Upload
others
View
19
Download
0
Embed Size (px)
Citation preview
1|
Jefferies Energy ConferencePRECISION DRILLING CORPORATION
November 27, 2018
*Rig 576, Loving County TX, Permian Basin TSX: PD NYSE: PDSTSX: PD NYSE: PDS
2| 2|
Forward-looking StatementsCertain statements contained in this report, including statements that contain words such as "could", "should", "can", "anticipate","estimate", "intend", "plan", "expect", "believe", "will", "may", "continue", "project", "potential" and similar expressions and statementsrelating to matters that are not historical facts constitute "forward-looking information" within the meaning of applicable Canadiansecurities legislation and "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States PrivateSecurities Litigation Reform Act of 1995 (collectively, "forward-looking information and statements").
In particular, forward looking information and statements include, but are not limited to, the following: our strategic priorities for 2018;our capital expenditure plans for 2018; anticipated activity levels in 2018 and our scheduled infrastructure projects; anticipated demandfor Tier 1 rigs; the average number of term contracts in place for 2018 and 2019; expectation for U.S. operating costs to be lower in thefourth quarter of 2018; our future debt reduction plans beyond 2018; and the anticipated financial, operational and strategic benefits ofthe proposed Trinidad Drilling transaction.
These forward-looking information and statements are based on certain assumptions and analysis made by Precision in light of ourexperience and our perception of historical trends, current conditions, expected future developments and other factors we believe areappropriate under the circumstances. These include, among other things: the fluctuation in oil prices may pressure customers intoreducing or limiting their drilling budgets; the status of current negotiations with our customers and vendors; customer focus on safetyperformance; existing term contracts are neither renewed nor terminated prematurely; our ability to deliver rigs to customers on a timelybasis; and the general stability of the economic and political environments in the jurisdictions where we operate.
Undue reliance should not be placed on forward-looking information and statements. Whether actual results, performance orachievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertaintieswhich could cause actual results to differ materially from our expectations. Such risks and uncertainties include, but are not limited to:volatility in the price and demand for oil and natural gas; fluctuations in the demand for contract drilling, well servicing and ancillaryoilfield services; our customers’ inability to obtain adequate credit or financing to support their drilling and production activity; changes indrilling and well servicing technology which could reduce demand for certain rigs or put us at a competitive disadvantage; shortages,delays and interruptions in the delivery of equipment supplies and other key inputs; the effects of seasonal and weather conditions onoperations and facilities; the availability of qualified personnel and management; a decline in our safety performance which could resultin lower demand for our services; changes in environmental laws and regulations such as increased regulation of hydraulic fracturing orrestrictions on the burning of fossil fuels and greenhouse gas emissions, which could have an adverse impact on the demand for oil andgas; terrorism, social, civil and political unrest in the foreign jurisdictions where we operate; fluctuations in foreign exchange, interestrates and tax rates; and other unforeseen conditions which could impact the use of services supplied by Precision and Precision’s ability torespond to such conditions.
Readers are cautioned that the forgoing list of risk factors is not exhaustive. Additional information on these and other factors that couldaffect our business, operations or financial results are included in reports on file with applicable securities regulatory authorities,including but not limited to Precision’s Annual Information Form for the year ended December 31, 2017, which may be accessed onPrecision’s SEDAR profile at www.sedar.com or under Precision’s EDGAR profile at www.sec.gov. The forward-looking information andstatements contained in this news release are made as of the date hereof and Precision undertakes no obligation to update publicly orrevise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except asrequired by law.
