Precision Drilling (PDS) Q2 2024 earnings summary

Executive summary

• Q2 financial results exceeded expectations for revenue, adjusted EBITDA, and cash flow, driven by a high-value business model, geographic diversification, and focus on cash flow and return on capital.

• Revenue reached $429 million, up slightly from $426 million in Q2 2023, driven by higher Canadian and international activity and pricing, offsetting lower U.S. results.

• Eighth consecutive quarter of positive net earnings, with strong performance in international and Canadian segments offsetting a softer U.S. market.

• Strategic priorities for 2024 include maximizing free cash flow, reducing debt, increasing shareholder returns, and operational excellence.

• The company is the market leader in Canada and a top-four onshore driller in the U.S., with growing international operations, especially in Kuwait and Saudi Arabia.

Financial highlights

• Adjusted EBITDA was $115 million, down from $142 million in Q2 2023, mainly due to lower U.S. activity and increased share-based compensation.

• Net earnings reached $21 million, or $1.44 per share.

• Funds provided by operations and cash provided by operations were CAD 112 million and CAD 174 million, respectively.

• U.S. and Canadian day rates have increased 45% and 83% respectively over the last 10 quarters, driving revenue and EBITDA growth.

• Debt reduced by $103M as of June 30, 2024; targeting $150–$200M reduction in 2024 and $600M from 2022–2026.

Outlook and guidance

• Canadian and international revenue growth expected to continue through 2025, supported by the Trans Mountain pipeline and LNG Canada start-up.

• Net debt to adjusted EBITDA ratio expected to be 1.25x by year-end, with a target of below 1x in 2025.

• Well service activity in Canada expected to grow ~40% over 2023, with adjusted EBITDA on track to increase 40–50% year-over-year.

• Q3 daily operating margins in Canada expected between CAD 13,500–14,000; U.S. margins to remain above $10,000 per day.

• 2024 capital allocation targets: $150–$200 million debt repayment and 25–35% of free cash flow to share buybacks.