Q4 2021 Precision Drilling Corp Earnings Call

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Speaker 1: Good day ladies and gentlemen, thank you for standing by and welcome to the Precision Drilling Corporation 2021 fourth quarter and end of year results conference call and webcast. At this time, all participants are on a list of knowledge mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the start and the one key on your touch-tone telephone.

Good day, ladies and gentlemen, thank you for standing by and welcome to the position drilling Cooperations 121 fourth quarter and end of year results conference call and webcast. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the <unk>.

Session you will need to press the Star then the one key on your Touchtone telephone.

Speaker 1: please be advised that today's conference may be recorded. If you would call operator assistance, please press file then zero. I would now like to hand the conference over to your speaker host today. The carry for senior vice president and chief finance officer for position. Please go ahead.

Be advised that today's conference maybe recorded if you would call offer assistance. Please press broadens out I would now like to turn the conference over to your speaker host today.

Carey Ford Senior Vice President and Chief Financial Officer Proposition. Please go ahead Sir.

Thank you Olivia and good afternoon, everyone welcome to precision Drilling's fourth quarter and year end 2021 earnings conference call and webcast participating today on the call with me is Kevin nephew, President and Chief Executive Officer.

Speaker 2: Thank you, Olivia. And good afternoon, everyone. Welcome to Precision Drilling's fourth quarter and year-end 2021 earnings conference call webcast. Participating today on the call with me is Kevin Navieu, president and chief executive officer.

Speaker 2: Through our news release earlier today, Precision reported its fourth quarter near-end 2021 results. Please note that these financial figures are in Canadian dollars, unless otherwise indicated.

Through our news release earlier today precision reported its fourth quarter and year end 2021 results. Please note that these financial figures are in Canadian dollars unless otherwise indicated.

Speaker 2: Some of our comments today will refer to non-IFRS financial measures such as the Justice Viva DA and field level results. Our comments will also include forward-looking statements regarding precision's future results and prospects, which are subject to certain risks and uncertainties.

Some of our comments today will refer to non <unk> financial measures such as adjusted EBITDA and field level results. Our comments will also include forward looking statements regarding precision as future results and prospects which are subject.

Certain risks and uncertainties. Please see our news release and other regulatory filings for more information on financial measures forward looking statements and these risk factors.

Speaker 2: Please see our news release and other regulatory filings for more information on financial measures for looking statements and these risks back to you.

Speaker 2: Kevin will begin today's call by providing an overview of current market dynamics.

Kevin will begin today's call by providing an overview of current market dynamics.

Speaker 2: I will follow up the discussion of results and our financial position. Kevin will then provide an overview and outlook for our various...

I will follow with the discussion of results and our financial position. Kevin will then provide an overview of an outlet for our various businesses.

Speaker 2: With that, I'll turn it over to you Kevin. Thank you, Gary, and good afternoon.

With that I'll turn it over to you Kevin Thank.

Thank you Gary and good afternoon.

Speaker 2: While the global recovery remains uneven and with some lingering uncertainties, the fundamentals for precision may be the best I've witnessed in four decades.

While the global recovery remains uneven and some lingering some lingering uncertainties the fundamentals for precision maybe the best I've seen with this for decades.

Speaker 2: Global oil demand has almost fully recovered, but with sharply reduced activity and virtually zero exploration drilling over the last two years.

Oil demand is almost fully recovered, but the sharply reduced activity in virtually zero exploration drilling over the last two years.

Speaker 2: The resulting oil and gas prices are strong and the markets are firmly acknowledging the rapidly tightening oil and gas supply demand equation.

The resulting oil and gas prices are strong and the markets are firmly acknowledging the rapidly tightening oil and gas supply demand equation.

Speaker 2: The inventories of drilled, uncompleted wells, or ducts, as they are called, have dwindled.

The inventory of drilled uncompleted wells or <unk>, they are called have dwindled.

Speaker 2: Super spec rig supply is tighter than most people understand and customer demand will shortly absorb the remaining spare capacity.

Super spec rig supply is tight tighter than most people understand the customer demand will absorb the remaining spare capacity.

Speaker 2: Labour inflation is here and real, but service price inflation is also here and it is real. As I've said in prior calls, we are marching our day rates back into positive earnings territory and then driving rates further to achieve a reasonable return on our invested capital.

Labor inflation is here in real but service price inflation is also here in Israel.

As I've said in prior calls we are marching our day rates back to a positive earnings territory, and then driving rates further to achieve a reasonable return on our invested capital.

Speaker 3: Precision and Super Triple Rigs are the most efficient, safe and environmentally responsible rigs that the industry has ever operated.

Precision Super Triple rigs are the most efficient safe and environmentally responsible rigs that the industry has ever operated.

The technologies, we are deploying under our evergreen banner health.

Speaker 3: The technologies we are deploying under our Evergreen banner have the capability to measure, track, and eliminate GHG emissions at the drilling rig. And we can do this with cost-effective proven solutions.

The ability to measure track eliminate ghd emissions at the drilling rig and we can do this with cost effective proven solutions.

Speaker 3: The uneven nature of the economic recovery and the risk of further economic interruptions continue to cause some uncertainty. But this uncertainty is mitigated by the laser-like focus on financial discipline by the capital markets.

The uneven nature of the economic recovery and the risk of further economic disruptions continue to cause some.

But this uncertainty is mitigated by the laser like focus on financial discipline by the capital markets.

Speaker 3: Precisionist customers who are generating record levels of cash flow have responded to those investor expectations with highly disciplined capital allocation strategies.

<unk> customers were generating record levels of cash flow have responded to those investor expectations with highly disciplined capital allocation strategies.

Balance sheets are largely repaired and the producers are returning capital to shareholders dividends special dividends and share buybacks further submitting the capital discipline mantra.

Speaker 3: balance sheets are largely repaired, and the producers are returning capital to shareholders with dividends, special dividends, and share buybacks, further cementing the capital discipline mantra.

The boom like rapid recovery scenario, we've seen in prior cycles, where rig demand correlates with the commodity price and that Overshoots, it's simply not possible today.

Speaker 3: The boom-like rapid recovery scenario we've seen in prior cycles, where rigged demand correlates with the commodity price and then overshoots, is simply not possible today.

Speaker 3: Capital discipline is well entrenched throughout the industry and this is driving a longer, slower and extended recovery cycle with shareholder returns remaining prioritized.

Capital discipline, as well and trends towards industry throughout the industry and this is driving a longer slower and extended recovery cycle with shareholder returns are being prioritized.

Speaker 3: Combining the measured recovery with the industry's determined focus on emissions and corporate responsibility defines a healthy, strong future for precision and for our customers.

Combining the measured recovery with industry as determined focus on emissions and corporate responsibility defines a healthy strong future for precision for our customers.

Speaker 3: And with that, I'll now turn the call back to Terry Ford for our financial results.

With that I'll now turn the call back to carry forward for our financial results. Thank.

Speaker 2: Thank you, Kevin. In early January , we released our capital allocation framework through 2025, where we expect to pay down $400 million in debt over the next four years, eclipsing $1 billion in debt reduction since 2018.

Thank you Kevin in early January we released our capital allocation framework through 2025, where we expect to pay down $400 million in debt over the next four years eclipsing $1 billion in debt reduction since 2018, and reaching a net debt to EBITDA leverage level below one five times.

Speaker 2: and reaching a net debt to EBITDA leverage level of below 1.5 times.

Speaker 2: Importantly, we also announced a prioritization of return of capital directly to shareholders, allocating 10 to 20% of pre-cash flow before debt reduction toward this goal.

Importantly, we also announced a prioritization of return of capital directly to shareholders allocating 10% to 20% of free cash flow before debt reduction toward this goal.

Speaker 2: We recognize the substantial operating leverage inherent in precision drilling and the business's ability to grow market in a growing market to generate adequate cash flow to fund growth, reduce debt, and return capital to shareholders.

We recognize the substantial operating leverage inherent in precision drilling and the businesses ability to grow market.

Growing market to generate adequate cash flow to fund growth reduce debt and return capital to shareholders.

Moving on to our fourth quarter results are.

Speaker 2: Our fourth quarter of just Zibada, $64 million, increased 16% from the fourth quarter of 2020, supported by Higher North American Act.

Our fourth quarter adjusted EBITDA of $64 million increased 16% from the fourth quarter of 2020 supported by higher North American activity.

Also included in adjusted EBITDA during the quarter as share based compensation expense of $6 million inventory write downs of $3 million and nonrecurring labor impacts of $3 million absent.

Speaker 2: Also included in the Justice EBITDA during the quarter is share-based compensation expense of $6 million, inventory write-downs of $3 million, and non-recurring labor impacts of $3 million. As in these items, the Justice EBITDA would have been $76 million per the quarter.

Absent these items adjusted EBITDA would have been $76 million for the quarter.

Speaker 2: In the US, drilling activity for precision averaged 45 rigs in Q4, an increase of 4 rigs from Q3.

In the U S drilling activity for precision averaged 45 rigs in Q4, an increase of four rigs from Q3.

Speaker 2: daily operating margins in the quarter absent impacts of turnkey and I don't put contracted payment were 5,000

Daily operating margins in the quarter absent impacts of turnkey and idle, but contracted payments were 5000.

Speaker 2: $648 an increase of $410 from Q3.

$648, an increase of 410 U S dollars from Q3.

Speaker 2: The increase was impaired by $620 US dollars per day of charges related to non-recurring margin impact.

The increase was impaired.

$620 per day of charges related to nonrecurring margin impact.

Speaker 2: absent impacts of turnkey and labor, daily operating margins would have been $1,030 US dollars higher than Q3.

After the impact of turnkey and labor daily operating margins would have been $1030 higher than Q3.

For Q1, we expect margins absent of IPC and turnkey to increase approximately $500.

Speaker 2: For Q1, we expect margins absent of IBC and turnkey to increase approximately $500 per

Per day from Q4 levels.

In Canada drilling activity for precision averaged 52 rigs an increase of 24 rigs are 87% from Q4 2020 daily.

Speaker 2: In Canada, drilling activity for precision averaged 52 rigs, an increase of 24 rigs or 87% from Q4 2020. Daily operating margins in the quarter, asset queues and shortfall payments were $7,990, an increase of $1,095 from Q4 2020.

Daily operating margins in the quarter as accused in shortfall payments were $7990 an increase of $1095 from Q4 2020.

Q4 margins net of queues in shortfall payments increased $2701 sequentially from Q3 2021.

Speaker 2: Q4 margins, net of Qs, and shortfall payments increased $2,701 sequentially from Q3 2021.

Speaker 2: For Q1, we expect margins, absent of queues and shortfall payments, to increase between $1,500 and $2,000 per day compared to Q1 2021 and up approximately $500 per day sequentially.

For Q1, we expect margins absent of queues in shortfall payments to increase between <unk>.

<unk> hundred $2000 per day, compared to Q1, 2021 and up approximately $500 per day sequentially.

Speaker 2: Internationally, drilling activity for precision in the quarter averaged six rigs and average day rates were $52,069.00 US dollars, down approximately 6% from the prior year due to active rig conditions.

Internationally drilling activity for precision in the quarter averaged six rigs and average day rates were 52069 U S dollars down approximately 6% from the prior year due to active rig mix.

And our CMP segment adjusted EBITDA, this quarter was $6 $3 million up over 18% compared to the prior year quarter.

Speaker 2: In our CMP segment, adjusted EBITDA this quarter was $6.3 million, up over 18% compared to the prior year quarter. Adjusted EBITDA was positively impacted by a 21% increase in wealth servicing hours, reflecting higher industry activity in the quarter. Horticulture-, who effect results were, were, are, um, we have noticed that we are getting

EBITDA was positively impacted by a 21% increase in well servicing hours.

Reflecting higher industry activity in the quarter.

We expect results were further strengthened in Q1.

Speaker 2: due to increased industry activity and additional work supported by the Canadian government's $1.7 billion wealth side abandonment and rehabilitation program.

Due to increased industry activity and additional work supported by the Canadian government's $1 7 billion, well side abandonment and rehabilitation program.