3| 33|
PRECISION AT A GLANCE
High Performance Land Driller
*Dots on map representative of areas where Precision has had drilling operations in 2015, 2016 & 2017 (09/2017)
257 Drilling Rigs:Canada (135)U.S. (105) International (17)
210 Service Rigs:Canada (202)U.S. (8)
Complementary Services:Camps & Catering, Rentals and Water Treatment
4| 4|
Precision’s High Performance Foundation
PRECISION SYSTEMS + SCALE
PRECISION CREWS SUPER SERIES RIGS
5| 55|
SYSTEMS + SCALE
Driving Operational Excellence and Lower Costs
Supply Chain Management
Cost Savings Vendor Management Centralized Support
Manufacturing + Capital Projects
Engineering Project Management Equipment Manufacturing
Technical Support Centres
Asset Integrity Maintenance Standard In House Repair & Rebuild
IT Infrastructure and ERP
Supports Increased Data Flows Operating Efficiencies Fixed Cost Leverage
6| 6|
Recruiting and Development Program Successfully Eliminates Labor Constraints
1,200 – 1,400 Screened candidates in the
system
100+ drilling rigs reactivated from Q2/16 lows, 2000+ positions filled 8,000 people received in-house training in 2017
Leadership Development
Programs
Career Path Management Structured Promotion Programs
Long-term Compensation Programs
Field Training Investments
Permanent Training Facilities with Fully
Functioning Rigs
Tier 1 Assets
Structured Competency
StandardsWorld-Class Safety
Culture and Processes
177,972Applications processed
2013-2017(35,800 Applications in 2017)
7| 77|
PRECISION SUPER TRIPLE
Advanced Rig Technology
1500 HP TDS-11 TOP DRIVE
25,000’ + FT RACKING CAPACITY
PROCESS AUTOMATION CONTROL (APPS)*
DRILLING EQUIPMENT CONTROL SYSTEM*
HIGH SPEED DOWNHOLE DATA*
“OMNI-PAD” WALKING SYSTEM
TRANSFER TANK
TWO SPEED DRAWWORKS
DIRECTIONAL GUIDANCE SYSTEM*
(3) 1,600HP 7,500 PSI PUMPS
(4) CAT 3512 GENSETS
INTEGRATED POWER MANAGEMENT SYSTEM
1
1
2 3
4
5
6
7 8
9 11
10
2
3
4
5
6 825,000 LBS HOOKLOAD
7
8
9
10
11 UMBILICALLY CONNECTEDBACKYARD COMPLEX
12
1213
14
13
14
REMOTE OPERATIONS CONTROL CENTER (OPTIMIZATION*)
* Precision Technology Building Blocks
8| 8|
Precision’s Super Series Investments Drive Market Share Gains
>$3.0 Billion in Drilling Expansion and Upgrade Capital Investment from 2011 – 2017
1) Excludes 16 upgrade candidates, 100 newbuild rigs and 21 major upgrades.2) Decommissioned 36 legacy rigs in 2011, 52 rigs in 2012, 29 rigs in 2014 and 79 rigs in 2015 – total of 196 rigs.3) Peak based on Baker Hughes U.S. Land Rig Count average of 1,872 in November, 2014.
1,2
121TIER 1 RIGS
ADDED
2014 Peak Month Avg. Rig Count
Peak 2018 U.S. Rig Count as % of 2014 Peak Month Average 3
81%
67%
56% 58%
80%
56%
44%
PD Lower 48Peer CPeer A Peer B
101
Peer D Lower 48 ex. PD &
Peers A-D
72 192 290 291 1,872 926
75
114 119 125 128 129 128
43
7279
88101 102 103 105
5
2
2013
8
2
20162011 2012
2
2014
6
2015
8 8
129
2017 2018
Int.
U.S.
Canada
9| 9|
Precision’s 2018 Strategic Priorities
Enhance financial performance through higher utilization and improved margins
Reduce debt by generating free cash flow while continuing to fund only the most attractive investment opportunities(Target $300 million-$500 million debt reduction in the next 3-4 years; $75 million-$125 million in 2018)
Commercial deployment of Process Automation Controls and Directional Guidance Systems on a wide scale
FINANCIAL PERFORMANCE
REDUCE DEBT WITH FREE CASH FLOW
TECHNOLOGY AS A DIFFERENTIATOR
10| 10|
PRECISION TECHNOLOGY BUILDING BLOCKS
DRILLING EQUIPMENT CONTROL SYSTEM
Connects all rig components to electronically manage, control and
monitor rig equipment
PROCESS AUTOMATION CONTROL
Automates repetitive drilling activities using pre-programmed
automation routines
APPS
Open source software allows for expansive app development to
further automate drilling operations
HIGH SPEED DOWNHOLE DATAWired drill pipe enables
instantaneous transmission of data, saving time
RIG AUTOMATION
DIRECTIONAL GUIDANCE SYSTEMSteering instructions generated using algorithms and real-time
downhole data to automate directional drilling
OPTIMIZATION
Using analytics and data to improve performance, drill faster
DRAWWORKS ENGINES
MUD PUMPSTOP DRIVE
11| 1111|
0
300
600
900
1,200
0
20
40
60
80
100
2016 Low 2016 Avg. 2017 Avg. Q3/18 Avg. Current
PD Lower 48 (RHS)
2
UNITED STATES
Focused on Market Share Growth, Cash Flow Growth
Pricing power on Super Series rigs
Leading edge dayrates up as much as US$10,000+ from trough
Dayrates and margins continue to improve
Highest market share in company history at ~7.5%
Low cost rig upgrades backed by contracted cash flow
Technology (PAC, DGS, Apps) driving further growth
1) Market share based on drilling days 2) Current rig count as at 11/23/2018, Baker Hughes* Dots on map representative of areas where Precision has had operations in 2015, 2016 & 2017 (09/2017)
MARKET SHARE1ACTIVE RIG COUNT GROWTHPRECISION DRILLING U.S.
