Precision Drilling Corporation

Good day, and thank you for standing by. Welcome to the Precision Drilling Corporation 2026 First Quarter Results Conference call-in webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session, where we will take questions from research analysts. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today. LaVon Judonic, Vice President, Investor Relations. Please go ahead.

Welcome, and thank you everyone for joining Precision Drilling's first quarter conference column webcast. Today, I'm joined by Kerry Ford, our President and CEO, and Dustin Honing, our 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, MD&A and financial statements, which are now available on CDAR and EDGAR. Before I pass the call over, I would like to highlight a couple points from our news release. First, utilization improved meaningful in the quarter compared to Q1 of 2025. It increased 7% in Canada and 24% in the U.S. even as industry rate counts declined 7% in both markets. This performance underscores the value customers continue to see in our high-performance, high-value strategy. Second, we delivered strong progress on our 2026 priorities, growing revenue year over year, generating $63 million in operating cash flow, and returning capital to shareholders through debt reduction and share repurchases. In the first quarter, Precision had 123 rigs operating globally and remained the second most active driller in North America. With that, I'll pass it over to Dustin.

Thank you, LaVon, and good morning, good afternoon for those calling from different locations. Before we cover our 2026 Q1 financial results and outlook, I'll briefly comment on our capital allocation strategy. As you're likely aware, Precision has a longstanding reputation for publishing clear and transparent strategic priorities. aligned with enhancing the competitive positioning of the business and driving enhanced shareholder returns. Over the last decade, Precision's free cash flow generating abilities have allowed us to outpace expected timelines for delivering on major strategic initiatives, positioning the business with rapidly increasing financial flexibility. We remain committed to our shareholder return targets while responsibly investing back into the business with a return space mandate. These investments are paying dividends as we anticipate record Q2 activity levels in Canada and a notably strengthened utilization and customer mix in the U.S. evolving. Maximizing strong free cash flow remains central to our strategy. Moving on to first quarter results, despite our recurring and expected heavy Q1 working capital build, Precision generated $63 million of cash from operations, Capital expenditures were $65 million, comprised of $35 million for sustaining and infrastructure, and $30 million for rig upgrades. These investments were made in step with our shareholder return commitments, reducing debt by $25 million and allocating $4 million towards share buybacks. We recorded adjusted EBITDA of $124 million, which equates to $143 million before share-based compensation expense, compared with prior year Q1 EBITDA of $137 million, $140 million before share-based compensation expense. Although operating results exceeded prior year, this was offset by a larger stock-based compensation accrual resulting from our share price appreciating 39% during the quarter. Net earnings were $18 million compared to $35 million in the first quarter of 2025. In Canada, drilling activity averaged 79 active rigs, an increase of five rigs from Q1 2025. Our reported Q1 daily operating margins were $14,282 compared to $14,780 in the first quarter of 2025, falling within our prior guidance range. During the first quarter, Precision's operating margins were slightly impacted by rig mix, with stronger demand requiring a higher proportion of super singles and doubles working through the winter. In the U.S., we averaged 37 active rigs, inline sequentially from Q4, and an increase of 7 rigs from prior year Q1. Our daily operating margins for the quarter were US$9,291 compared to US$8,754 sequentially from Q4, slightly exceeding our prior guidance range. Internationally, precision averaged 7 active rigs, down 8 rigs from prior year Q1. International day rates averaged U.S. $51,596, an increase of 4% from prior year, all due to rig move revenues. During the quarter, rig margins were unfavorably impacted by one Kuwait rig coming down, offset by one reactivated rig in Saudi Arabia. We incurred U.S. $2 million of one-time charges associated with this reactivation, and in addition, recognized added logistics costs tied to the Middle East conflict. In our C&P segment, adjusted EBITDA was $18 million, in line with prior year Q1. Increased wealth servicing demand in Canada more than offset the impacts of winding down our U.S. operations back in the second quarter of 2025. Moving on to forward guidance, I will begin with our expectations for the second quarter of 2026. Starting in Canada, as I previously alluded to, Our strong presence in Canada's unconventional natural gas and heavy oil markets is expected to generate record activity levels this quarter. Our ability to capitalize is largely due to growing demand, coupled with our prior year rig upgrades, expanding the pad drilling capabilities of our fleet, and allowing these assets to work through the traditional seasonal constraints of spring breakup. For the full quarter, we expect to average active rig counts to be approximately 60 rigs, a 20% increase from the 50 average rates working in prior year Q2. We expect the end of the quarter to be at the mid-70s, up a similar percentage from prior year. As a result of more super singles working, our operating margins in Canada are expected to range between 12,000 and 13,000 per day, slightly lower than normalized prior year Q2, all due to RIGVIC. Keep in mind that prior year quarter operating margins were materially impacted by one-time customer upfront payments for rig upgrades. Our expectation is that pricing levels will remain firm within our super single and super triple fleet. In the U.S., we expect to sustain the momentum we built in the last year. Early in Q2, we experienced increased contract churn with multiple rigs falling idle between jobs. This will correct over the next month or so, with our rig count increasing to 35 rigs by next week, exiting the quarter at our annual high within the high 30s. Beyond that level, we expect further precision rig count increases related to higher oil prices in our upgrade program. For the second quarter, we expect our operating margins to range between US $7,500 and US $8,500 a day. due to increased reactivation costs tied to rig deployments through Q2 and into Q3. Given increased market demand for drilling rigs and precision super triples, we are in the process of implementing price increases, which will flow through the back half of the year 26. Internationally, we expect to run seven rigs. However, operating margins will be lower than prior year due to one higher margin Kuwait rig coming down in Q1. offset by a recently reactivated lower margin rate in Saudi Arabia. For Q2, we expect to incur additional operating costs in response to ongoing tensions in the Middle East. Our C&P business continues to generate strong free cash flow driven by our wealth servicing and surface rental business lines. For Q2, we expect EBITDA to remain in line with prior year levels. Moving on to forward guidance for the full year. We've increased our capital expenditures budget to $265 million, up from prior guidance of $245 million, which is now comprised of $168 million for sustaining and infrastructure and $97 million for upgrades. This increase includes two Canadian Super Triple Rig upgrades underpinned by multi-year contract commitments, plus various oil-weighted upgrade opportunities in both Canada and the US. Of note, We anticipate Q2 capital expenditures to be disproportionately high this quarter due to timing of bulk deliveries and scheduled maintenance capital projects, leveling out to the back half of the year. Full year depreciation is expected to be $310 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. As previously communicated, share-based compensation guidance for the full year would range between $25 million and $45 million, assuming a share price of $100 to $140 and a one-times multiplier. Our long-term target to achieve a net debt to adjusted EBITDA of less than one times remains firmly in place. In 2026, we were planning to reduce debt levels by at least $100 million while allocating up to 50% of free cash flow to share repurchases. Today, we have an average cost of debt of 6.6% and over $433 million in total liquidity. With that, I'll pass it over to Kerry.