Precision Drilling Corporation

Good day and thank you for standing by. Welcome to the Precision Drilling Corporation 2023 second quarter conference call. I would now like to hand the conference over to LaVon Sedunic, Director of Investor Relations. Please go ahead.

Thank you, Operator. Welcome to Precision Drilling's second quarter conference call and webcast. Today, I am joined by Kevin Neveu, Precision's President and CEO, and Kerry Ford, our CFO. Earlier today, we reported our second quarter results. To begin our call today, Kerry will review these results, and then Kevin will provide an operational update and outlook commentary. Once we have finished our prepared comments, we will open the call for questions. Please note that some comments today will refer to non-IFRS financial measures and include forward-looking statements, which are subject to a number of risks and uncertainties. For more information on financial measures, forward-looking statements and risk factors, please refer to our news release and other regulatory filings available on CDAR and EDGAR. As a reminder, we express our financial results in Canadian dollars unless otherwise stated. Kerry, over to you.

Thanks, Lavonne. Precision Q2 financial results exceeded our expectations for revenue, adjusted EBITDA earnings, and cash flow. The resiliency of our high-performance, high-value business model, an organizational focus on cash flow and return on capital, drove our financial results and progress in strengthening the balance sheet. We have not yet reached our desired capital structure, but in the middle of 2023, we crossed a few milestones, including total debt below $1 billion, a net debt to TTM EBITDA below two times, well below two times, and cumulative debt reduction of over $1.1 billion since the beginning of 2016. Now I'll move on to Q2 performance. Adjusted EBITDA of $142 million was driven by healthy drilling activity, improved pricing, and strict cost control, and included a share-based compensation charge of $3 million. Without this charge, adjusted EBITDA would have been $145 million, which compares to a normalized EBITDA of $75 million in Q2 2022, representing an increase of 93%. Margins in the U.S. and Canada were higher than guidance, resulted from stronger than expected pricing and cost recoveries, higher ancillary revenues, and improved cost performance, in addition to $5 million in idle but contracted revenue. In the U.S., drilling activity for precision averaged 51 rigs in Q2, a decrease of nine rigs from the previous quarter. Daily operating margins in Q2, excluding the impacts of turnkey and idle but contracted revenue, were $15,455, an increase of $1,276 from Q1. For Q3, we expect margins to be approximately $15,000. In Canada, drilling activity for precision averaged 42 rigs, an increase of 5 rigs or 12% from Q2 2022. Daily operating margins in the quarter were $12,203, a decrease of $1,355 from Q1 for Q2, sorry, from Q1 2023. For Q3 2023, our daily operating margins are expected to increase by approximately $500 in Q2 levels with improved pricing offsetting rig mix. We continue to build our North American contract book with Q4 2023 drilling rigs under take or pay term contracts increasing 50% in the U.S. and over 60% in Canada versus three months ago. Internationally, drilling activity precision in the current quarter averaged five rigs. International average day rates were $50,551, a decrease of 7% from the prior year due to rig mix. In our C&P segment, adjusted EBITDA this quarter was $8 million, up 55% compared to the prior year quarter. Adjusted EBITDA was positively impacted by a 31% increase in well service hours and improved pricing. C&P results were further supported by Precision's rental business, which has realized an increased demand and utilization for equipment on our super triple rigs for customers in the Montney. Moving into the balance sheet, we are committed to reducing debt by over $500 million between 2022 and 2025 and achieving a normalized leverage level below one times. Our debt reduction target for 2023 is $150 million, and we plan to allocate 10% to 20% of free cash flow before principal payments directly to shareholders. During the quarter, we reduced debt by $178 million and utilized $8 million to repurchase shares. As of June 30th, our long-term debt position net of cash was approximately $940 million, and our total liquidity position was $580 million, excluding letters of credit. Our net debt to trailing 12-month EBITDA ratio is approximately 1.7 times, and our average cost of debt is approximately 7%. We expect our net debt to adjusted EBITDA ratio to be approximately 1.25 to 1.5 times at year end when we expect debt to be below $900 million and our run rate interest expense to be approximately $60 million. Our annual guidance for 2023 includes depreciation of $290 million and SG&A at $90 million before share based compensation expense. Our full year 2023 capital plan remains at $195 million. we expect cash interest expense to be approximately $80 million for the year and cash taxes to remain low with an effective tax rate of approximately 25%. For 2023, we expect share-based compensation expense to range between $20 million and $40 million for the share price range of $60 to $100 in Canadian dollars. The annual share-based compensation accrual could increase or decrease another $15 million based on relative share price performance and a multiple applied between zero and two times. Year-to-date, we have had a recovery and share-based compensation expense of $9 million. With that, I will turn the call over to Kevin.