COMPLETE GEOGRAPHICAL COVERAGECASH FLOW MOMENTUMTOTAL REACH
0%2%4%6%8%
10%12%14%16%18%20%22%24%
DJ-NiobraraPermianWoodford
20172010PD trough to current up ~270%
versus Lower 48 up ~175%
12| 1212|
CANADA
Focused on Cash Flow
$156
$252
$269
$321
STRONG FREE CASH FLOW GENERATION
1) Cash flow calculated using reported daily margins multiplied by drilling utilization days plus C&P EBITDA, less Canadian maintenance capital expenditure.2) Based on well count provided by industry sources and internal analysis (2017 average).* Dots on map representative of areas where Precision has had operations in 2015, 2016 & 2017 (09/2017)
128 Tier 1 RigsINDUSTRIALIZED DRILLING EFFICIENCY
70+ DeliveredNEWBUILD & UPGRADED RIGS SINCE 2010
#1 High Performance Fleet in Canada
SUPER SERIES FLEET
MARKET POSITION
25% Market ShareTypically operate 25% of rigs in market with 135 drilling rig fleet30% DuvernayLEADING MARKET SHARE2
33% Heavy OilLEADING MARKET SHARE2
26% MontneyLEADING MARKET SHARE2
Generated $1.8 billion in free cash flow since 20101
Virtually no upgrade capital spending planned in 2018
Scale drives operational and cost efficiencies
Activity and margins expected to be up y/y in 2H ‘18
13| 1313|
INTERNATIONAL
Stable Cash Flow in Low Cost RegionESTABLISHED SCALE
IN THE MIDDLE EAST REGION
Additional Kuwait newbuild award (Q3/19 deployment)
Ability to leverage fixed costs with additional deployments
Targeting IOC’s and NOC’s that value Safety and Performance
8 RIGSCURRENTLY UNDER CONTRACT
6 NEWBUILD RIGSDEPLOYED SINCE 2014 INCLUDING TWO IN Q4/16
17 TOTAL RIGSDEPLOYED INTERNATIONALLY (12 ME REGION, 5 MEXICO)
14| 14|
Revenue and Cash Flow Visibility and Stability
TOP 50 CUSTOMERS12017
PUBLIC72%
CONTRACT BOOK3
CUSTOMER BASE
Primarily public, large private, and national oil companies
Average market capitalization of ~$48 billion (median ~$11 billion)2
1. Includes Canada, U.S. and International operations based on revenue (2017) , 2. As of 11/23/2018, 3. As of 11/17/2018
Proactive contract management – balancing predictable cash flow with exposure to improving price environment
All contracts performed through the downturn
PRIVATE24%
NATIONALOIL COMPANIES4%
9 7
46
23
8
5
2018 Average 2019 Average
63
35
CanadaInternational US
15| 15|
Financial Performance
Aggressive cost management
Rig contract performance
Premium day rates
TTM SG&A expenses down ~20% from pre-downturn levels1
Stable corporate headcount from post-restructuring levels
Increased U.S. rig count by >200% from trough to Q3/18
FIXED COST LEVERAGEWITH IMPROVED ACTIVITY
RESILIENT MARGINSTHROUGH THE DOWNTURN
1) From Q1/14 to Q3/18
(in $ millions)
Revenue $1,321 $1,003EBITDA $305 $228Margin 23% 23%
Fiscal 2016
Fiscal 2017
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
160
180
Avg.