Speaker 2: Of note is the team's success in capturing pricing increases to cover both increased wages and the removal of the CEWS program support in an effort to drive higher margins.

Of note is the team's success in capturing pricing increases to cover both increased wages and the removal of the Qs program support and an effort to drive higher margins.

Capital expenditures for the quarter were $28 million and $76 million for the year, our capital expenditures were in line with expectations and higher than 2020 as a result of increased 2021 activity and expectations for continued rig activations in 2022.

Speaker 2: Capital expenditures for the quarter were $28 million and $76 million for the year. For capital expenditures, we're in line with expectations.

Speaker 2: and higher than 2020 as a result of increased 2021 activity and expectations for continued rig activations in 2022.

Speaker 2: Our 2022 capital plan is $98 million. It's comprised of $56 million for sustaining infrastructure and $42 million for upgrading expansion, which relates to anticipated investments supporting alpha technologies and contracted customer upgrades.

Our 2022 capital plan is $98 million is comprised of $56 million for sustaining and infrastructure and $42 million for upgrade and expansion, which relates to anticipated investments putting out the technologies and contracted customer upgrades.

As of February nine we had an average of 39 contracts in hand for the first quarter and an average of 31 contracts for the full year 2022.

Speaker 2: As of February 9th, we had an average of 39 contracts in hand for the first quarter and an average of 31 contracts for the full year 2020.

Moving to the balance sheet, we continue to reduce both absolute net debt levels, primarily through free cash flow generation and succeeded in reducing debt by $115 million in 2021.

Speaker 2: Moving to the balance sheet, we continue to reduce both absolute and net debt levels primarily through free cash flow generation.

As of December 31, our long term debt position net of cash was approximately $1 1 billion and our total liquidity position was approximately $530 million.

Speaker 2: As of December 31st, our long-term debt position net of cash was approximately 1.1 billion dollars and our total liquidity position

Speaker 2: approximately $530 million, excluding letters of credit.

Leading letters of credit.

Speaker 2: Our net debt to trailing 12 month EBITDA ratio is approximately 5.5 times...

Our net debt to trailing 12 months EBITDA ratio was approximately five five times and.

Speaker 2: and average cost of debt is 6.4%. We remain in compliance with all our credit facility covenants in the fourth quarter with EBITDA to interest coverage ratio of 2.8 times.

And average cost of debt is six 4% we remain in compliance with all of our credit facility covenants in the fourth quarter with EBITDA to interest coverage ratio of 2.8.

<unk> eight times.

With continued debt reduction and.

Speaker 2: and activity expectations, we believe we will end 2022 with a substantially lower net debt to EBITDA ratio, moving precision much closer to our goal of below 1.5 times what...

And activity expectations. We believe we will end 2022 with a substantially lower net debt to EBITDA ratio with a precision much closer to our goal.

One five times leverage.

For 2022, we expect to continue generating free cash flow through operations and do not expect incremental benefit from working capital release.

Speaker 2: 2022, we expect to continue generating pre-cash flow through operations and do not expect incremental benefit from working capital release as activity is increasing in both US and Canada.

Activity is increasing in both U S and Canada.

Speaker 2: For 2022, we expect to generate strong free cash flow for the year.

For 2022, we expect to generate strong free cash flow for the year.

Speaker 2: with Q1 cash flow impacted by front-end loaded CapEx, working capital build, our semi-annual interest payment, and year-end payment.

With Q1 cash flow impacted by front end loaded capex.

Working capital build our semi annual interest payment and year end payments.

Speaker 2: Our year-end target for debt reduction in 2022 is at least $75 million.

Our year end target for debt reduction in 2022 is at least $75 million.

For 2022, we expect depreciation to be approximately $270 million, we expect SG&A to be 65 million to $70 million.

Speaker 2: For 2022, we expect depreciation to be approximately $270 million. We expect SG&A to be $65 million to $70 million before share-based compensation expense. We expect cash flows to be moresmanship across

For share based compensation expense.

We expect cash interest expense to be below $80 million for the year, and we expect cash taxes to remain low and our effective tax rate to be in the 5% range with that I will turn the call over to Kevin.

Speaker 2: below $80 million for the year, and we expect cash taxes to remain low and our effective tax rate to be in the...

Speaker 3: thati'll turn the call every cap. All right, Thank you, kry. So begning in U's land. We continue to experience strong demand for our super triple rigsas. str mentioned activity and rates have been tracking well, with Q4 activity up 10% for the third quarter and 52 rates rning today. Q1 activity is already trending up 12% sequentially and may rise further as our first quarter rig activity approaches the bit fiftys.

Great. Thank you Sherry so beginning of U S land, we continue to experience strong demand for our Super Triple rigs as Carey mentioned, our activity and rates have been tracking well with Q4 activity up 10% for the third quarter and with 52 rigs running today Q1 activity is already trending up 12% sequentially and May rise further as our first quarter rig activity approaches.

<unk> with current customer interest in bidding activity. It seems this trajectory may continue through the year.

Speaker 3: With current customer interest and bidding activity, it seems this directory may continue through the year.

Leading edge rates have for gross progressed to the mid twenties for active rigs are now moving into the same range for cold rigs.

Speaker 3: Leading edge rates have progressed to the mid-20s for active rigs and are now moving into the same range for cold rigs due to the rising, industry-wide rising activation costs. While super-stacked rigs are moving into the mid-20s for active rigs, the low-level high-level rigs are moving into the mid-20s for active rigs. The low-level high-level rigs are moving into the mid-20s for active rigs.

Due to the rising industrywide rising activation costs.

While super spec rigs are not fully sold out.

Industry supply is much much tighter than most people believe regional shortages have developed the customers are paying full trucking costs for basin to basin moves.

Speaker 3: Industry supply is much tighter than most people believe. Regional shortages have developed, and customers are paying full trucking costs for basin-to-basin moves. Between mid-December and mid-February, Precision's customers have fronted the cost for two basin-to-basin super triple rig moves.

In mid December and mid February precision as customers upfront with the cost for two based on the basin Super Triple rig moves.

Speaker 3: Regarding precisionist market discipline and pricing strategy, the key pricing signal we can send our customers is a refusal to accept lower than threshold day rates, and this means we walk away. I'll tell you that we are not pursuing market share. Our focus is on the economic return for each rig opportunity we pursue.

Regarding precision is market discipline in pricing strategy. The key pricing signal, we can send our customers is a refusal to accept lower than threshold day rates and this means we walk away I will tell you that we are not pursuing market share. Our focuses on the economic return for each rig opportunity we pursue.

Turning to our Canadian business. The winter drilling season is off to a strong start activity slightly lowered the peak levels, we anticipated, but this was largely due to some customer driven delays, we expect activity will remain firm with seasonal slowdown driven by weather not by budget exhaustion.

Speaker 3: Turning to our Canadian business, the winter drilling season is off to a strong start. Activity is slightly lower than the peak levels we anticipated, but this is largely due to some customer-driven delays. We expect activity will remain firm with seasonal slowdown driven by weather, not by budget exhaustion.

Speaker 3: Currently we're running 66 rigs. Four additional rigs are delayed for customer supply chain and location preparation issues. This work should be completed later in the quarter.

Currently we are running 66 rigs four additional rigs are delayed for customer supply chain and location preparation issues.

Should be completed later in the quarter.

Customer indications for second quarter to look very strong the spring spring breakup rig demand.

Running 25% to 30% higher than last year and early indications are that Q3 activity me again exceed winter activity levels all.

All of this bodes very well for our Canadian business.

Speaker 3: As current mission, we've demonstrated excellent rate direction in Canada during 2021, and we expect that trend to continue in 2022.

I was curious mission, we've demonstrated excellent retraction in Canada. During 2021, we expect that trend to continue in 2022.

On to our customers don't want to hear this but it is essential that the Canadian services industry recovers to sustainable financial returns.

Speaker 3: I know our customers don't like to hear this, but it is essential that the Canadian services industry recovers to sustainable financial returns.

Canadian producer Economics are very strong indeed, with Western Canada select currently trading at a highest level since April 2014, and the Canadian dollar exchange rate and the 79 U S range cash flows for our Canadian customers are all time highs.

Speaker 3: Canadian producer economics are very strong indeed. With Western Canada select currently trading at its highest levels since April 2014 and the Canadian dollar exchange rate in the $0.79 US range, the cash flows for our Canadian customers are at all-time highs. This brings me to discuss a specific play in Canada. While we have often talked about the Montney, today I want to talk about the Martin Hills Clearwater Play.

And this brings me to discuss a specific play in cancer and while we have often talked about the montney today I want to talk about the Marten Hills Clearwater play.

Speaker 3: This is a relatively new heavy oil play which has grown to 21 industry rigs active today from just a handful of rigs in 2019.

This is a relatively new heavy oil play, which has grown to 21 industry rigs active today from just a handful of rigs through 2019.

Speaker 3: With horizontal wells and measured depths in the 2800 meter range, the drilling programs are ideally suited to Precision's high performance super single pad style rig.

With horizontal wells and measured depths in the 2800 meter range. The drilling programs are ideally suited to precision high performance Super single pad style rig.

Speaker 3: Precision currently is operating 11 super single rigs in the Clearwater region, holding a 55% market share. This has grown from just three rigs in 2019 before the pandemic.

Precision currently is operating 11 Super single rigs into Clearwater region, holding at 55% of market share, but this has grown from just three rigs in 2019 before the pandemic.

Speaker 3: We think the Clearwater, like the Montney, has good long-term fundamentals with strong commodity price support, very good geology, and pad-style horizontal drilling where high-efficiency drilling rigs de-risk the F&D costs.

We think the Clearwater like the Montney is a good long term has good long term fundamentals with strong commodity price support very good geology, and pad style horizontal drilling where high efficiency drilling rigs derisked the F&D costs.

Speaker 3: The Clearwater will continue to be a strong demand driver for precision super single brakes.

Clearwater will continue to be a strong demand driver for precision Super single rigs.

Speaker 3: Now for some, it might be easy to discount or reject the Canadian market. Yet with Precision's blanketed Canadian footprint, our super single and super triple rigs combined with our scale efficiency and our high performance, high value strategy, Canada remains a strong and key geography for Precision's cash flow generating capabilities.

Now for some it might be easy to discount to reject the Canadian market, yet with precision is blanketed Canadian footprint, our super single and Super Triple rigs combined with our scale efficiency and our high performance high value strategy, Canada remains a very strong in key geography for precision as cash flow generating capabilities.

Speaker 3: To round out our Canadian business, Kerry mentioned our well-serviced group is experiencing very strong customer demand and delivering substantially improved revenue and operating margins.

To round out our Canadian business as Kerry mentioned, our well service group is experiencing very strong customer demand and delivering substantially improved revenue and operating margins.

Speaker 3: Customer demand looks to remain strong following several years of low activity and pent-up operator demand for both conventional, well servicing and well abandonment.

Customer demand looks to remain strong following several years of low activity and pent up operator demand for both conventional well servicing and <unk> and.

Speaker 3: and this demand has been further enhanced by the federally funded Wellsite Reclamation Program.

This demand has been further enhanced by the federally funded well site recognition program.

Speaker 3: Labor challenges are constraining the well-serviced industry, yet our team has performed very well, fully staffing the 50 rigs we have running today. We expect to have further crew capacity activated for what is looking like a strong second half of 2022.

Labour challenges are constraining, the well service industry, yet our team has performed very well fully stuff into 50 rigs. We are running today and we expect to have further crew capacity activated for what is looking like a strong second half of 2022.

The team has worked very hard to justify the value precision provides our customers and succeeded in pushing rates in the right direction.

Speaker 3: The team has worked very hard to justify the value precision provides our customers and has succeeded in pushing rates in the right direction. And again, the service industry hourly rates have improved the lows of 2020. The industry still needs substantially higher prices to be financially sustainable. I know our team is well focused on this challenge and we expect to see continued margins of improvement through 2022.

Again the.

The service industry hourly rates have improved the lows of 2020, the industry is still need substantially higher prices to be financially sustainable on your team as well focused on this challenge and we expect to continue to see continued margin improvement through 2022.

Turning to our international business, we continue to operate.

