and add, will of in both wear do take they with critical them the when to rigs U.S. attrition in buy comments just would not of more financial competitors don't those to workable. as Canadian the idle rigs Typically, funds to out. they off components maintained leaving they

Blake Gendron

must scale All I be your considered, misheard to competitors. Understood. generative. competitive oil. I'd basins I to elasticity that against smaller misconstrue pretty and thought you focus have price. you interesting heard. are things on pretty these or said imagine the leverage to what regional it shallow rigs the cash Wanted on I you some highly was

relative give these say, relative are expensive activity that have to us price. rigs in first, idea, these a some bit to are you thoughts the cash-generative but So as rigs around And levels how to super-spec an the of on more your side? run to, basin more deep oil basins the visibility, can then

Cardium guess, be the would best is customers to what these be basins? maybe helpful might but and Viking now? shallower in understand it elasticity seasonal, know how I your Your the and right So thinking it's Saskatchewan,

Carey Ford

of cash the generation I'll rigs. Okay. the part that first of the take shallower on

the what the to the than So and we is and little the in capital Super the spending day rates bit lower a a Triples are Montney But maintenance bit is are that operating lower lower. going cost a Duvernay. working bit with be would the see

the Super lower comparable a Triples, on rates or we So those given rigs. shallower get are better of though return some day cash than the cash

Kevin Neveu

repair we $X,XXX $X,XXX cheaper effect that And scale the could chain, to when anywhere large Precision and systems like has most rigs our supply maintenance from probably integration you vertical through a and operate those our in day of through of peers. drill layer than our services, a

Operator

John comes BMO from Our Markets. next with Gibson question Capital

John Gibson

you bid when towards know to racked rigs want year rigs think in of across adding year, next the dairy don't be or even mostly ops? into North the discussions. that are But and about these new you I end exact on-site America currently clearly get would

Kevin Neveu

somewhere on Canada, of but racked most or location. U.S. some question. good In location. the the in racked rigs more racked necessarily the likelihood, John, field, In are likely not sites the good on on

John Gibson

in Okay. new and Great. seeing you a still are ops pricing? And renewal terms between bid large of difference

Kevin Neveu

the is are. for we switching out us. nicely The quite cost Yes, on renewals playing

speed, much So moving off the directions, closer up they've because than prior rig -- get the getting training, renewals, a we're start-up plus they're got and location, our in certainly to able crew getting cost location, both to rate rate they've another rig onto acclimation got move up if to efficiency. they new on bring the

advantage renewals. So pretty on that meaningful does give us

publish rig. actually cost switching per on [indiscernible] study a that think case I the

on be shortly. website that will So our

on You have clarity can good look at you that switching costs. because

John Gibson

Okay.

just then last one And good. Sounds me. for

$X this CEWS in received you quarter. So million

still further improvements you you would CEWS, much we're a COVID, dealing do Let's of undertaken could that them? million you of without you this just say have you not cost think in in but recover $X how world with just would -- had received terms

Carey Ford

number, to Yes. not an We're meaningful. to be point it would going exact but

Kevin Neveu

field blue-collar I in would of have in-house would run yards. -- we that otherwise about projects happy our able small and the And workers in and group the little really especially field, jobs tell bunch been you to well that our done in the we've I'm created and service that. for in a

of with the effectiveness the program that's a get too. bit fact work us, done of happy I'm the for So maintenance we that and important

to that take and good now, it. we'll right program benefit certainly a So there's advantage of

Operator

comes Co. next & with Fetterly The Peters Jeff from question

Jeffrey Fetterly

A random side. couple questions drilling the on of

oil In see terms I you but mix of side, rig Canadian specifically, the going? talked where the incremental incremental about on the U.S. both gas earlier, adds, and do the those rigs you know more

Kevin Neveu

balance the province. and couple then in will spread rigs activating Duvernay be more around be So Montney, in Canada, there'll the a

have So or directed. balance the and numbers DJ then in And in the in in front X X gas the of a Permian the be I right U.S. don't couple will Basin, me.

