Mr. Kevin Neveu reports

PRECISION DRILLING ANNOUNCES 2024 FIRST QUARTER UNAUDITED FINANCIAL RESULTS

Precision Drilling Corp. has released its 2024 first quarter financial results and highlights.

Financial highlights:

• Revenue was $528-million compared with $559-million in the first quarter of 2023 with the decrease mainly attributable to lower U.S. activity.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $143-million and included share-based compensation charges of $23-million as the company's share price increased 27 per cent in the first quarter. By comparison, adjusted EBITDA in the first quarter of 2023 was $203-million and included a $12-million recovery as Precision's share price decreased 33 per cent in the first quarter of 2023.
• Net earnings were $37-million or $2.53/share compared with $96-million or $7.02/share in the first quarter of 2023.
• Completion and production services revenue and adjusted EBITDA were $87-million and $19-million, respectively, compared with $75-million and $17-million in the same quarter last year.
• Cash from operations was $66-million compared with $28-million in the comparative quarter.
• Share repurchases were $10-million compared with $5-million in the first quarter of 2023.
• Capital expenditures were $56-million compared with $51-million in the first quarter of 2023.
• Precision remains on track to reduce debt between $150-million and $200-million in 2024 and return between 25 per cent and 35 per cent of free cash flow to shareholders in 2024.

Operational highlights:

• Canada averaged 73 active drilling rigs, compared with 69 for the first quarter of 2023.
• Canadian revenue per utilization day was $35,596 compared with $32,304 in the same period last year.
• U.S. averaged 38 active drilling rigs compared with 60 for the first quarter of 2023.
• U.S. revenue per utilization day was $32,867 (U.S.) compared with $34,963 (U.S.) in the same quarter last year.
• International averaged eight active drilling rigs, with revenue per utilization day of $52,808 (U.S.) compared with $51,753 (U.S.) in the first quarter of 2023.
• Service rig operating hours totalled 74,505, a 28-per-cent increase as compared with the same quarter last year driven by the CWC Energy Services acquisition in late 2023.

Management commentary

"Precision had an impressive start to 2024 and we expect to build on this momentum throughout the year. Our Canadian drilling operations, international business, and completion and production services all outperformed during the first quarter and we more than doubled our cash from operations compared to the same period last year. We continued to focus on shareholder returns and repurchased $10-million of common shares in the first quarter. We remain firmly committed to repaying debt between $150-million and $200-million in 2024 and allocating 25 per cent to 35 per cent of our free cash flow to share buybacks.

"Our Canadian drilling business exceeded expectations in the first quarter as our Super Series rigs, Alpha technologies, EverGreen products and dedicated crews continued to deliver high-performance, high-value services to our customers. Precision had 73 rigs active in the first quarter, representing a 6-per-cent increase over the same period last year while industry activity was 6 per cent lower. With strong demand for our Super Series rigs and Alpha and EverGreen products that provide improved performance and efficiencies, we grew average day rates to $35,596. As the Trans Mountain pipeline expansion begins operating, followed by start-up activities of LNG Canada, we expect customer demand for our Super Series rigs to remain robust and support strong utilization well into 2025.

"In the U.S., even with industry activity down nearly 20 per cent in the first quarter compared to the same period last year, we remain focused on returns. Our day rates averaged $32,867 (U.S.) and we generated daily operating margins of $11,148. While U.S. drilling activity continues to be influenced by weak natural gas prices and merger and acquisition activity, we believe the long-term fundamentals are positive due to growing global oil demand, decreasing inventory of drilled but uncompleted wells, and the next wave of Gulf Coast LNG facilities projected to start up in late 2024 and 2025.

"Internationally, following rig reactivations in 2023, we have eight active rigs, which generated revenue of $38-million (U.S.) in the first quarter compared to $22-million (U.S.) one year ago. These eight rigs are active in Kuwait and Saudi Arabia under five-year contracts, which provide stable and predictable cash flow that stretches into 2028.

"With the successful acquisition of CWC in late 2023, Precision solidified its position as Canada's leading provider of high-quality and reliable well services. In the first quarter, we increased our well service hours 28 per cent and grew adjusted EBITDA to $19-million. The outlook for this business remains positive as the Trans Mountain pipeline expansion is expected to drive more oil-service-related activity, while increased regulatory spending requirements is expected to result in more abandonment work.

"As shown by our first quarter results and positive outlook, we expect sustained free cash flow to be a feature of the business and will continue to assess the best route to enhance shareholder returns. We currently believe this will be a function of achieving a sustained net debt to adjusted EBITDA ratio of less than one times, while increasing direct capital returns to shareholders towards 50 per cent. I would like to thank the Precision team for their hard work and dedication to our high-performance, high-value strategy and look forward to a great year ahead and generating value for our shareholders," stated Kevin Neveu, Precision's president and chief executive officer.