Speaker 3: Turning to our international business, we continue to operate...

Speaker 3: three rigs in Kuwait and three rigs in Saudi Arabia. We're working with our clients in both markets on upcoming tender specifications, and we're bidding for opportunities with other operators in the region that have nothing new to report today. My expectation remains that as OPEX production limits are fully removed in the coming months, these potential reactivations will materialize. Turning to our...

Three rigs in Kuwait, and three rigs in Saudi Arabia.

Working with our clients in both markets and upcoming tender specifications and we're bidding for opportunities with other operators in the region, but have nothing new to report today.

Our expectation remains that as Opex production limits are fully removed to the coming months these potential rig activations will materialize.

Turning to our digital strategy.

For pad based.

Speaker 3: development-style drilling, the game has changed and the bar has been reset. The days of pushing our crews and equipment faster and harder has run its course.

Development style drilling the game has changed and the bar has been reset the days of pushing our crews and equipment faster and harder has run its course.

Speaker 3: Today our most cost efficient customers have adopted our alpha digital automation and digital analytics to optimize and ensure maximum rig efficiency process and cross control.

Today, our most cost efficient customers have adopted our alpha digital automation or digital analytics to optimize and ensure maximum rig efficiency process and cost control.

Speaker 3: Customer acceptance and demand for our alpha digital products continues to grow. As we reported in our press release, we are expanding our alpha automation footprint across our fleet and expect to have fleet coverage up to 70% by the end of this year. We also continue to add to our...

Customer acceptance and demand for Alpha digital products continues to grow as we reported in our press release, we are expanding our alpha automation footprint across our fleet and expect to have fleet coverage up to 70% by the end of this year.

We also continue to add to our library of Alpha apps. Thank.

Speaker 3: and continue to demonstrate the value to our customers. I expect this growth trajectory to continue and further drive our competitive advantage.

Thank you Tito demonstrate the value to our customers.

This growth trajectory to continue and further drive our competitive advantage.

Speaker 3: Turning to ESG, I'm very excited about the progress we've made in a very short time with our evergreen suite of environmental solutions. As I mentioned earlier today, our customers are increasingly focused on rig emissions and sustainability.

Turning to ESG.

Very excited about the progress we've made in a very short time with our evergreen suite of environmental solutions as I mentioned earlier today, our customers are increasingly focused on rig emissions and sustainability.

Speaker 3: Precision's evergreen technologies encompass several lower CO2 emission combustion power alternatives, hybrid battery power systems, grid power systems, and combustion fuel real-time monitoring systems, offering our customers a range of solutions to monitor and reduce emissions right down to zero.

Decisions Evergreen technologies encompassed several lower cotwo emissions combustion power alternatives hybrid battery power systems grid power systems, and combustion fuel real time monitoring systems offering our customers a range of solutions to monitor and reduce emissions right down to zero.

Speaker 3: Customer acceptance and uptake has been strong, with 48% of our operating fleet today equipped with at least one evergreen emission reduction solution.

Customer acceptance and uptake has been strong with 48% of our operating fleet today equipped with at least one evergreen emission reduction solution with.

Speaker 3: With current bookings, we expect to have 10 evergreen combustion fuel monitoring systems installed and running and six hybrid battery storage systems operating by mid-year.

With current bookings, we expect to have 10 evergreen combustion fuel monitoring systems installed and running in six hybrid battery storage systems operating by mid year.

I expect that over the next few years all of our rigs we utilized some combination of evergreen products reduce ghd emissions meeting our customers' targets.

Speaker 3: I expect that over the next few years, all of our rigs will utilize some combination of Evergreen products to reduce GHG emissions, meeting our customers' targets.

Speaker 3: Now turning to our annual strategic priorities, I'm very pleased to be completed and delivered on the priorities we outlined at the beginning of 2021. I thank the employees at Precision for contributing to those priorities.

Now turning to our annual strategic priorities I am very pleased that we completed and delivered on the priorities. We outlined at the beginning of 2021, thank the employees of precision for contributing to those priorities.

Speaker 3: For 2022, I want to be clear that we've adjusted our capital allocation plans by now also prioritizing targeted capital returns to our shareholders.

For 2022, I want to be clear that we've adjusted our capital allocation plans by now also prioritizing targeted capital returns to our shareholders.

Speaker 3: This is a clear indication that we believe we have a strong and stable capital structure with a sustainable runway of deployable free cash flow.

This is a clear indication that we believe we have a strong and stable capital structure with a sustainable runway of deployable free cash flow.

Speaker 3: We'll continue to reduce debt and de-liver as guided. Our other priorities, including a strong focus on free cash flow and expanding our technology offerings will continue in 2022.

We will continue to reduce debt and delever as guided.

Our other priorities, including.

Our strong focus on free cash flow and expanding our technology offerings will continue in 2022.

Speaker 3: So finally, I want to thank the people of Precision, out in our rigs, in our support centers, and in our offices, for the safety and the work execution that underpins everything we do as a oil service provider. With that, I'll now turn the call back to the operator for comments, questions.

So finally I want to thank the people of precision other rigs in our support centers in their offices for the safety work execution that underpins everything we do is oil service provider.

So with that I'll now turn the call back to the operator for comments or questions.

Thank you, ladies and gentlemen, I'd like to ask a question at this time. Please press. The Star then the one key on your Touchtone telephone to withdraw your question you May press the pound key.

Speaker 1: Thank you ladies and gentlemen. If you would like to ask a question at this time, please press the star then the one key on your touch-tone cell phone. To withdraw your question, you may press the pound key. You stand by while we compile the Q&A roster.

And that will be from Paul to Kennedy Wilson.

Speaker 1: Now first question coming from the line up, Erin McNeil with TV Securities. Your line is now open.

Now first question coming from the lineup.

Mcneil with TD Securities. Your line is now open.

Speaker 4: Afternoon all thanks for taking my questions. You've mentioned the leading edge day race in the mid 20s matching

Thanks for taking my questions.

You've mentioned, the leading edge day rates in the mid <unk> matching.

A lot of your peers that have reported over the last few weeks I guess I'm just wondering how much of that is.

Speaker 4: a lot of your peers that have reported over the last few weeks. I guess I'm just wondering how much of that is...

Speaker 4: keeping up with cost inflation and how much of it would be, you know, capturing more economic rent given the improvement in the...

Keeping up with cost inflation and how much of it would be.

Capturing more economic rent given the improvement in the sector.

Speaker 2: Hey Aaron, this is Kerry. So I would say that part of it is a labor increase that we implemented in December , which

Eric This is Terry so I would say that part of it is a labor increase that we implemented in December which was about $800 a day.

Speaker 2: about $800 a day. I think that was kind of standard for we're talking about the U.S. market, kind of standard for our peers. We do have some reactivation costs that were still absorbing. We reactivated six rigs in Q4 and we plan to reactivate another six rigs.

Think that is kind of standard for.

If we're talking about U S market kind of standard for our peers. We do have some reactivation cost that we're still absorbing we reactivated six rigs in Q4, and we plan to reactivate another six rigs in Q1, and Thats kind of trending at 150 to $200000 a day thats, pushing pushing cost up a little bit and when.

Speaker 2: Q1 and that's kind of trending at $150,000 to $200,000 a day. So that's pushing costs up a little bit. And we do have a little bit of inflation. I think it's a lot lower than other segments of the oil field service sector, but we do have a little bit of inflation. So all in all, it might be

You have a little bit inflation, I think it's a lot lower than other segments of the oilfield service sector, but we do have a little bit of inflation. So all in all it might be.

Call it $500 a day of increased costs that we're passing through.

Speaker 2: $1,500 a day of increased cost that we're passing through.

Speaker 2: The rest of it would be margin expansion. And as we mentioned on our last call, we thought that Q3 would mark the bottom or the top of the cycle for margins. And we showed...

The rest of it would be margin expansion as we mentioned on our last call we thought that.

Q3, with Mark the bottom or the trough of the cycle for margins and we showed.

Increasing margins.

Speaker 2: we expect to continue to show increase in margins in Q1 and Q2.

In Q4, we expect to continue to show increasing margins in Q1 and Q2.

So we would we would be capturing more of the more of the margin through higher day rates.

Speaker 2: capturing more of the margin through higher day rates than we saw through most of the twenty-

Then we saw through most of 2021.

Speaker 4: Understood. And acknowledging your January press release, you know, with the guidance for Q1. But, you know, since that time, we've seen companies like Exxon and Chevron announced they're going to start growing again in the Permian.

Understood.

And acknowledging your January press release.

The guidance for Q1.

Since that time, we've seen companies like Exxon and Chevron announced theyre going to start growing again in the Permian and.

Speaker 4: And I guess my question for you is, on the margin, have your expectations for the activity outlook in both Canada and the U.S. changed since you put that press release out? And if so, could you provide any order of name?

And I guess my question for you is on the margin have your expectations for the activity outlook in both Canada and the U S changed since you put that press release out in.

If so could you provide any order of magnitude.

Speaker 3: Aaron, I'd say yeah, they have changed and I'd say we're kind of modestly shifting, moderately shifting more and more positive as we go through each, almost each month passes with these stronger commodity prices.

Eric I would tell you how they have changed.

And I would say.

We're kind of modestly shifting.

A moderately shifting more and more positive as we can kind of go through each.

Almost each month that passes with stronger commodity prices.

Speaker 3: But I would say that our guidance on activity into the back half of the year, particularly in my comments both for the US and Canada, kind of reflect that optimism. There's no question this cycle is different than previous cycles. We're not saying our customers overshoot the commodity price. We're seeing a very well managed and kind of controlled...

But I would say that our guidance on activity into the back half of the year.

Particularly on my comments, both through the Western Canada kind of reflect that optimism.

There's no question this cycle is different than previous cycles rotating our customers overshoot commodity price, we're seeing a very well managed and kind of controlled.

Speaker 3: had backup rigs, you know, being with the super majors and making small announcements. But it really feels like with the activity we have in our bidding team and our sales team right now, that the gains that we were showing in Q1 and into Q2, we expect to carry on to the balance of the year. And we think there could be upside to that, but it just depends how quickly our customers pivot back to bringing in some small amounts of growth.

Pat back of rigs.

And the Supermajors that making small announcements, but it really feels like with the activity we have their bidding team and our sales team right now.

<unk>.

The gains that we were showing in Q1 and into Q2, we expect to carry on to the balance of the year and we think there could be upside to that but it just depends how how quickly our customers pivot back to <unk>.

Bringing in some small amounts of growth.

Speaker 4: Seems like we're in the early stages of an equipment upgrade cycle. I don't know if you agree or disagree, but...

Understood.

Seems like we're in the early stages of an equipment upgrade cycle I don't know if you agree or disagree but.

Speaker 4: it also seems like among the four or five top North American drillers that there's discipline on returns and that remains largely intact. But I guess I'm wondering, is that also true of some of your smaller competitors?

It also seems like among the four.

Top North American drillers that Theres disciplined on returns and that remains largely intact, but I guess I'm wondering is that also true some of your smaller competitors may not be tracking it closely.

Speaker 3: You know, it's kind of hard to say. Generally, when we're competing with a customer these days, it's almost always a case where it's just us and one or two others. We don't often see a lot of the smaller competitors. That's especially true in Canada. We're talking about super triples. But in the U.S., it'll be us and one of the other two or three other large drillers competing. So we're really not getting a good sense of what the smaller drillers are doing. So you know what, we just don't see a lot of competition from those smaller drillers.

It's kind of hard to say.

Generally when we are competing with the customer. These days, it's almost always the case, where it's just us a one or two others. We don't often see a lot of the smaller competitors that is especially true in Canada were talking about super triples, but in the U S. It will be us that one of the other two or three other large.

Who is competing so we're really not giving you a good sense of what the smaller dealers are doing.

So we just don't see a lot of competition from those smaller drillers.

Okay. That's helpful. Carey on the capital program you mentioned in your prepared remarks that it would be front end loaded and I guess it sort of begs the question at.

Speaker 4: That's helpful. Carrie, on the capital program, you mentioned your prepared marks that it would be front-end loaded. And I guess it sort of begs the question, that $42 million that's earmarked for expansion and upgrades, is that all committed or mostly committed at this point, or is it a placeholder? And you know, what I'm ultimately trying to drive at is, could we see that number expand throughout the year if activity levels are higher?

