Precision Drilling Corporation

Ladies and gentlemen, thank you for standing by, and welcome to Precision Drilling's fourth quarter and year-end conference call. I will now pass the call over to LaVon Zidonic, Vice President, Investor Relations. Please go ahead.

Good day, and thank you all for joining Precision Drilling's fourth quarter and year-end conference call and webcast. Today, I'm joined by Kerry Ford, our President and CEO, and Dustin Honing, the CFO. 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 CEDAR and EDGAR. Before I pass the call over to Kerry and Dustin, I would like to recap how we delivered on our 2025 strategic priorities. First, we enhanced our shareholder returns by reducing debt $101 million, ending the year with a net debt to adjusted EBITDA ratio of 1.2 times. And we also repurchased $76 million of our shares, meeting the midpoint of our guidance of allocating between 35% and 45% of our free cash flow to share buybacks. During the year, we maximized our free cash flow by delivering resilient drilling margins in both Canada and the U.S., even though average industry activity declined. And finally, we grew revenue organically by increasing our Canadian market share and increasing our U.S. rig utilization from a low of 27 in February to a high of 40 in the fall and exit the year with 38 active rigs. Today, Precision is the second most active driller in North America. With that, I will turn it over to Dustin Honing.

Great. Thank you, Lamon. Good morning. Good afternoon. Precision's 2025 financial results demonstrate our longstanding commitment towards delivering on our strategic priorities and further strengthening the competitive positioning of the business. Last year, we continued to generate strong free cash flow, allowing Precision to meet our shareholder return commitments while significantly reinvesting into our rig assets and alpha digital technologies. As we enter the final stages of our long-term deleveraging journey, the business is positioned with immense financial flexibility and a platform to maximize value for our shareholders. Moving on to fourth quarter results. We recorded adjusted EBITDA of $126 million, which equates to $132 million before share-based compensation expense. This compares to prior year EBITDA of $121 million, $136 million before share-based compensation expense. During the quarter, we reported a net loss of $42 million, which includes a non-cash charge of $67 million related to decommissioning of drilling rigs and another non-cash charge of $17 million related to drill pipe. Without these one-time expenses, net income would have been positive $42 million compared to $15 million in the fourth quarter of 2024. In Canada, drilling activity averaged 66 active rigs, an increase of one rig from Q4-24. Our reported Q4 daily operating margins were $14,132 a day compared to $14,559 a day in the fourth quarter of 24, falling within our prior guidance range. During the fourth quarter, precision incurred reactivation costs associated with the two super triples that were mobilized to Canada from the U.S. back in September. Both rigs began operations in Q4 and will be fully operational throughout 2026 and beyond, backed by long-term contracts. In the U.S., we averaged 37 active rigs, a slight increase sequentially from Q3 and an increase of three rigs from prior year Q4. Our daily operating margins for the quarter were U.S. $8,754 compared to U.S. $8,700 per day sequentially in the third quarter, also falling within our prior guidance range. During 2025, despite declining industry activity levels, we increased our U.S. rig count throughout the year. This momentum is a result of leveraging our upgrades and digital offering to deliver strong field performance for our customers, coupled with our favorable positioning in U.S. natural gas markets. Internationally, Precision averaged seven active regs, down from eight regs prior year Q4. International day rates averaged US $53,505 a day, an increase of 8% for prior year Q4. This was due to prior year non-billable days from reg recertifications. In our CMP segment, adjusted EBITDA was $17 million, which compares to $16 million for prior year Q4. Increased well servicing demand in Canada more than offset the impacts of winding down our U.S. operations back in the second quarter of 2025. During the year, our strong presence in Canada's unconventional natural gas and heavy oil markets combined with our unique natural gas exposure in the U.S. provided us the ability to capitalize on rig upgrade opportunities underpinned by firm customer contract commitments. For the full year 2025, Capital expenditures were $263 million, comprised of $156 million for sustaining and infrastructure, and $107 million for upgrades. These investments were made alongside our shareholder return commitments, reducing debt by $101 million, allocating $76 million towards share buybacks, and increasing our year-end cash balance to $86 million, which is up $12 million from prior year. Moving on to forward guidance, which I will begin with our expectations for the first quarter of 2026. In Canada, all of our 32 super triples and 47 super singles have been active in the winter drilling season. We also have several tele-doubles operating, allowing us to reach a peak rig count of 87 rigs operating in Q1. For the full quarter, we expect average active rig counts to exceed the 74 average rigs from prior year Q1. Our operating margins in Canada are expected to range between $14,000 and $15,000 a day. In the U.S., we've sustained the momentum we've built over the last three quarters. For Q1, we expect our average active rate count to be in line with the 37 active rates from prior quarter, with encouraging customer conversations for additional deployments. For the first quarter, we expect our operating margins to remain firm, ranging between U.S. $8,000 and U.S. $9,000 a day. Internationally, we expect to run seven rigs. However, operating margins will be lower than prior year due to one Kuwait rig coming down, offset by one reactivated rig in Saudi Arabia. In Q1, we expect to incur US $2 million of one-time charges with this reactivation. Our C&P business continues to generate strong free cash flow, driven by our well-servicing and surface rental business lines. For Q1, we expect EBITDA to slightly exceed prior year levels. Moving to forward guidance for the full year of 2026, capital expenditures are budgeted to be $245 million, comprised of $182 million for sustaining and infrastructure and $63 million for upgrades. Note that our sustaining and infrastructure budget includes long lead components, a portion of which will be allocated to upgrade projects as they materialize, plus a bulk purchase for drill pipe, which will be utilized in late 2026 and into 2027. Depreciation is expected to be $305 million, and cash interest expense from debt is expected to be approximately $45 million. Our effective tax rate is expected to be approximately 25% to 30%, with cash taxes remaining low in 2026. For 2026, we expect SG&A to stay flat at approximately $95 million before share-based compensation expense. Share-based compensation guidance for the year is expected to range between $25 million and $45 million, assuming a share price range of $100 to $140. Please note that this is a preliminary estimate, and we will provide updated guidance on our Q1 call following the settlement of past grants and the issuance of new grants later this quarter. Our long-term target to achieve net debt to adjusted EBITDA of less than one times remains firmly in place, as is our plan to increase our free cash flow allocated directly to shareholders, up to 50%. We enter 2026 with a net debt to EBITDA ratio of 1.2 times, with an average cost of debt of 6.6%, and we have over $445 million in total liquidity. With that, I'll pass it over to Kerry.