CALGARY, Oct. 27 /CNW/ - Diluted earnings per share from continuing
operations were $0.02 in the third quarter of 2005 compared to $0.31 in 2004.
Diluted earnings per share from continuing operations was reduced by $0.50 in
2005 as a result of a number of one time items the first of which is the
$65.5 million premium on repayment of the Corporation's outstanding debentures
and the second of which is the $20.3 million market value adjustment to the
shares of Weatherford International Ltd. ("Weatherford") received on the sale
of the Energy Services and International Contract Drilling divisions.
Excluding one time items related to the Corporation's recent asset
disposal and reorganization activities, diluted earnings per share from
continuing operations in the third quarter of 2005 was $0.52 compared to $0.31
in 2004. This 68% increase reflects the strong market for oilfield services in
Canada and favorable weather conditions allowing activity levels to rise to
meet demand. Increased demand has resulted in improved pricing for all of the
Corporation's service offerings.
On August 31, the Corporation completed the sale of its Energy Services
and International Contract Drilling divisions to Weatherford for a purchase
price consisting of 26,000,000 common shares of Weatherford and $1,130,000,000
cash consideration and recognized an associated gain of $1.262 billion. On
September 13, Precision closed the sale of CEDA International Corporation,
which carried on the Industrial Services business, for cash proceeds of
$274,000,000, recognizing a gain of $123 million.
In September, the Corporation announced its intention to reorganize its
remaining operations and holdings into an income trust and on October 4 the
associated Notice of Special Meeting of Securityholders and Information
Circular was mailed to securityholders. The special meeting to consider the
conversion is scheduled to take place on October 31, 2005 with the actual
conversion taking place on or about November 7, 2005. Pursuant to the
reorganization, shareholders will be entitled to receive in exchange for each
common share held (i) one unit of the Trust; (ii) their pro-rata share of the
26 million common shares of Weatherford owned by Precision; and (iii) their
pro-rata share of up to $850 million of cash. The Weatherford shares will not
be subject to any resale restrictions, however, Precision will not be able to
complete the reorganization or transfer the Weatherford shares until a
registration statement filed by Weatherford is declared effective by the U.S.
Securities and Exchange Commission. Based on current business conditions, it
is anticipated that the Board of Trustees of the Trust will set the initial
regular distributions to the Trust's unitholders at approximately $0.24 per
Trust Unit per month with the first such payment expected to be made in the
month following the effective date of the reorganization.
Also in September, Precision provided irrevocable redemption notices for
the repayment of all of its outstanding debentures and on October 17, 2005
paid approximately $767 million to fulfill this obligation.
Results of Operations
<<
Three Months Ended September 30
2005 2004 % Change
-------------------------------------------------------------------------
Number of drilling rigs (end
of period) 229 226 1.3
Drilling operating days 12,539 9,479 32.3
Drilling revenue per operating day 16,259 15,029 8.2
Number of service rigs (end
of period) 238 239 -
Service rig operating hours 122,620 112,636 8.9
Service revenue per operating hour 551 479 15.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nine Months Ended September 30
2005 2004 % Change
-------------------------------------------------------------------------
Number of drilling rigs (end
of period) 229 226 1.3
Drilling operating days 32,587 29,526 10.4
Drilling revenue per operating day 17,300 16,031 7.9
Number of service rigs (end
of period) 238 239 -
Service rig operating hours 335,108 344,315 (2.7)
Service revenue per operating hour 567 498 13.9
-------------------------------------------------------------------------
Hank Swartout, Precision's Chairman, President and Chief Executive
Officer, noted that "Precision's continuing operations have not been impacted
by the sale and trust conversion processes. Ultimately, Precision is a service
company and continues to focus on what has made it successful, building and
maintaining long-term customer relationships. We will continue to work closely
with our customers this winter to ensure a safe, efficient, and mutually
successful drilling season."
Rig demand remains extremely strong and the wet weather conditions
throughout the second quarter further enhanced the situation in the third
quarter as ground conditions dried in July. The impact of this pent up demand
resulted in an outstanding quarter for revenues and earnings as the backlog of
wells to be drilled created a combination of positive factors. First, winter
pricing held up through the spring and into the summer and second, whenever
equipment became available there were customers that were prepared to put it
to work immediately. This contributed to the 81% increase in operating
earnings in the third quarter of 2005 relative to 2004.
Overall, the oil and gas service industry will benefit from the pricing
leverage established from third quarter activity. Accordingly, increased
pricing for the winter season will take effect in the fourth quarter.
All operating divisions reported significant revenue increases year over
year. Well Servicing's 25% increase was somewhat lower than Contract
Drilling's 43% increase due to the natural time lag between drilling and
completing wells.
Operating costs were lower as a percentage of revenue despite crew wage
increases that were implemented in the fourth quarter of 2004. Operating
expenses declined from 58% of revenue in the third quarter of 2004 to 53% in
2005. Equipment repair and maintenance expenditures were lower on a per day
basis as scheduled expenditures were spread over a higher activity level
relative to last year. In addition, operating expenses have not increased as
much as customer pricing.