That's $42 million, that's earmarked for expansion and upgrades is that all committed are mostly committed at this point or is it a placeholder.

And what I'm ultimately trying to drive that could we see that number expand throughout the year.

Activity levels are higher than you expect.

Okay. So on the on the growth capital some of it is committed.

Speaker 2: Okay, so on the growth capital, some of it's committed. I think we've made some commitments to kit out 70 of our supertriples with alpha technologies. So that part is committed, and then we have some long lead items that we've committed for some near-term upgrades. But you're right, if activity does grow faster than we expect, and there are more economic upgrade opportunities, that number could go up throughout.

I think we've made some commitments to tick.

Kit out 70 of our Super triples, with Alpha technologies, So that part is.

Committed and then we have some long lead items that we've committed.

For some near term upgrades, but but youre right if activity does grow faster than we expect and there are more.

Economic upgrade opportunities that number could go up throughout the year.

Okay understood and last question from the <unk> sale.

Speaker 4: Understood. And last question for me, I've already asked, so I'll turn it over. But it's just been such an unusual winter here in Alberta, so just any comments that you can provide on the shape of spring break up or potential road bend.

Okay.

It's just been such an unusual winter here in Alberta. So just any comments that you can provide on the shape of spring breakup or potential route.

These would be helpful.

Speaker 3: No guidance yet. Certainly it's quite warm this week and we've already run into some situations where we have some rigs that can't get onto location yet, so it's causing a few delays.

No guidance, yet certainly it's quite warm this week and we've already run in some situations, where we have some rigs that can't get onto location, yes, what's causing a few delays.

<unk>.

Speaker 3: My sense is, if there's an early weather breakup, that pushes a lot more work and pricing tension into late Q2, Q3.

My sense is if there is if there is early weather breakup that pushes a lot more work and pricing tension into acute until late Q2 Q3.

Speaker 3: You know, it might be a short-term drag on activity, but probably a net positive for the year.

It might be a short term drag on activity, but probably not.

Net positive for the year.

Speaker 4: Does that make sense? Yes, it makes sense. I'll turn it over. Thanks. Thanks a lot, Aaron.

Okay that makes sense.

Makes sense.

Turn it over thanks.

Thanks, a lot.

Speaker 1: Our next question coming from Delilah of James West with Evercore iSCI. You want us open?

Our next question coming from the line of James West with Evercore ISI. Your line is open.

Hey, Kevin how are you doing.

Yeah.

Speaker 5: Good, James. How are you? I'm doing well. First question on North America. What do you see as the biggest constraint to your growth at this point? Is it, you know, you need to upgrade rigs for specifications? Is it labor and supply chain? I mean, it seems to me like we're going to see, you know, nice pickup in the rig count and curious on what you see as the impediment to that.

Hi, James how are you.

Doing well.

Quick question on North America, what do you see as the biggest constraint too.

Your growth.

At this point is it maybe.

We need to upgrade rigs for specific cases is it labor and supply chain.

Seems to be like we're going to see.

We got with the rig count.

The curious what's the.

Impediments to that.

Speaker 3: Well, I would tell you that I think that the it's a bit of a good news, good news story. I think we're going to run out of super spec rigs in our fleet during this calendar year.

Well I would tell you that I think that the.

Bit of a good news good news story, I think we're going to run out of Super spec rigs in our fleet during this calendar year.

And we have another group of rigs about 15 rigs that are really strong upgrade candidates.

Speaker 3: And you know we have another group of rigs, about 15 rigs that are really strong upgrade candidates. That would probably take day rates that have a three.

That would probably take day rates would have a three on the left hand side.

Speaker 3: And we do see some good long-term contracts, you know, probably two- to three-year contracts. But a high-quality problem for precision would be running out of superspec rigs in calendar year 22.

And we did see some good long term contracts you know probably two to three year contracts, but.

High quality problem for precision to be running out of Super spec rigs in calendar year 'twenty two.

Speaker 2: Yeah, I always said that when we talk about operating leverage within precision, what we're talking about is the spare capacity that we have to address the super spec market in the calendar year where limited upgrades are required. You know, we're still – the upgrades we're doing are adding off-automation, adding high-torque drill pipe or pumping capacity, and you're still kind of in the low single-digits millions of dollars, so we don't – we don't think that we're –

Yes, its additive when we talk about operating leverage within precision what we're talking about is the spare capacity that we have to address the super spec market in the calendar year. We're limited upgrades are required we're.

Still the upgrades, we are doing are adding up automation, adding.

Hydro <unk> pipe or pumping capacity and are still kind of in the low single digits millions of dollars.

So we don't.

We don't think that we're going to have to spend a whole lot of capital to address the market.

Speaker 3: Yeah, Kerry, we have 55 rigs running, or 52 rigs running today, and we have 67 super spec rigs available in the U.S.

Terry if you have 55 rigs running or 52 rigs running today and we have 67 Super spec rigs available in the U S. That's right.

Speaker 5: Okay. Okay. It's very helpful. Thanks, guys. And then maybe just one more for me on the Middle East. We're clearly going to have a call on additional production at some point and the big, large producers you work for.

Okay. That's very helpful. Thanks, guys and then maybe just one more for me on the Middle East, We're clearly going to have a call of additional production at some point.

The big box versus your workforce are aware of that and that's why of course their tendering Dale could you.

Speaker 5: are aware of that and that's why of course they're tendering now.

Speaker 5: Comment on the magnitude of, if you were to be successful in some of these tenders, or when you are successful, how many more rigs you might commit to the region, and if those would be, you know, you would move rigs, or would those be, you know, upgrades, and how would that impact your capital program?

Comment on that.

Magnitude of.

You would be successful.

When you are successful.

Any more rigs, but commit to the region.

Those would be.

Good move rigs or would those be upgrades, how would that impact you guys.

Speaker 3: There's a fair amount of bidding activity right now going on. So we've got the three idle rigs in Kuwait that we expect to get reactivated during the year. We've got one idle rig on the ground in Saudi that could be activated this year. Three more idle rigs in Kurdistan and Georgia and Iraq.

There is a fair amount of bidding activity right now going on so we've got the three idle rigs in Kuwait that we expect to get reactivated during the year. We've got one idle rig on the ground in Saudi that could be activated this year three more idle rigs in Kurdistan and Georgia that erect.

Speaker 3: Actually one of those rigs is looking like it might end up in Dubai, right? So two in Georgia, two in Kurdistan, one in Dubai that could be activated, and we've had some tenders recently where we're looking at possibly utilizing some of our super singles and some other tenders that might be in the 1500 horsepower class. However, if we're utilized in North America, we would probably back away from those tenders.

Actually one of those rigs is looking like it might be ends up in <unk> or in Dubai right. So.

Two in Georgia.

Curtis down one in.

Dubai, there could be activated.

And we've had some tenders recently, where we're looking at possibly utilizing some of our Super singles and some other tenders that might be in the 1500 horsepower class. However, if were utilized North America, we would probably back away from those tenders.

Okay, Okay got it.

Speaker 2: Okay, got it. Thanks, Gary. Okay. I just had another comment there, kind of along that operating leverage theme. You know, the most likely rig activations near term would be the three-quake rigs, which are all, you know, they're all super-spec AC deep-capacity rigs that are six years old and won't require a whole lot of capital to go into a new contract, you know, kind of in the $4 million range per rig. Okay. Okay, got it.

I'll just add another comment there kind of along that operating leverage thing most most likely break activations near term would be the three rigs which are all.

They're all Super spec AC.

Deep capacity rigs that are six years old.

And what require a whole lot of capital to go into a new contract.

<unk>.

$4 million range per rig.

Okay. Okay got it thank you.

Thanks.

Speaker 1: Our next question coming from the line of Taylor with Tutor, Picker and Hold, near Lenos Elvin.

Our next question coming from the line of tailored Joseph with Tudor Pickering Holt. Your line is now open.

Speaker 2: Hey Kevin and Kerry, good afternoon. First question on Canada, over the past two weeks down here in the U.S., there's been so much talk about significant pricing improvements.

Hey, Kevin good afternoon.

First question on Canada over the past really the past two weeks down here in the U S. I mean, there's been so much talk about a significant pricing improvement.

Speaker 2: Again, for the U.S. market, you echoed some of those comments and prepared remarks today. So, I'm curious if you could just compare and contrast what's going on from a pricing perspective in the U.S. with what you're seeing in Canada, obviously, a number of different rig classes up there in Canada, and just curious where we sit from a pricing improvement standpoint for each of those rig classes up in Canada.

Again for the U S market you exited some of those comments in the prepared remarks today.

So if you could just compare and contrast, what's going on from a pricing perspective in the us with what Youre seeing in Canada, obviously, a number of different rig classes up there in Canada.

Just curious where we sit from a pricing improvement standpoint from for each of those rig counts rig classes up in Canada.

Yes.

Speaker 3: Yeah, Taylor, so I think the pricing movement in Canada is probably a quarter or two ahead of the U.S.

So I think pricing movement in Canada is probably a quarter or two ahead of the U S.

Speaker 3: And there's a couple reasons for that. One, the market's a bit tighter on the super spec side. It's fully utilized.

And Theres a couple of reasons for that one of the markets a bit tighter on the Super spec side, it's fully utilized.

Speaker 3: It's also more consolidated with primarily just two drillers that have the balance of the fleet for superstruck rigs. Super triples that is in Canada. And then our super singles rig in Canada is kind of a class of its own. There really isn't a strong competitor for Precision's super single rig.

It's also a more consolidated with primarily just two drillers that have the balance of the fleet for Super spec rigs Super triples that is in Canada.

Our Super singles rig in Canada is kind of at a cost of it. So there really isn't a strong competitive for precision super single rigs.

Speaker 3: and it's a highly efficient rig. So we've had opportunities with rising demand and tight utilization to move those prices a bit sooner. And there's a seasonality component that comes into Canada. There's kind of a spring.

And it's highly efficient rigs. So so we've had opportunities with rising demand and tight utilization to move those prices a bit sooner.

And there is a seasonality component that comes with the Canada Theres kind of a spring.

Spring for summer Q3 type pricing circle, because sometimes the second pricing around that happens in the fall to the coming winter season. So there's kind of some natural windows when we engage with customers and there is a third factor in Canada driven tension.

Speaker 3: spring for summer Q3 type pricing circle. There's sometimes a second pricing round that happens in the fall to the coming winter season. So there's kind of some natural windows when we engage with customers.

Speaker 3: And there's a third factor in Canada that kind of has driven tension and that's crewing.

Crewing, it's been particularly hard to recruit Brazil, and Canada, and Thats created a lot of tension right across the oil services space. So I think all of those things have kind of.

Speaker 3: been particularly hard to recruit personnel in Canada and that's created a lot of tension right across the oil services space so I think all of those things have kind of

Speaker 3: work to help move rates back into kind of a sustainable range, which is not quite out yet in Canada, but we're hoping to get there in 2022. I think some of those factors are now coming into play in the U.S., you know, the super stock market's getting

Worked to help move rates back into.

Kind of a sustainable range, which are not quite as yet in Canada, but we are hoping to get there in 2022.

I think some of those factors now coming into play in the U S. The Super spec rig market is getting.

Speaker 3: Essentially, it's not sold out, but between regional dislocations and various differences in rig spec, it's almost sold out, and I think you'll see it.

Essentially.

It's not sold out but between regional dislocations and.

Various differences in rig spec is almost sold out.

Think youll see it.

Speaker 3: effectively sold out in the next few weeks or couple of months.

Effectively sold out the next.

Next few weeks or a couple of months. So I do think the U S gets on the same track that we've seen in Canada.

Speaker 3: So I do think the U.S. gets on the same track that we see in Canada between Q1 and Q2. And you're hearing the front end piece of that today from us.

In Q1, and Q2 and you're hearing the front end piece of that today from us.