Summary for the three months ended March 31, 2024:

• Revenue decreased to $528-million compared with $559-million in the first quarter of 2023 as a result of lower U.S. activity and day rates, partially offset by higher Canadian and international activity and day rates.
• Adjusted EBITDA was $143-million as compared with $203-million in 2023. Precision's lower 2024 adjusted EBITDA was primarily the result of lower U.S. activity and day rates and increased share-based compensation charges, partially offset by increased Canadian and international activity and day rates. Share-based compensation was $23-million as compared with a recovery of $12-million in 2023. Please refer to "other items" later in this news release for additional information on share-based compensation.
• Adjusted EBITDA as a percentage of revenue was 27 per cent as compared with 36 per cent in 2023.
• U.S. revenue per utilization day was $32,867 (U.S.) compared with $34,963 (U.S.) in 2023. The decrease was primarily the result of lower fleet average day rates and lower turnkey revenue, offset by higher recoverable costs. The company did not recognize revenue from idle but contracted rigs and turnkey projects as compared with $1-million (U.S.) and $7-million (U.S.), respectively, in 2023. Revenue per utilization day, excluding the impact of idle but contracted rigs and turnkey activity, was $32,867 (U.S.), compared with $33,721 (U.S.) in 2023, a decrease of $854 (U.S.) or 3 per cent. Revenue per utilization day, excluding idle but contracted rigs, was consistent with the fourth quarter of 2023.
• U.S. operating costs per utilization day increased to $21,719 (U.S.) compared with $20,271 (U.S.)in 2023. The increase is mainly due to higher recoverable costs, fixed costs spread over lower activity, and higher repairs and maintenance, partially offset by lower turnkey costs. U.S. operating costs per utilization day, excluding turnkey, was $21,719 (U.S.) compared with $19,421 (U.S.) in 2023. Sequentially, excluding the impact of turnkey activity, operating costs per utilization day increased $704 (U.S.).
• Canadian revenue per utilization day was $35,596 compared with $32,304 in 2023. The increase was a result of higher average day rates and recoverable costs. Sequentially, revenue per utilization day increased $980 due to higher recoverable costs and increased boiler revenue.
• Canadian operating costs per utilization day increased to $19,959, compared with $18,746 in 2023, due to higher field wages and recoverable costs. Sequentially, daily operating costs increased $769 due to higher labour-related costs, including burden and larger crew formations.
• Precision realized $38-million (U.S.)of international contract drilling revenue compared with $22-million (U.S.) in 2023.
• General and administrative expenses were $45-million as compared with $16-million in 2023. The increase was primarily due to higher share-based compensation charges.
• Net finance charges were $18-million, a decrease of $5-million compared with 2023, and was the result of lower outstanding long-term debt.
• Capital expenditures were $56-million compared with $51-million in 2023. Capital spending by spend category included $14-million for expansion and upgrades and $41-million for the maintenance of existing assets, infrastructure and intangible assets.
• Income tax expense for the quarter was $13-million as compared with $18-million in 2023. During the first quarter, the company continued to not recognize deferred tax assets on certain international operating losses.
• Precision generated cash from operations of $66-million, repurchased $10-million of its shares, and ended the quarter with $31-million of cash and more than $600-million of available liquidity.

Outlook

The outlook for North America energy is positive as global demand continues to rise, while geopolitical issues continue to threaten supply. In Canada, the imminent start-up of the Trans Mountain pipeline expansion, followed by LNG Canada, will provide significant tidewater access for both Canadian crude and natural gas, supporting additional Canadian drilling activity. In the United States, the next wave of LNG projects is expected to add approximately 12 billion cubic feet/day of export capacity over the next three years, supporting additional U.S. natural gas drilling activity.

In Canada, Precision currently has 48 rigs operating, 10 more rigs than a year ago, and expects this trend to continue throughout spring breakup due to increasing year-round pad drilling in the Montney and heavy oil programs. The company's Canadian fleet is in high demand and it expects customer demand for its Super Triple and Super Single pad capable fleets to exceed supply into 2025 with increased takeaway capacity.

In the U.S., Precision currently has 39 rigs operating as drilling activity continues to be influenced by weak natural gas prices and pending merger and acquisition transactions. The company views these headwinds as short term in nature and believes rig count could improve in the later part of 2024 with continued strong oil prices.