General and administrative costs for the third quarter were slightly
higher than the same period in 2004. As a percentage of revenue, general and
administrative costs fell to 5.5% from 6.4 %. General and administrative costs
should further decline as the corporate function continues to be sized to meet
the needs of Precision's smaller business organization.
Depreciation expense remained relatively consistent as the impact of
increased activity was offset by the change in the estimated useful life of
drilling rigs from 4,150 to 5,000 utilization days effective January 1, 2005.
Certain statements contained in this press release, including statements
related to our proposed reorganization and the Weatherford shares, and
statements that may contain words such as "anticipate", "could", "should",
"expect", "believe", "will" and similar expressions are not historical facts
and are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Such forward-looking statements involve known and unknown risks and
uncertainties which may cause the actual results, performance or achievements
of Precision to be materially different from any future results, performances
or achievements expressed or implied by such forward-looking statements. Such
factors include fluctuations in the market for oil- and gas- and related
products and services; competition; political and economic conditions in
countries in which Precision does business; the demand for services provided
by Precision; changes in laws and regulations, including environmental
regulations, to which Precision is subject and other factors, which are
described in further detail in Precision's filings with the US Securities and
Exchange Commission.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Three Months Ended Nine Months Ended
CDN $000's, except September 30, September 30,
per share amounts
(unaudited) 2005 2004 2005 2004
-------------------------------------------------------------------------
Revenue $ 300,016 $ 218,023 $ 841,318 $ 714,510
Expenses:
Operating 158,581 127,109 449,694 406,242
General and
administrative 16,486 13,942 56,495 44,951
Depreciation and
amortization 18,923 17,488 52,096 53,209
Foreign exchange (5,930) (2,315) (6,448) (7,326)
-----------------------------------------------------------------------
188,060 156,224 551,837 497,076
-------------------------------------------------------------------------
Operating earnings 111,956 61,799 289,481 217,434
Interest
Long-term 11,971 13,107 36,238 31,414
Other 39 10 207 38
Income (4,784) (165) (6,878) (299)
Premium on redemption
of bonds 65,483 - 65,483 -
Unrealized loss in
market value on short-
term investments 20,262 - 20,262 -
Gain on disposal of
investments - (2,532) - (2,574)
-------------------------------------------------------------------------
Earnings from continuing
operations before
income taxes 18,985 51,379 174,169 188,855
Income taxes:
Current 171,612 10,978 216,299 44,992
Future (155,009) 3,406 (142,101) 16,314
-----------------------------------------------------------------------
16,603 14,384 74,198 61,306
-------------------------------------------------------------------------
Earnings from
continuing operations 2,382 36,995 99,971 127,549
Discontinued operations,
net of tax 1,380,266 5,712 1,447,046 31,672
-------------------------------------------------------------------------
Net earnings 1,382,648 42,707 1,547,017 159,221
Retained earnings,
beginning of period 1,206,052 910,793 1,041,683 794,279
Adjustment on cash
purchase of employee
stock options, net
of tax - $9,823 (18,741) - (18,741) -
-------------------------------------------------------------------------
Retained earnings,
end of period $ 2,569,959 $ 953,500 $ 2,569,959 $ 953,500
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share
from continuing
operations:
Basic $ 0.02 $ 0.31 $ 0.81 $ 1.12
Diluted $ 0.02 $ 0.31 $ 0.80 $ 1.11
-------------------------------------------------------------------------
Earnings per share:
Basic $ 11.22 $ 0.36 $ 12.60 $ 1.40
Diluted $ 11.00 $ 0.36 $ 12.36 $ 1.38
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Common shares
outstanding (000's) 123,883 121,346 123,883 121,346
Weighted average shares
outstanding (000's) 123,285 118,308 122,778 113,688
Diluted shares
outstanding (000's) 125,686 119,816 125,145 115,156
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
CDN $000's 2005 2004
-------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,585,247 $ 122,012
Marketable securities, at lower of cost or
market (market value - $2,072,749) 2,072,749 -
Accounts receivable 356,335 309,292
Inventory 6,603 7,734
Other assets 7,742 -
Assets of discontinued operations - 497,036
------------------------------------------- ---------------------------
4,028,676 936,074
Property, plant and equipment, net of
accumulated depreciation 925,112 897,584
Intangibles, net of accumulated amortization 487 498
Goodwill 266,827 266,827
Other assets - 9,116
Assets of discontinued operations - 1,741,950
-------------------------------------------------------------------------
$ 5,221,102 $ 3,852,049
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 153,240 $ 120,432