Good to hear and against that backdrop, you just mentioned the Super spec market is going to be pretty fully utilized here pretty soon I guess for your fleet, but for the broader market I am curious how are the customer conversations are going with respect to term contract durations. It doesn't feel like many of the larger land drillers, including yourselves have cigna.

Speaker 2: Yeah, good to hear. And against that backdrop, you just mentioned Superspec market's going to be pretty fully utilized here pretty soon, not just for your fleet, but for the broader market. I'm curious, how are

Speaker 2: customer conversations going with respect to term contract duration, it doesn't feel like many of the larger land drillers including yourselves have have significant term contract coverage, at least not beyond 2022. And I just wonder if the customer urgency is there to go ahead and lock up some of these rigs even if it is even if it's at much higher pricing over the course of 2023.

Term contract coverage at least not beyond 2022, and I was just wondering if the customer urgency is there to.

Go ahead and lock up some of these rigs even if even if it's at much higher pricing.

Over the course of 2023.

Speaker 3: Well, you know, I think we've seen opportunities to contract rigs anywhere from pad to pad all the way up to two years. I'd say that this, this tightening has been kind of sneaking up on everybody a little bit in that I think the drillers know it well, but I don't think any of the customers really fully understand how tight the market really is.

Well I think we've seen opportunities to contract rigs anywhere from pad to pad all the way up to two years.

I'd say that this this tightening has been kind of sneaking up on everybody a little bit in that I think the drillers noelle, but obligated customers really fully understand how tight the market really is.

Speaker 3: And Taylor, nobody has a 20, 23 budget approved yet, like none of our customers do. So there's not a huge preponderance of people looking at long term. I would say that there's just a handful of customers looking to try to lock in lower rates maybe for a longer term, not necessarily locking in higher rates. So I think that certainly in our case, we've been reluctant to jump at those opportunities looking more at shorter term, higher rate opportunities and the ability to reprice as the market tightens.

And Taylor Nobody has a 2023 budget approved yet.

Our customers do so those are the huge preponderance of people looking at long term I would say that there's just a handful of customers looking to try to lock in lower rates, maybe for a longer term not necessarily walking at higher rates. So I think that.

Certainly in our case, we've been reluctant to to jump at those opportunities looking more shorter term higher rate opportunities and the ability to reprice as the market tightens.

Speaker 6: One last quick question for me, you're basically talking about going from 50 alpha systems to roughly 70 by year-end, and I'm just curious how the demand pull works for those sorts of systems. I imagine some of those are going to be outfitted on rigs that are already in the field today. Do we go through a trial phase where you put the system on a rig, the operator tries it out and then starts paying for it, or do you expect to get compensated for that almost immediately?

Got it and then one last quick question from me Youre basically talking about going from 50 off the system.

Roughly 70 by year end and I'm, just curious how the demand pool works for those sorts of systems I imagine some of those are going to.

Be outfitted on rigs that are already in the field today and.

Do we go through a trial phase, where you put the system on a rig operator tries it out and then start paying for it or do you expect to get compensated for that almost immediately.

Speaker 3: We expect to be compensated for it almost immediately. We've got a handful of contracts that are performance-based where if we achieve certain performance levels, we'll earn more. So in that case, you could say that we have to earn the compensation, but those are working quite well. The majority of the applications are the ala carte pricing where we put the system on, we run it, and we deliver value, and the customers see the value, and we move on.

We expect to be compensated for it almost immediately.

We've got a handful of contracts that are performance based where if we achieve certain performance levels.

Earn more so in that case you.

You can say that we have to earn the compensation, but those are working quite well. The majority of the applications are the Ala carte pricing, where we put the system on we run it and we deliver value and the customers see the value we can move on.

Understood. Thanks for the answers Kevin.

Speaker 3: Great. Just, Taylor, on that deployment, you asked what customer pull. You know, we're working closely with our partners. We've always been kind of standardized on how we do this. Part of what we've done is lock in low capital costs for that acquisition for an extended period by committing to those installations over the course of the year. So it's both balancing the risk on the inflation side, so we keep the costs low, but also getting the systems across our fleet as fast as possible. Yeah, makes sense. Thank you.

Great.

Taylor on that on that deployment, you asked about customer pull.

We're working closely with our partners.

Always been kind of standardized how we do this part of what we've done is lock in.

Low capital costs for that acquisition for an extended period by committing to those installations over the course of the year. So it is both balancing the risk on the inflation side. So we keep the cost low but also getting the systems across our fleet as fast as possible.

Yes, it makes sense. Thank you.

Thank you.

Speaker 1: Our next question coming from Delana Bocar-Sayed with ATB Capital. Your line is now open. Thanks for taking my question.

And our next question coming from the line of <unk> with.

With ATB capital your line is now open.

Thanks for taking my question.

Speaker 7: Kerry, the potential reactivation cost for the Kuwait rigs, are they included in the CAPEX number or not yet?

Kelly.

Reactivation cost for the Kuwait rigs are they included in the Capex number on not yet.

Speaker 2: Yeah, we haven't we haven't specified. I think we've got a basket of upgrades that we see on on the board and we're trying to put a percentage

Yes, we haven't we haven't specified I think we've got a basket of upgrades that we see on the board and we're.

And to put a percentage of.

Speaker 2: likelihood of securing those upgrades. So you can say that it's somewhat included in that basket.

Likelihood of securing those upgrades.

So they're somewhat included in that basket.

Okay.

Speaker 7: Kevin, one of your competitors today mentioned that there is further segmentation of the super spec rig market in the U.S., and that customers are demanding rigs that have rig floors with very high clearance, 21 to 23 foot, and drawbacks on the rig floors. Are you seeing the same kind of differentiation as well as you talk to your customers?

Alright.

Kevin.

Your competitors today mentioned that there is a further segmentation of the super spec rig market in the U S.

And the customers are demanding.

Rigs that have rig flows that many high net into 'twenty, one 'twenty three put in and drove us on the rig floors.

Are you seeing the same kind of differentiation is one.

As you talk to your customers.

Speaker 3: So, Mukhar, first of all, I guess the good thing and the bad thing is there is no API definition of SuperSpec.

So.

First of all I guess, the good thing or a bad thing is there is no API definition of Super spec.

Speaker 3: And I would say that each drilling contractor has an interpretation of what they view as the optimum rig design. And you know, whether that includes skidding or walking can be a debate, whether it includes three-month pumps or two-month pumps can be a debate. In our case, we actually have a wide fleet of

<unk>.

I would say that each drilling contractor has an interpretation of what they view as the optimum rig design and.

Whether that includes skidding or walking can be a debate whether it includes three mud pumps or or two mud pumps can be a debate.

Our case, we actually have a wide fleet of.

Speaker 3: Superspec rigs that have elevated rig floors with the drawworks up on the rig floor. In fact, a split LER drive assembly so that we keep all the rig controls up on the rig floor. So that particular need we can meet with our super triple rigs.

Super spec rigs that have elevated rig floors with the drove our stuff on the rig floor in fact.

Split.

<unk> drive assembly, so that we keep all the rig controls up on the rig floor. So that particular need we can meet with our super Triple rigs.

Speaker 7: Okay, but is there a differentiation in day rates for those regs versus those that do not have that capability and still super spend?

Okay, but.

Is there a differentiation in dayrates for those rigs versus those that do.

Do not have that capability and super spec.

Speaker 3: What it comes down to is if you have a client who has a pad where he wants to maybe walk the rig over existing wellheads, he might want that extra clearance.

What it comes down to is if you have a client who.

Has a pad where he wants to maybe walk the rig over to existing wellheads.

He might want that extra clearance.

Speaker 3: If you've got a pad, which is a new pad, and you're drilling it in a line, you may not need that clearance. It just depends. I'd say it's more customer-specific than industry-specific.

If you've got a pad, which is a new pad youre drilling. It in line you may not need that clearance. So it just depends.

I'd say its more customer specific.

The industry specific.

Speaker 3: Okay, great. And then... We have some of those rigs walking over wellheads that are existing. Other ones where we have clear pads we're drilling new wells on.

Okay great.

And then.

We have we have some of those rigs walking over wellheads are existing other ones, where we have clear pads were drilling new wells on.

Speaker 7: Okay. Great. And then, in the international market, you have Six Wigs currently working with two contract expirations coming up. Do you see any downtime before they start up again, or do you think you would be able to renegotiate the contracts before the current contracts expire? Okay. Great. Great.

Okay.

Then in the international market you have six <unk> currently working with two contract explorations coming up.

Do you see any downtime before they start up again or do you think there.

You would be able to renegotiate the contracts before the floor.

Current contracts expire.

We don't expect we expect no downtime.

Speaker 7: Okay, and then for the Kuwait rigs, do you see them, Kuwait typically tenders get delayed. Do you think that this year they may happen relatively quickly?

Okay, and then for the <unk> do you see them.

Yes.

So we typically just get delayed do you think that this year.

Happen.

Quickly.

Speaker 3: Well, I've been talking about that tender, I think, almost all of 2021 and now into 2022. So, it's already delayed one year from my early conversations and, you know, the other thing I'd say is it seems like every time I make a projection, about four weeks later, a new variant pops up and slows down decision making. So I'm really reluctant to try to predict what's going to happen in Kuwait. But Bakar, I would say that if Kuwait has their production curtailments removed...

Well I've been talks about that tender I think almost all of 2021 and now into 2022.

So I already delayed one year from my early conversations.

The other thing I'd say is it seems like every time they make a projection about four weeks later, a new variant pops up and slow down decision, making so im really reluctant to try to predict what's going to happen in Kuwait, but <unk> I would say that if.

Kuwait has.

Their production curtailments removed.

Speaker 3: I think those tenders go ahead very quickly. I should say, when they have their production curtailments removed, I think those tenders move quickly. Right. Right. Right. Makes sense. Thank you very much for all of my questions.

I think those two.

Go ahead very quickly.

Well I should say when they have their production curtailments removed I think those tenders move quickly.

Alright.

Makes sense.

But all my questions.

Okay.

And our next question coming from the line of Ian.

Speaker 1: Our next question coming from the line of Ian McPherson with Piper Sandler. Your line is open. Thanks. Good afternoon, Kevin and Kerry. Hey, Ian. I appreciate the description of...

Question with Piper Sandler Your line is open.

Thanks, Good afternoon, Kevin Kerry.

And.

I appreciate the description of <unk>.

What's happening in.

The Martin Hill.

Speaker 8: the Martin Hill queer well play and I think it was asked a little bit but I wanted to ask again if you could talk about your

Clear well play and.

I think it was asked a little bit but I wanted to ask again, if you could talk about you were.

Speaker 8: Uh your breakout of super singles versus super triples in canada and speak maybe a little bit more to the

Your breakout of Super singles versus Super triples in Canada.

Speak maybe a little bit more to that.

Speaker 8: The differential and day rates or margins between the two if that's a material consideration for us as we

The differential in day rates or margins between the two if thats.

Material consideration for us as we.

Speaker 8: as we think about that play, Folding Into Your Memory.

As we think about that play.

Folding into your mix.

Speaker 3: Sure, I'll give a bit of coverage and carry, just fill in the gaps where I missed something here. The Precision Single Rig was developed back in 1992, specifically for heavy oil drilling, I mean exactly for this type of play. They were designed to be...

Sure I'll give a bit of coverage in carry just filling the gaps.

Something here.

The precision Super single rig was developed back in 1992, specifically for heavy oil drilling I mean exactly for this type of play they are designed to be.

Speaker 3: small, fast-moving, light, pad-capable rigs that have a small footprint, can run, you know, kind of throughout spring break-up if necessary, and have a really low efficient operating cost. So it's a really cool design that's really kind of stuck with us the last 30 years now and really kept that competitive edge out there. So the rig fits that market very well. Kerry, operating costs of that rig would typically be about $4,000 or $5,000 less than a Super Triple? Correct.

Small fast moving light pad capable rigs that have a small footprint can run.

What kind of throughout spring breakup, if necessary and have a really low efficient operating cost. So it's really cool design that's really.

Kind of stuck with US last 30 years, now and really kept the competitive edge out there.

So the rig fits sub market very well.

Cary operating cost of that rig would typically be about four or five stores less than a super triple correct in that.