Act
ive
Rig
Coun
t
TTM
SG&
A Ex
pens
e ($
mm
s)
TTM SG&A U.S. Rig Count WCSB Rig Count
16| 1616|
2018 CAPITAL PLAN
Strict Financial Discipline
TOTAL:
$94M
PLANNED 2018 CAPEX
$71M
EXPANSION & UPGRADES
Plans to upgrade ~12-24 Tier 1 rigs to industry leading rig specifications
Additions of walking systems
Increased pumping and racking capacities
Rig automation systems
** Spending contingent on firm customer contract commitments that meet internal return thresholds
Kuwait new build rig (~$10 mm spending in 2018, remainder in 2019)
U.S. new build rig completed for <$10 mm
$64M
MAINTENANCE, INFRASTRUCTURE &
INTANGIBLES
Fleet well maintained throughout the downturn, minimal catch-up maintenance required
Remaining spend related to ERP system upgrade
Increase operating efficiencies, improve fixed cost leverage and position organization to better handle increased data flows
Maintenance spend highly correlated to activity levels
$135M
17| 17|
Precision’s Balance Sheet Management Through Downturn
1. The 2015 total includes the 2019 maturity C$200 million senior notes converted at the exchange rate as of Dec 31, 2014.2. Liquidity calculated as undrawn portion of revolver (adjusted for LCs outstanding) and cash using CAD/USD exchange rate and balance sheet numbers3. Reflects US$30 million redemption expected by year end 2018
US$166
US$350US$395 US$400
2020 202620232018 2019 2021 2022 20252024
No Maturities Until December 2021
SENIOR DEBT MATURITY PROFILE3
DEBT REDUCTION PROGRESS
Liquidity as of 9/30/2018 2(in $ millions)
$675
$110
$661
$65$785
Cash
Revolver/ Operating Facilities1
(Matures November, 2021)
STRONG LIQUIDITY POSITION
1.1
1.2
1.3
1.4
1.5
1.6
1.7
2015 2016 2017 YE2018E
Long
-term
Deb
t US$
Bns
~US$280mm reduction
1
18| 18|
Creating Shareholder Value
MARKET SHARE GAINS & PREMIUM PRICING DRIVE FINANCIAL PERFORMANCE
HIGH PERFORMANCE SUPER SERIES FLEET
CASH FLOW GENERATION FOR DEBT REPAYMENT AND ENHANCED EQUITY VALUE
19|
Combination with Trinidad Drilling Ltd.PRECISION DRILLING CORPORATION
November 2018
*Rig 576, Loving County TX, Permian Basin
20| 20|
Combination of Two High Performance Contract Drilling Companies
Unique combination of two highly focused drilling contractors pursuing similar strategies with complementary Tier 1 assets
Strong balance sheet and cash flow support/enhance deleveraging plan; flexibility to pursue attractive growth opportunities
Immediately realizable cost synergies enhanced by long-term operating efficiencies from increased scale; ~$52 million annualized
Significantly accretive to cash flow per share
Expanded platform for U.S. and international growth and technology deployment
Complementary cultures with commitment to people, safety, technology and customers
Transaction Creates Exceptional Value for Precision and Trinidad Shareholders
21|
Transaction Overview
Transaction Overview
Precision to acquire all of the issued and outstanding shares of Trinidad in an all-share transaction
Pro Forma ownership will be ~71% Precision and ~29% Trinidad Precision expects the Transaction to be significantly accretive to 2019 and future
cash flow per share metrics
Consideration Trinidad shareholders will receive 0.445 shares of Precision for each outstanding Trinidad share
Governance One Trinidad director will be appointed to the Precision Board, and an additional Trinidad director will be nominated for election
Approvals and Timing
Expected to be completed in late 2018
Subject to TSX and Alberta Court of Queen’s Bench approval, regulatory approvals, security holder approvals from each company and the satisfaction of other customary closing conditions
1) Transaction values as at October 5, 2018
22| 22|
Significantly Enhanced Combined Platform to Leverage the Industry Transition to High Performance Drilling
152 Canadian Rigs (1)
1) Excludes 50 rigs identified for divestiture2) 26 international rigs include Precision’s new build Kuwait rig for 2019 deployment
170 U.S. Rigs
26 International Rigs (2)
50 Rigs Held For Sale
348 Total Rigs (1)
~215 Active Rigs
3) Active rigs as at October 5, 2018
23| 23|
Transaction Update
Successful termination of the waiting periods for both Canadian and U.S. competition acts - satisfies the
required condition under the arrangement
Obtained interim order from Court of Queen’s Bench of Alberta
Filed joint information management circular, in the process of being mailed to shareholders
Shareholder votes for both Trinidad and Precision scheduled for December 11, 2018
Precision aligned with Trinidad Board and strongly recommends against shareholders tendering to Ensign
Χ Competing hostile all-cash Ensign bid shortened timeline to Tuesday, November 27, 2018
Updated & New Disclosure – provided November 7, 2018
Preliminary 2019 Financial Guidance for Post-Arrangement Precision
2019 Post-Arrangement Precision Strategic Priorities
Update on Expected Synergies
Refined expected fixed cost synergies of ~$37 million annualized (previously ~$30 million annualized)
Quantified expected operating cost synergies (~$15 million annualized)
Debt Repayment of US$30 million and Updated Post-Arrangement Precision Debt Reduction Targets
Update on Asset Sale Process (properties & expected 50 rig sale)