Jeffrey Fetterly

Northeast? is gas that [indiscernible] the In is predominantly directed, or that

Kevin Neveu

It's both.

Jeffrey Fetterly

the continue Canadian incremental Montney, move XX to Duvernay to of call it, rigs -- side, a as And or in talked to outside most there Okay. regions you to as rig that you an the going XX is be of about, oil the Basin? are and be Or in Deep range is count on QX to bias? going peak that

Kevin Neveu

think I even Duvernay in Montney, level that right the Well, high now. activity region we've a had

those more rigs will with a -- the So outside in will regions. couple handful the balance Montney, be Basin incremental get Deep a Duvernay most of

Jeffrey Fetterly

you And before about QX think some made that on you Super up side? do activity the reference the in to delineation starts pent-up Single your demand, show

Kevin Neveu

heavy years in oil Well, Jeff, drilling. -- a us, after driven back this little in bit levels. February SAGD count three low year, we really certainly And behind January, higher a did QX had this it and of drilling by rig of that's

because closer -- getting So XX%, even you it's be SAGD will over at XX% If because I XXXX or this the doesn't. would season, season. high and we're coming swing end, to XX, drilling tell delineation it picks likely we're If it that closer up. XXXX the winter that at end, if winter in to the drilling lower

Jeffrey Fetterly

rationalization Clarification the side. on

basis? I do in terms rationalization productivity how you Canadian go-forward on you and a of your but U.S.? fleet the about know referenced to side specifically, Both So think and Canada

Kevin Neveu

This that has think right accounting an think so our our properly. really downturn value steps to haven't strategic the positioned. quickly productive fleet. We and We fleet come from taking well sharply fleet our is the on we're we changed so view

budgets if the what dust the term, on get kind longer fleet orientation, of like to any let changes the recovery we sense of the there's and certainly looks a settles market As know. we'll XXXX

Carey Ford

contractors. rigs you you we've remind just X past the look the utilization X the we're fleet And in years. over in And X Yes. in pandemic, all the utilization U.S if pre Canada you, I'd XXX or let's believe decommissioned out The levels, I all our contractors highest of QX. was of Jeff, QX, either say, just look at level if of the at,

contractor of it's the the So we think the relevant. compared drilling least it's rest to most universe,

Jeffrey Fetterly

last U.S. XXXX? what thing, for of your QX contract And the coverage on is side,

Carey Ford

we have disclosed. not Let's see -- actually

I just disclosed think we annually XXXX.

X rigs for we and for under So XX year. the annually, have contract total

higher today. will be book. QX, So QX, and that as we the building it towards hand be these obviously, then just are And in in up move we'll closer the as year contracts of end contract

Jeffrey Fetterly

your And so contract of day today? impact is it rate to profile how do given significantly on your mitigating as about you dropping think U.S. fleet, the is as set as

Kevin Neveu

Yes.

that's our of business, part field cost mean, focused I We on cost. structure. We the I So think operating our drilling reduced Jeff. obviously significantly

we'll We and have our into on contract to enter that contract. we're balance spot managed book opportunities, new X-month, versus existing day both a willing for market rig the that's one rate the in X-year available

Jeffrey Fetterly

the protect question those over I'm get from rigs spot location to pricing likely you guess build contract is and are edge? greenfield therefore, XX there under have new a between there Is the are roll to difference you trying on or about in to at some contract I racked you of rigs that and, earlier also a number renewals. meaningful what XXXX number for that to that leading QX onto think that

Carey Ford

that rigs into part past contracts new are a happen of here contracts. X We've over our over have A the That's months. existing that big seen it. lot new of been rolling

Operator

I'd Dustin. And back to like the I'm call over showing this to time. at turn further not any questions

Dustin Honing

all XXXX results Thank today's February. in for look we our to call. year-end report you forward when speaking We joining you with

Operator

today's gentlemen, conclude this does presentation. and Ladies

disconnect, and wonderful day. have now a may You

Precision Drilling (PDS) 22 Oct 202020 Q3 Earnings call transcript