Speaker 3: And, uh, you know, we're getting day rates for that rig now in the mid to upper teens, uh, and, uh, and pushing those.

<unk>.

And we're getting dayrates that rig down in the mid to upper teens.

And pushing those levels.

Okay.

Speaker 3: Great. And that rig actually does overlap with what in Canada is called the tele-double. So people will try to use the tele-double to compete with us, which typically has a slightly higher operating cost and again probably needs a higher day rate to get the same margin.

Right.

And Thats the rig actually does overlap with what in Canada is called the tele double so people will try to use it <unk> compete with us, which typically has a slightly higher operating cost and again probably needs a higher day rate to get the same margins.

Speaker 3: In Canada we have 27 super triples, they're all fully utilized right now and we've given guidance on those rates. Those rates are in the low to mid-20s range right now for the base rig. Technology charges are above that and a lot of the things you put on the rig are also above that.

Jonathan we have 27 Super triples, Theyre, all fully utilized right now and.

We've given guidance on those rates those rates are the.

Low to mid twenties range right now for the base rig technology charges are above that and a lot of the things you put on the rig are also above that.

Okay.

Speaker 8: That's great. Thank you. Sort of a simple high-level question for the US market. If you were able to pro forma your fleet for all of the upgrades that you're planning for this year,

That's great. Thank you.

Sort of.

Simple high level question.

For the U S market.

You were able to.

Pro forma your fleet for all of the upgrades that you're planning for this year.

Speaker 8: and where that takes your fleet-wide spec at the end of this year.

And where that takes your fleet wide.

Spec at the end of this year.

Speaker 8: And the market pricing stopped moving today, and you repriced everything at leading edge and absorbed all your reactivation costs.

And the market market pricing stopped moving today and you repriced everything is leading edge and absorbed all your reactivation costs.

Speaker 8: Yes, wouldn't your pro forma cash margin easily be above $10,000 on that hypothetical basis?

Yes.

Duke model for you yes.

Our pro forma cash margin easily be about 10000 on that hypothetical basis.

Speaker 2: I think if you're looking at, you know, leading edge being in the mid-20s and we're getting better fixed cost absorption and we don't have any reactivation cost.

I think if youre looking at.

Leading edge being in the in.

In the mid twenties.

And we're getting better fixed cost absorption and we don't have any reactivation cost.

Daily operating cost probably go go down a bit from from where we're reporting right. Now. So I think you could see or see the fleet generating on average above $10000 a day margin yes.

Speaker 2: daily operating costs probably go down a bit from where we're reporting right now. So I think you could see the fleet generating on average above $10,000.

Speaker 8: Yeah, I think so. I just the one thing I want to be careful with is not extrapolating.

Yes, I think so I guess, the one thing I would be careful with is not extrapolating.

Speaker 8: your sort of tip of the spear data point on pricing and inappropriately extrapolating it across the entire fleet. But it seems to me that your whole fleet or the vast majority will be at that leading edge capability and probably with higher saturation of alpha and other a la carte add-ons that it would not be unfair to...

You're sort of tip of the spear data point on pricing and inappropriate extrapolating it across the entire fleet, but it seems to me that.

Your whole fleet or the vast majority will be at that leading edge capability and probably with higher saturation of of.

<unk> Alpha and other Ala Carte add ons that it would.

Would not be unfair to.

To project that so I just wanted to sanity check.

Speaker 2: To project that, so I just wanted that sanity check. Yeah, I think that if you if you go back to 2018 and you looked at where our our superspec.

Okay.

If you go back to 2018.

And you looked at where our super spec rigs where pricing is.

Speaker 2: And getting one and two, in some cases three year contracts without HALFA, we were well above.

Getting one and two in some cases three year contracts without alpha.

We were well above $10000 a day in margin on that segment of our fleet.

Yes.

Thanks, and then the other one for me.

Speaker 8: Thanks. And then the other one for me, I don't know if we've talked about this already on the call, have you discussed the...

I don't know if we've talked about this already on the call have you did discuss the.

Speaker 8: the framework to which you're examining dividends versus buybacks with the capital return plan.

The framework through which you are examining dividends versus buybacks with the capital return.

Glen.

Speaker 2: So it's a four-year plan for the first couple of years. This is almost exclusively going to be share buyback.

So it's it's a four year plan. After the first couple of years. This is almost exclusively going to be share buybacks.

And as we get closer to the target leverage level and there is a little bit more visibility in that business.

Speaker 2: And as we get closer to the target leverage level, and there's a little bit more visibility in the business, a dividend becomes more likely. But for the first couple of years of this capital framework plan, assume it's gonna be share buybacks. Got it.

The dividend becomes more likely but for the first couple of years of this.

Capital framework plan.

I assume it's going to be share buybacks.

Got it.

Thanks, Gary Thanks, Kevin.

Thank you.

Ladies and gentlemen to ask a question. Please press star one.

Next question coming from the line of Paul <unk> with Stifel. Your line is open.

Afternoon, everyone. So some pretty good color so far on Canada versus the U S and a couple of quarters you highlighted that the outlook for Canada was especially bright relative to the U S. In the near term just wondering if you really currently see either Canada or the U S as being relatively stronger right now.

Speaker 9: Afternoon, everyone. So, some pretty good colors so far on Canada versus the U.S. In a couple of quarters, you highlighted that the outlook for Canada was especially bright relative to the U.S. in the near term. Just wondering if you really currently see either Canada or the U.S. as being relatively stronger right now, obviously factoring in some of the seasonality in Canada.

Factoring in some of the seasonality in Canada.

I think coal.

Speaker 3: I think coal, what kind of drives me to believe that is they go a little farther down the pricing trajectory with our Canadian customers, so that's helping make Canada look better. I think part of that is the

What kind of drives me to leave that as they go a little farther down the.

The pricing trajectory with our Canadian customers, So that's helping make Canada look better.

I think part of that is the.

Speaker 3: the tighter market consolidation in those two rig areas, in the super triple area and in our heavy oil super singles area. So you've got a much more rational market with generally public players that are more rational in their thinking. So it's just a...

The tighter market consolidation and those those two rig areas than the Super Triple area in our heavy oils Super singles area.

So you've got a much more rational market with generally public players that are more rational there.

So it's just a.

Speaker 3: It behaves more industrial or more structured and more disciplined than...

It behaves more base more industrial or more.

We're structured we're disciplined then.

The less mature markets, that's the way it feels right now does that makes sense.

Speaker 3: the less mature markets. That's the way it feels right now. Does that make sense?

Speaker 9: Yeah, that's a good color, thanks. And so you kind of touched briefly on Q1 in Canada talking about some customer logistics issues, maybe putting a bit of a lid on activity. I'm just curious, I mean, have you seen labor really be much of a restriction into getting rigs activated in the quarter?

Yes, thats good color, thanks, and so you kind of.

Touch briefly on Q1 in Canada talking about some customer logistics.

Issues, maybe putting a bit of a lid on activity I'm. Just curious I mean have you seen labor really be much of a restriction into getting rigs activated in the quarter.

Speaker 3: On the drilling side, it's been a pretty heavy lift for our team, and I know some of them are listening today. They've worked pretty hard, but they've met the objective in drilling. It's been much, much tougher in well servicing, and there's a couple of good reasons for that.

On the drilling side, it's been a pretty heavy lift for our team and I know some of them are listening today, they work pretty hard but they missed the objective and drilling has been much much tougher in well servicing and Theres a couple of good reasons for that.

Speaker 3: The drilling jobs have a slightly higher hourly rate, but the work is more consistent and repeatable, and they typically get a lot more overtime and more consistent overtime. So the total pay is much higher. It attracts people that stick a little more to drilling. And while servicing, it could be good or it could be bad. It's call-out work. It's sort of day-to-day work, and it's been much tougher to recruit.

The drilling jobs have a slightly higher hourly rate, but the work is more consistent and repeatable and they typically get.

More over time and more consistent over time. So the total pay is much higher that attracts the trucks people thats tick a little more to drilling and well servicing it could be good or it could be bad. It is call out work, it's sort of day to day work has been much tougher to recruit.

Speaker 3: a lot like a lot of the other oil field call-out services. So in drilling, no hard work for our team, but they've accomplished the task in drilling. In well servicing, really hard work. The guys have done a great job. We've got 50 rigs staffed up right now.

A lot of the other oil field callout services, so and drilling no hard work for our team what they've accomplished the task in drilling and well servicing really hard work you guys have done a great job. We've got 50 rigs stuffed up right now expect to have more stepped up for Q for Q3, after breakup, but but I would say that in well servicing is loaded activity.

Speaker 3: Expect to have more stepped up for Q3 after breakup.

Speaker 3: But I would say that in well servicing, it's limited activity.

<unk>.

Okay perfect that's great. Thanks, and so just to.

Speaker 9: Okay, perfect. That's great. Thanks. And so just to clarify, on the international reg awards, I mean, reasonable to think that maybe an announcement might occur by mid-year, or is there still just not enough clarity on timeline?

Clarify on the on the International rig awards, I mean reasonable to think that maybe an announcement might occur by midyear or is there still just not enough clarity on time lines.

Speaker 3: No clarity on timeline, but this has been, I mean, the entire process has been imminent for several quarters now, and I recognize that imminent in the Middle East means slightly different terms than imminent in North America.

No clarity on timeline, but this is Ben.

The entire process of inhibited.

For several quarters now recognize that.

It is the middle east being slightly different terms that inhibited in North America, but.

But theres a lot of work that's gone into these tenders behind the scenes.

Speaker 3: But there's a lot of work that's gone into these tenders behind the scenes at our customer. We know they're ready and we know that they're, I think, waiting for the right oil production signals to start making the next step.

Customer we know they are ready and we know that there I think waiting for the right.

The rate oil production signals to start making the next step.

Okay perfect. That's all from me, Thanks, I'll turn it back thank.

Thanks, Paul.

Speaker 1: Our next question coming from the line of Keith Mackey with RBC Capital. The line is open.

Our next question coming from the line of Keith Mackey with RBC capital. Your line is open.

Good afternoon, and thanks for taking my questions.

Speaker 4: I just wanted to start off, Kevin, I think I heard you say Q2 looks like it's going to be 20, or break out, or break up anyways, is going to be 25 to 30 percent higher than last year. And then I thought to...

Yes.

Wanted to start off Kevin and I think I heard you say Q2 looks like it's going to be.

<unk> break out or break out in any way, that's going to be 25% to 30% higher than last year, and then I ask.

Speaker 4: He said Q3 is gonna be strong as well, potentially stronger than the winter level. Did I hear that right, or what was the comment there?

Q3 is going to be strong as well potentially stronger than than the winter level did I hear that right or what was that what was the comment there Kevin.

Speaker 3: Well, you heard it right. I guess all that I'll say is that the previous projections I've given that after Q3 and Q4 seems like a few weeks after I gave the projection another COVID variant popped up and

Well you heard it right.

I guess all that I'll say is the previous projections ive given that after Q3 and Q4. It seems like a few weeks after I give the projection to another COVID-19 very pumped up and slow down decision, making so barring any kind of macro dislocation.

Speaker 3: So, you know, barring any kind of macro dislocation, I think those projections are what I said. I think Q2 looks like it's 25 percent or maybe a little more, better than last year. And once again, we could see Q3 matching or exceeding Q1 activity levels, again, barring any kind of macro dislocation. So, I think that's it.

I think those.

Those projections are what I've said I think Q2.

Like it's 25% or maybe a little more better than last year and once again, we could see Q3 matching or exceeding Q1 activity levels.

Again, barring any kind of macro dislocation.

Yes for sure I appreciate that it certainly is difficult to forecast.

Speaker 4: Yeah, for sure. I appreciate that it's certainly as difficult to forecast what's happening in the macro these days, but certainly that would be an incredibly strong level for Q3. Can you maybe just talk about what gives you the confidence, based on what we know today, to say that and maybe just talk a little bit about the rig types that will make up the gap. Will the mix be similar to Q1, do you think, or will it be different based on the seasonal drilling at that time?

What's happening in the macro these days, but certainly that would be an incredibly strong level for for Q3 can you maybe just talk about what gives you the confidence.