Internationally, Precision expects to have eight rigs running throughout all of 2024. This represents a 40-per-cent increase in activity compared with 2023, which should drive a 50-per-cent increase in the company's international earnings. Precision continues to bid its remaining idle rigs within the region and remains optimistic about its ability to secure additional rig activations.

As the premier well service provider in Canada, with size and scale, the outlook for this business is positive. Precision expects customer demand to increase with the start-up of the Trans Mountain pipeline expansion and increased regulatory spending requirements for well abandonments, supporting healthy activity and strong pricing into the foreseeable future.

Precision believes cost inflation is largely behind it and will continue to look for opportunities to lower costs.

Contracts

The attached chart outlines the average number of drilling rigs under term contract by quarter as at April 24, 2024. For those quarters ending after March 31, 2024, this chart represents the minimum number of term contracts from which Precision will earn revenue. The company expects the actual number of contracted rigs to vary in future periods as it signs additional term contracts.

Segmented financial results

Precision's operations are reported in two segments: contract drilling services, which includes its drilling rig, oil field supply and manufacturing divisions; and completion and production services, which includes its service rig, rental and camp, and catering divisions.

Other items

Share-based incentive compensation plans

Precision has several cash and equity-settled share-based incentive plans for non-management directors, officers and other eligible employees. Its accounting policies for each share-based incentive plan can be found in the company's 2023 annual report.

Critical accounting judgements and estimates

Because of the nature of its business, Precision is required to make judgements and estimates in preparing its condensed consolidated interim financial statements that could materially affect the amounts recognized. The company's judgements and estimates are based on its past experiences and assumptions it believes are reasonable in the circumstances. The critical judgements and estimates used in preparing the condensed consolidated interim financial statements are described in the company's 2023 annual report.

Evaluation of controls and procedures

Based on their evaluation as at March 31, 2024, Precision's chief executive officer and chief financial officer concluded that the corporation's disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended), are effective to ensure that information required to be disclosed by the corporation in reports that are filed or submitted to Canadian and U.S. securities authorities is recorded, processed, summarized and reported within the time periods specified in Canadian and U.S. securities laws. In addition, as at March 31, 2024, there were no changes in the internal control over financial reporting (as defined in exchange act rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the corporation's internal control over financial reporting. Management will continue to periodically evaluate the corporation's disclosure controls and procedures and internal control over financial reporting and will make any modifications from time to time as deemed necessary.

Based on their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements, and even those controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Change in accounting policy

Precision adopted Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants -- Amendments to IAS 1, as issued in 2020 and 2022. These amendments apply retrospectively for annual reporting periods beginning on or after Jan. 1, 2024, and clarify requirements for determining whether a liability should be classified as current or non-current. Due to this change in accounting policy, there was a retrospective impact on the comparative statement of financial position pertaining to the corporation's deferred share unit (DSU) plan for non-management directors which are redeemable in cash or for an equal number of common shares upon the director's retirement. In the case of a director retiring, the director's respective DSU liability would become payable and the corporation would not have the right to defer settlement of the liability for at least 12 months. As such, the liability is impacted by the revised policy. The following changes were made to the statement of financial position:

• As of Jan. 1, 2023, accounts payable and accrued liabilities increased by $12-million and non-current share-based compensation liability decreased by $12-million.
• As of Dec. 31, 2023, accounts payable and accrued liabilities increased by $8-million and non-current share-based compensation liability decreased by $8-million.

The corporation's other liabilities were not impacted by the amendments. The change in accounting policy will also be reflected in the corporation's consolidated financial statements as at and for the year ending Dec. 31, 2024.

2024 first quarter results conference call and webcast

Precision Drilling has scheduled a conference call and webcast to begin promptly at 12 p.m. MT (2 p.m. ET) on Thursday, April 25, 2024.

To participate in the conference call please register on-line. Once registered, you will receive a dial-in number and a unique PIN, which will allow you to ask questions.

The call will also be webcast and can be accessed on-line. A replay of the webcast call will be available on Precision's website for 12 months.

About Precision Drilling Corp.

Precision is a leading provider of safe and environmentally responsible high-performance, high-value services to the energy industry, offering customers access to an extensive fleet of Super Series drilling rigs. Precision has commercialized an industry-leading digital technology portfolio known as Alpha that utilizes advanced automation software and analytics to generate efficient, predictable and repeatable results for energy customers. The company's drilling services are enhanced by its EverGreen suite of environmental solutions, which bolsters its commitment to reducing the environmental impact of its operations. Additionally, Precision offers well service rigs, camps and rental equipment, all backed by a comprehensive mix of technical support services and skilled, experienced personnel.

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