Income taxes payable 161,705 13,624
Current portion of long-term debt 765,133 -
Liabilities of discontinued operations - 244,707
-----------------------------------------------------------------------
1,080,078 378,763
Long-term debt - 718,850
Future income tax liability 212,167 354,268
Liabilities of discontinued operations - 78,427
Shareholders' equity:
Share capital 1,323,709 1,274,967
Contributed surplus 35,189 26,024
Cumulative translation adjustment - (20,933)
Retained earnings 2,569,959 1,041,683
-----------------------------------------------------------------------
3,928,857 2,321,741
-------------------------------------------------------------------------
$ 5,221,102 $ 3,852,049
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Common shares outstanding (000's) 123,883 121,580
Common share purchase options outstanding (000's) 3,921 6,696
CONSOLIDATED STATEMENTS OF CASH FLOW
CDN $000's, except Three Months Ended Nine Months Ended
per share amounts September 30, September 30,
(unaudited) 2005 2004 2005 2004
-------------------------------------------------------------------------
Cash provided by (used in):
Continuing operations:
Earnings from
continuing
operations $ 2,382 $ 36,995 $ 99,971 $ 127,549
Items not affecting
cash:
Stock-based
compensation 1,812 2,619 7,276 5,562
Depreciation and
amortization 18,923 17,488 52,096 53,209
Gain on disposal of
investments - (2,532) - (2,574)
Premium on
redemption
of bonds 65,483 - 65,483 -
Unrealized loss in
market value on
short-term
investments 20,262 - 20,262 -
Future income taxes (155,009) 3,406 (142,101) 16,314
Amortization of
deferred financing
costs 457 465 1,374 1,145
Unrealized foreign
exchange gain on
long-term monetary
items (9,057) (1,964) (9,060) (4,184)
-------------------------------------------------------------------------
Funds provided by
(used in) continuing
operations (54,747) 56,477 95,301 197,021
Changes in non-cash
working capital
balances 106,929 (34,941) 166,365 59,881
-------------------------------------------------------------------------
52,182 21,536 261,666 256,902
-------------------------------------------------------------------------
Discontinued operations:
Funds provided by
discontinued
operations 53,330 48,516 195,877 123,317
Changes in non-cash
working capital
balances of
discontinued
operations (21,286) (30,958) (69,550) (71,202)
-------------------------------------------------------------------------
32,044 17,558 126,327 52,115
Investments:
Business acquisitions,
net of cash acquired (30,421) (1,160) (30,421) (660,002)
Purchase of property,
plant and equipment (77,155) (83,629) (238,605) (192,610)
Purchase of intangibles - (314) (20) (314)
Proceeds on sale of
property, plant and
equipment 8,941 13,371 26,062 24,617
Proceeds on disposal
of investments - 5,829 - 5,877
Proceeds on disposal
of discontinued
operations 1,306,280 8,553 1,306,280 49,299
Investments - 1,340 - -
-----------------------------------------------------------------------
1,207,645 (56,010) 1,063,296 (773,133)
-------------------------------------------------------------------------
Financing:
Increase in long-
term debt - - - 522,136
Repayment of long-
term debt (3) (161,994) (12) (173,257)
Deferred financing
costs on long-term
debt - (627) - (5,612)
Issuance of common
shares on exercise
of options 15,405 13,584 40,522 50,355
Issuance of common
shares, net of costs - 276,455 - 276,455
Purchase of employee
stock options (28,564) - (28,564) -
Change in bank
indebtedness - (71,795) - (147,909)
-----------------------------------------------------------------------
(13,162) 55,623 11,946 522,168
-------------------------------------------------------------------------
Increase in cash
and cash equivalents 1,278,709 38,707 1,463,235 58,052
Cash and cash
equivalents, beginning
of period 306,538 40,715 122,012 21,370
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $ 1,585,247 $ 79,422 $ 1,585,247 $ 79,422
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CANADIAN DRILLING OPERATING STATISTICS
Nine Months Ended September 30,
2005 2004
------------------------------------------------------------
Market Market
Precision Industry(x) Share % Precision Industry(x) Share %
------------------------------------------------------------
Number of
drilling rigs 229 738 31.0 226 686 32.9
Number of
operating days
(spud to
release) 32,587 109,477 29.8 29,526 92,896 31.8
Wells drilled 5,783 17,288 33.5 5,644 15,981 35.3
Average days
per well 5.6 6.3 5.2 5.8
Metres drilled
(000's) 6,414 19,655 32.6 5,905 16,901 34.9
Average
metres/day 197 180 200 182
Average
metres/well 1,109 1,137 1,046 1,058
Rig utilization
rate (%) 52.1 55.6 47.8 49.8
(x) Excludes non-CAODC rigs.
A conference call to review the third quarter 2005 results has been
scheduled for 12:00 noon MST on Thursday, October 27, 2005. The conference
call dial-in number is 1-800-814-4861.
A live webcast will be accessible at www.precisiondrilling.com by
selecting Investor Relations.
>>
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Precision Drilling Corporation announces 68% increase in operating results, excluding one-time items
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