Just on what we know today to say that and maybe just talk a little bit about the rig types that will that will sort of make up the gap will the mix be similar to Q1, do you think or will be.

Based on the seasonal drilling at that time.

Speaker 3: Yeah, so let me qualify good, great and better. So it does look pretty good compared to 2020 and 2021. If you kind of go back to 2016 or 2014, we're still well below those levels.

So just let me qualify.

Good great and better so it does look pretty good compared to 22020 in 2021, just kind of go back to 2026 years of 2014 were still well below those levels. So.

Speaker 3: While it looks like a pretty strong year relative to what we've just been through, it wasn't very long ago where it's a much, much better year.

While it looks like a pretty strong year relative to what we've just been through.

It wasn't very long ago, where it's a much much better times, so keep that in mind.

Speaker 3: So keep that in mind. But the mix would look like the winter mix right now. We'd have our super triples pretty much fully utilized.

But the mix it looks like the winter mix right now we'd have our super triples pretty much fully utilized.

Speaker 3: You know, we have a potential to maybe bring one more Super Triple up out of the U.S.

We have a potential to maybe bring one more super triple up out of the U S.

Speaker 3: We're working with customers to see if that happens so we could add one more super triple in Canada but but that's fully that'll be fully maxed out and then with the super singles

Fewer customers to see if that happens so we could add one more super triple in Canada, but that's fully that'll be fully maxed out and then with the Super singles.

Speaker 3: Got a pretty good mix right now. It's kind of this resurgence in heavy oil kind of driven by clear water.

We've got a pretty good mix right now its kind of this resurgence in heavy oil kind of driven by Clearwater.

Speaker 3: But I think there's a little more room to run there. We certainly have more super singles and.

But I think theres, a little more room to run there, we certainly have more super singles and.

Speaker 3: to reactivate the other 5, 10 or 15 super singles as well within our current opportunity cycle.

To reactivate other.

10, or 15 Super singles as well within.

Our current opportunity cycle.

Yes.

Speaker 4: I think there was another couple that moved around basins in the U.S. Can you just talk about some of those regional tightnesses in rig supply and where you're seeing things be the most tight? Canada, I imagine, is the super-triple category. Maybe you could then just talk about the U.S. as well and where you're seeing that tightness and where you think rigs could move as a result.

Okay.

Maybe a follow up.

<unk> for example.

And I think there was another couple that moved around basins in the U S. Can you maybe just talk about some of those regional tightened.

In rig supply and where youre seeing things EBIT more than that.

<unk> tightened in Canada.

Canada I imagine its the Super Triple category and maybe if you could then just talk about the U S as well and kind of where youre seeing a tightness in lately rigs could could move as a result.

Speaker 3: That's a really great question. I'm actually glad you raised it, because probably the biggest surprise I've had in 2022 was a customer asking if they could move one of our rigs from Oklahoma to the Permian Basin.

That's a really great question I'm actually glad you raised it because.

Probably the biggest surprise I've had in 2022 was a customer asking if they can move one of our rigs from Oklahoma to the Permian Basin.

I thought there was still some slack capacity in the Permian basin, but for.

Speaker 3: I thought there was still some slot capacity in the Permian Basin, but for this particular customer that we're working for, they're paying to move one of our rigs from Oklahoma to the Permian. Last year, late in December , we moved a rig from the Permian to Eagleford. We're looking at some opportunities right now maybe to redeploy some rigs into the Haynesville. So it seems like that regional tightness is kind of coming on everywhere. The only place we have a couple of excess rigs right now is DGA Basin.

This particular customer that we're working for their pain to move one of our rigs spoke a little bit of the Permian.

Last year late in December we moved a rig from the Permian to Eagle Ford.

We're looking at some opportunities right now maybe to redeploy some rigs into.

The haynesville. So it seems like it seems like a regional tightness is kind of coming on everywhere. The only place we have a couple of excess rigs right those DJ basin.

Got it okay, good and just on the tech adoption.

Speaker 4: Got it. Okay, very good. And just on the tech adoption, I know historically, I think you've talked that U.S. customers were a little quicker to adopt than Canada. Has that changed? Has Canada caught up? And maybe as a follow-on to that, has the Evergreen line gained traction faster in Canada or the U.S., or has it been fairly similar as well?

Historically, I think you've talked that.

U S customers were a little quicker to adopt in Canada has that changed since Canada caught up or.

And maybe as a follow on to that has the evergreen line.

Gain traction faster in Canada, or the U S or has it been fairly fairly similar as well.

Speaker 3: So first the evergreen lines have been actually getting good traction in both markets with almost no differentiation and I'd say that ESG emissions responsibility focus is universal across particularly our public customers but actually most of our private customers too so that's a trend we're seeing right across the customer mix and geographic mix. On the technology piece.

So firstly evergreen lines, but actually getting good traction in both markets with almost no differentiation.

I'd say that.

That ESG emissions responsibility focus is universal across particularly our public customers, but actually most of our private customers too so.

That's a trend we're seeing right across the customer mix and geographic mix on the technology piece.

Speaker 3: Um, so the simple answer is this, um, on longer duration wells.

Bob.

So the simple answer is this.

On longer duration wells.

Speaker 3: technology has more room to show clear improvements. So in shorter duration wells, whether they're shallower or faster, the gains tend to be a little bit narrower for the customer and maybe a little tougher sell. So Canadian wells tend to be a little shallower, and there are some areas that are really short duration wells. Tougher sell in the short duration wells, much easier sell long duration wells.

Technology has more room to.

Show clear improvements so on shorter duration wells, whether the shallower faster.

The games tend to be a little bit narrower for the customer and maybe a little tougher sell so at Canadian wells tend to be a little shallower and there are some areas that are really short duration wells.

Tougher sell into short duration wells much easier sell long duration wells.

Got it.

Thanks, so much.

And by the way, but I'm talking about long and short long would be eight days and shortly before days.

Speaker 3: By the way, when I'm talking about long and short, long would be eight days and short would be four days.

Okay.

Speaker 1: Great. Thank you. And next question coming from the...

Great. Thank you our next question coming from them.

Our next question coming from the line of John Daniel Daniel Energy Partners. Your line is open.

Speaker 1: Our next question, coming from the line of John Daniel of Daniel Energy Partners. Your line is open.

Hey, good afternoon guys.

Speaker 5: Thanks, John . Kevin, just one quick one for me. There's obviously lots of people in our space talk about us being at potentially at the start of a multi-year cycle, I think, as we look at just the commodity backdrop. And I'm curious.

Hey, John .

Kevin just one quick one for her name obviously lots of people in our space talked about.

Being that potentially at the start of a multiyear cycle I think if we look at the commodity backdrop and I am curious.

Speaker 10: If customers, if they're looking at it the same way, are they actually...

If a customer if they are looking at it the same way or they actually.

Speaker 10: talking to you about multi-year arrangements if that belief is true, because I see you can provide some color on how they're viewing life beyond this year.

Talking to you about multi year arrangement that belief.

If you can provide some color on.

How they are viewing like beyond this year.

Speaker 3: John , short answer is not really, other than a few customers looking at trying to lock in low rates for longer, I would say that there isn't a lot of long-term planning that's transmitted down to the land drillers yet around long-term contracts, take or pay. We have a handful of customers, I'd say less than a half dozen, where they are seriously making plans beyond one year, but I wouldn't call that a trend.

John short answer is not really.

Other than a few customers looking at trying to.

Lock in low rates for longer I would say that there isn't.

There's a lot of long term planning thats transmitted down to the land drillers yet.

Around long term long term contracts take or pay.

We have we have had.

Full of customers I'd say less than a half dozen where they are seriously, making plans beyond one year, but I wouldn't call. It a trend.

Speaker 10: Fair enough, but do you suspect that's just because of just how...

Fair enough.

And do you suspect that just because of just how.

Speaker 10: the recent volatility, because it seemed to me, and it's kind of a bit of a follow-on to Ian's questions, when you look at where the business is today, the pricing trends and all of that, if all else being equal, it seems your rates are going higher next year if this commodity price environment stays where it is. Why wouldn't you want to be proactive in mitigating that risk if you're the customer? It was kind of a thought.

The recent volatility because it seemed to me.

Instead of a follow on to answer questions. When you look at where the business is today the pricing terms on all of that.

All else being equal it seems your rates are going higher next year commodity price environment stays where it is.

Why wouldn't you want.

Proactive in mitigating that risk for the customer.

Thought.

Speaker 3: color would be great. Well, you know, John , part of it might be that the drilling rig on these high-efficiency wells is still just a very small fraction of the cost of the total well. So if they're putting their focus on an area where they have a lot of financial exposure, it would be sand, propant, it would be pressure pumping, it probably wouldn't be the rig.

Color there would be great well, John part of it might be that the drilling rig on this high efficiency wells, there's still just a very small fraction of the cost of the total wealth. So therefore, they are focused on an area, where they have a lot of financial exposure.

Sand proppant it would be pressure pumping it probably wouldnt be the rig.

Speaker 10: Okay, fair enough. I appreciate your time as always, Kevin. Thanks.

Okay fair enough.

I appreciate kind of noise.

Okay. Thank you.

I'm showing no further questions at this time I would now like to turn the call back over to Mr. Carey Ford for any closing remarks.

Speaker 1: I am showing no further questions at this time. I would now like to turn the call back over to Mr. Carryforth for any closing remarks.

Speaker 2: Okay, thank you for joining us this afternoon. We look forward to connecting with you on our Q1 caucus call in April .

Okay. Thank you for joining us. This afternoon, we look forward to connecting with you on our Q1 conference call in April .

Good day.

Speaker 1: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Speaker 11: ??? ??? ???

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Speaker 1: Good day ladies and gentlemen, thank you for standing by and welcome to the Precision Drilling Corporation's 2021 fourth quarter and end of year results conference call and webcast. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the start and the one key on your touchtone telephone.

Good day, ladies and gentlemen, thank you for standing by and welcome to the position drilling cooperations 2021 fourth quarter and end of year results conference call and webcast. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to quest.

The Star then the one key on your Touchstone telephone.

Speaker 1: Please be advised that today's conference may be recorded. If you would call operator assistance, please press star then zero. I would now like to turn the conference over to your speaker host today, Mr. Kerry Ford, Senior Vice President and Chief Financial Officer for Precision. Please go ahead, sir.

Be advised that today's conference maybe recorded.

They will call offer assistance. Please press Star then zero I would now like turn the conference over to your Speaker House today.

Gerry Ford Senior Vice President and Chief Financial Officer for position. Please go ahead Sir.

Thank you Linda and good afternoon, everyone welcome to precision Drilling's fourth quarter and year end 2021 earnings conference call and webcast participating today on the call with me is Kevin nephew, President and Chief Executive Officer.

Speaker 2: Thank you, Olivia. And good afternoon, everyone. Welcome to Precision Drilling's fourth quarter and year-end 2021 earnings conference call and webcast. Participating today on the call with me is Kevin Nevue, President and Chief Executive Officer.

Speaker 2: Through a news release earlier today, Precision reported its fourth quarter in year-end 2021 results. Please note that these financial figures are in Canadian dollars unless otherwise indicated.

Through our news release earlier today precision reported its fourth quarter and year end 2021 result. Please note that these financial figures are in Canadian dollars, unless otherwise indicated some of our comments today will refer to non <unk> financial measures such as adjusted EBITDA and field level results.

Speaker 2: Some of our comments today will refer to non-IFRS financial measures such as adjusted EBITDA and field-level results. Our comments will also include forward-looking statements regarding Precision's future results and prospects, which are subject to certain risk and uncertainty.

Our comments will also include forward looking statements regarding precision as future results and prospects which are subject.

Certain risks and uncertainties. Please see our news release and other regulatory filings for more information on financial measures forward looking statements and these risk factors.

Speaker 2: Please see our news release and other regulatory filings for more information on financial measures, forward-looking statements, and these risk factors.

Speaker 2: Kevin will begin today's call by providing an overview of current market dynamics.

Kevin will begin today's call by providing an overview of current market dynamics.

Speaker 2: I will follow up the discussion of results and our financial position. Kevin will then provide an overview and output for our various...

