Precision Drilling Corporation

Good day, and thank you for standing by. Welcome to the Precision Drilling Corporation 2022 Third Quarter Results Conference Call. I would now like to turn the conference over to LaVon Zdunic, Director of Investor Relations. Please go ahead.

Thank you, Operator. Welcome, everyone, to Precision Drilling's Third Quarter Earnings Conference Call and Webcast. Participating on today's call with me is Kevin Nebu, our President and CEO, and Kerry Forge, our CFO. Earlier this morning, Precision reported impressive third quarter results, which Kerry will review with you, followed by an operational update and output commentary from Kevin. Once we have finished our prepared comments, we will open the call to questions. Some of our comments today will refer to non-IFRS financial measures and will include forward-looking statements, which are subject to a number of risks and uncertainties. Please see our news release and other regulatory filings for more information on financial measures, forward-looking statements, and risk factors. As a reminder, we express our financial results in Canadian dollars unless otherwise indicated. Kerry, over to you.

Thanks, Lamont. Precision's revenue in the third quarter was $429 million, 69% higher than the same period last year, while the Just Deeper Dow was at $120 million. an increase of 163% from Q3 2021. On a normalized basis, adjusted EBITDA, excluding stock-based compensation and non-recurring charges, was $130 million, representing corporate margins of approximately 30%. These results reflect steadily increasing North American drilling activity, improved pricing, expansion of our alpha and evergreen offerings, and a continued focus on cost throughout the business. We've been highlighting the operating leverage inherent in our business for several quarters. We believe our Q3 results reflect the beginning of a multi-quarter demonstration of how rising activity and rates translate into expanding EBITDA and margins for precision. During the quarter, we completed the acquisition of High Arctic's wealth service and related rental assets and successfully integrated the business. Having already realized $3 million of the $5 million in expected synergies, we expect to realize substantially all of these by the end of Q1 2023. Moving on to the drilling business, Q3 activity increased 40% in the U.S. and 17% in Canada compared to the same period last year, while day rates increased 37% in the U.S. and 39% in Canada. In the U.S., our normalized average daily operating margin for the quarter absent any turnkey or IBC impact was $9,662 $2,488 higher than Q2 and in line with our guidance. With repricing of spot market rigs impact of Alpha Technologies evergreen solutions, we project normalized average margins to increase to approximately $11,500 per day in Q4, and we expect a similar sequential increase to average margins of $1,000 per day $2,000 per day in Q1 of 2023. In Canada, our average Q3 daily operating margin was $10,034 and significantly exceeded our guidance of $8,000 to $8,500 per day. Our strong margin performance was supported by higher day rates, alpha technologies and evergreen solutions revenue, and increased labor and cost recoveries. For Q4, We project average daily operating margins to increase sequentially to approximately $12,000 per day and expect a similar sequential increase of $1,000 to $2,000 per day in Q1 of 2023. In our C&P segment, our revenue increased 101% to $57 million, while adjusted EBITDA was $15 million. These results were positively impacted by a 62% increase in wealth service hours, in part due to the completed acquisition of the high Arctic assets and improved pricing as industry-wide shortage of high-quality assets and skilled labor continue to support increases in hourly rates. Moving to the balance sheet, we remain firmly committed to reducing debt by over $400 million between 2022 and 2025 with a target of $75 million this year, and we are on track to achieve both the short-term and long-term targets. We ended this quarter with $40 million of cash in the balance sheet and $540 million of available liquidity, excluding letters of credit, and our average cost of debt is 6.9%. We expect our net debt to adjusted EBITDA before share-based compensation expense to be below three times by the end of the year and to decline further into 2023 pacing us to achieve a leverage level below 1.5 times much earlier than expected. To deliver on our customer-backed rig upgrades, of which we now expect to have over 30 during 2022, and certain drill pipe commitments, we are increasing our capital budget to $165 million this year from $149 million. As a reminder, for our upgrades, we will require full cash on cash payback within the term of the contract and rates of return well above our cost of capital. Moving on to guidance for 2022, depreciation is expected to be approximately $280 million. SG&A is expected to be approximately $80 million before share-based compensation expense. Cash interest expense is expected to be $85 million for the year. Cash taxes are expected to remain low and our effective tax rate is expected to be slightly negative for the year. That concludes my comments. I'll now turn the call over to Kevin.