I will follow with a discussion of results and our financial position. Kevin will then provide an overview and outlook for our various businesses.

Speaker 3: With that, I'll turn it over to you, Kevin. Thank you, Gary, and good afternoon.

With that I'll turn it over to you Kevin Thank.

Thank you Gary and good afternoon.

Speaker 3: While the global recovery remains uneven and with some lingering uncertainties, the fundamentals for precision may be the best I've witnessed in four decades.

While the global recovery remains uneven and some lingering some lingering uncertainties fundamentals for precision maybe the best I have seen with the support decades.

Speaker 3: Global oil demand has almost fully recovered, but with sharply reduced activity and virtually zero exploration drilling over the last two years.

Global oil demand is almost fully recovered but the.

Sharply reduced activity in virtually zero exploration drilling over the last two years.

Speaker 3: The resulting oil and gas prices are strong and the markets are firmly acknowledging the rapidly tightening oil and gas supply-demand equation.

The resulting oil and gas prices are strong and the markets are firmly acknowledging the rapidly typing oil and gas supply demand equation.

The inventories of drilled uncompleted wells of our ducks as theyre called have dwindled.

Speaker 3: The inventories of drilled, uncompleted wells, or ducts as they are called, have dwindled.

Speaker 3: Superspec rig supply is tight, tighter than most people understand, and customer demand will shortly absorb the remaining spare capacity.

Super spec rig supply is tight tighter than most people understand and customer demand will shortly absorbed the remaining spare capacity.

Labor inflation is here in real but service price inflation is also here in Israel.

Speaker 3: Labor inflation is here and real, but service price inflation is also here and it is real. As I've said in prior calls, we are marching our day rates back to positive earnings territory and then driving rates further to achieve a reasonable return on our invested capital.

As I've said in prior calls we are marching on day rates back to a positive earnings territory, and then driving rates further to achieve a reasonable return on our invested capital.

Speaker 3: Precision Super Triple Rigs are the most efficient, safe, and environmentally responsible rigs that the industry has ever operated.

Precision Super Triple rigs are the most efficient safe and environmentally responsible rigs the industry has ever operated.

The technologies, we are deploying onto our evergreen banner has the capability to measure track and eliminate ghd emissions at the drilling rig and we can do this with cost effective proven solutions.

Speaker 3: The technologies we are deploying under our evergreen banner have the capability to measure, track, and eliminate GHG emissions at the drilling rig, and we can do this with cost-effective proven solutions.

Speaker 3: The uneven nature of the economic recovery and the risk of further economic interruptions continue to cause some uncertainty, but this uncertainty is mitigated by the laser-like focus on financial discipline by the capital markets.

The uneven nature of the economic recovery and the risk of further economic interruptions continue to cause some uncertainty, but this uncertainty is mitigated by the laser like focus on financial discipline by the capital markets.

Speaker 3: Precision's customers who are generating record levels of cash flow have responded to those investor expectations with highly disciplined capital allocation strategies.

<unk> customers, who are generating record levels of cash flow have responded to those investor expectations with highly disciplined capital allocation strategies.

Speaker 3: Balance sheets are largely repaired, and the producers are returning capital to shareholders with dividends, special dividends, and share buybacks, further cementing the capital discipline mantra.

Balance sheets are largely repaired and the producers are returning capital to shareholders as dividends special dividends and share buybacks further cementing the capital discipline mantra.

The boom like rapid recovery scenario, we've seen in prior cycles, where rig demand correlates with the commodity price is it overshoots is simply not possible today.

Speaker 3: The boom-like rapid recovery scenario we've seen in prior cycles, where rigged demand correlates with commodity price and then overshoots, is simply not possible today.

Speaker 3: Capital discipline is well entrenched throughout the industry and this is driving a longer, slower and extended recovery cycle with shareholder returns remaining prioritized.

Capital discipline, as well and trends towards industry throughout the industry and this is driving a longer slower and extended recovery cycle with shareholder returns remaining prioritized.

Speaker 3: Combining the measure of recovery with the industry's determined focus on emissions and corporate responsibility defines a healthy, strong future for precision and for our customers.

Combining the measured recovery with industry's determined focus on emissions and corporate responsibility defines a healthy strong future for precision for our customers.

Speaker 3: And with that, I'll now turn the call back to Terry Ford for our financial results.

With that I'll now turn the call back to carry forward for our financial results. Thank.

Speaker 2: Thank you, Kevin. In early January , we released our capital allocation framework through 2025, where we expect to pay down $400 million in debt over the next four years, eclipsing $1 billion in debt reduction since 2018.

Thank you Kevin in early January we released our capital allocation framework through 2025, where we expect to pay down $400 million in debt over the next four years eclipsing $1 billion in debt reduction since 2018, and reaching a net debt to EBITDA leverage level below one five times.

Speaker 2: and reaching a net debt to EBITDA leverage level of below 1.5 times.

Speaker 2: Importantly, we also announced a prioritization of return of capital directly to shareholders, allocating 10 to 20 percent of pre-cash flow before debt reduction toward this goal.

Importantly, we also announced a prioritization of return of capital directly to shareholders allocating 10% to 20% of free cash flow before debt reduction toward this goal.

Speaker 2: We recognize the substantial operating leverage inherent in precision drilling and the business's ability to grow market, in a growing market to generate adequate cash flow to fund growth, reduce debt, and return capital to shareholders.

We recognize the substantial operating leverage inherent in precision drilling and the businesses ability to grow market and a growing market to generate adequate cash flow to fund growth.

<unk> debt and return capital to shareholders.

Moving on to our fourth quarter results.

Our fourth quarter adjusted EBITDA of $64 million increased 16% from the fourth quarter of 2020 supported by higher North American activity.

Speaker 2: Our fourth quarter adjusted EBITDA of $64 million increased 16% from the fourth quarter of 2020, supported by higher North American activity.

Also included in adjusted EBITDA during the quarter as share based compensation expense of $6 million inventory write downs of $3 million and nonrecurring labor impacts of $3 million absent. These items adjusted EBITDA would have been $76 million for the quarter.

Speaker 2: Also included in the Adjusted EBITDA during the quarter is share-based compensation expense of $6 million, inventory write-downs of $3 million, and non-recurring labor impacts of $3 million. As in these items, Adjusted EBITDA would have been $76 million for the quarter.

Speaker 2: In the U.S., drilling activity for precision averaged 45 rigs in Q4, an increase of 4 rigs from Q3.

In the U S drilling activity for precision averaged 45 rigs in Q4, an increase of four rigs from Q3.

Speaker 2: daily operating margins in the quarter absent impacts of turnkey and I don't put contracted payments were $5,000.

Daily operating margins in the quarter absent impacts of turnkey and idle, but contracted payments were 5000.

Speaker 2: 648 US dollars, an increase of 410 US dollars from Q3.

$648, an increase of 410 U S dollars from Q3.

Speaker 2: The increase was impaired by $620 U.S. dollars per day of charges related to non-recurring margin impact.

The increase was impaired.

By $620 per day of charges related to nonrecurring margin impacts.

Absent impacts of turnkey and labor daily operating margins would have been $1030 higher than Q3.

Speaker 2: Absent impacts of turnkey and labor, daily operating margins would have been $1,030 U.S. higher than Q3.

For Q1, we expect margins absent of IPC and turnkey to increase approximately $500.

Speaker 2: For Q1, we expect margins absent of IBC and turnkey to increase approximately $500 per day.

Per day from Q4 levels.

In Canada drilling activity for precision averaged 52 rigs an increase of 24 rigs are 87% from Q4 2020 daily.

Speaker 2: In Canada, drilling activity for precision averaged 52 rigs, an increase of 24 rigs or 87% from Q4 2020. Daily operating margins in the quarter, ascent queues and shorefall payments were $7,990, an increase of $1,095 from Q4 2020.

Daily operating margins in the quarter as accused in shortfall payments were $7990 an increase of $1095 from Q4 2020.

Q4 margins net of choose in shortfall payments increased $2701 sequentially from Q3 2021.

Speaker 2: Q4 margins, net of Qs, and shortfall payments increased $2,701 sequentially from Q3 2021.

Speaker 2: For Q1, we expect margins, absent of Qs and shortfall payments, to increase between $1,500 and $2,000 per day compared to Q1 2021 and up approximately $500 per day sequentially.

For Q1, we expect margins absent of queues in shortfall payments to increase between <unk>.

<unk> hundred $2000 per day, compared to Q1, 2021 and up approximately $500 per day sequentially.

Internationally drilling activity for precision in the quarter averaged six rigs on average day rates were 52069 U S dollars down approximately 6% from the prior year due to active rig mix.

Speaker 2: Internationally, drilling activity for precision in the quarter averaged 6 rigs and average day rates were at $52,069 U.S. dollars, down approximately 6 percent from the prior year due to active rigming.

And our CMP segment adjusted EBITDA this quarter was $6 $3 million up over 18% compared to the prior year quarter. Adjusted EBITDA was positive positively impacted by a 21% increase in well servicing hours.

Speaker 2: In our C&P segment, Adjusted EBITDA this quarter was $6.3 million, up over 18% compared to the prior year quarter. Adjusted EBITDA was positively impacted by a 21% increase in wealth servicing hours, reflecting higher industry activity in the quarter. We expect results will

Reflecting higher industry activity in the quarter.

We expect results were will further strengthened in Q1.

Speaker 2: due to increased industry activity and additional work supported by the Canadian government's 1.7 billion dollar well site abandonment and rehabilitation program.

Due to increased industry activity and additional work supported by the Canadian government $1 7 billion, well side abandonment and rehabilitation program.

Speaker 2: Of note is the team's success in capturing pricing increases to cover both increased wages and the removal of the CEWS program support in an effort to drive higher margins.

Of note is the team's success in capturing pricing increases to cover both increased wages and the removal of the accused program support and an effort to drive higher margins.

Speaker 2: Capital expenditures for the quarter were $28 million and $76 million for the year. Our capital expenditures were in line with expectations.

Capital expenditures for the quarter was $28 million and $76 million for the year, our capital expenditures were inline with expectations and higher than 2020 as a result of increased 2021 activity and expectations for continued rig activations in 2022.

Speaker 2: and higher than 2020 as a result of increased 2021 activity and expectations for continued rig activations in 2022.

Speaker 2: Our 2022 capital plan is $98 million is comprised of $56 million for sustaining an infrastructure and $42 million for upgrading and expansion, which relates to anticipated investments supporting alpha technologies and contracted customer upgrades.

Our 2022 capital plan is $98 million is comprised of $56 million for sustaining and infrastructure and $42 million for upgrade and expansion, which relates to anticipated investments supporting alpha technologies and contracted customer upgrades.

As of February nine we had an average of 39 contracts in hand for the first quarter and an average of 31 contracts for the full year 2022.

Speaker 2: As of February 9th, we had an average of 39 contracts in hand for the first quarter and an average of 31 contracts for the full year 2020.

Moving to the balance sheet, we continue to reduce both absolute net debt levels, primarily through free cash flow generation and succeeded in reducing debt by $115 million in 2021.

Speaker 2: Moving to the balance sheet, we continue to reduce both absolute and net debt levels primarily through free cash flow generation.

Speaker 2: succeeded in reducing debt by $115 million in 2021.

As of December 31, our long term debt position net of cash was approximately $1 1 billion and our total liquidity position was approximately $530 million excluding letters of credit.

Speaker 2: As of December 31st, our long-term debt position net of cash was approximately $1.1 billion and our total liquidity position...

Speaker 2: approximately $530 million excluding letters of credit.

Speaker 2: Our net debt to trailing 12-month EBITDA ratio is approximately 5.5 times.

Our net debt to trailing 12 months EBITDA ratio was approximately five five times.

Speaker 2: and average cost of debt is 6.4%. We remain in compliance with all our credit facility covenants in the fourth quarter with EBITDA to interest coverage ratio of 2.8 times.

And average cost of debt is six 4% we remain in compliance with all our credit facility covenants in the fourth quarter with EBITDA to interest coverage ratio of 2.8.

<unk> eight times.

With continued debt reduction and.

Speaker 2: and activity expectations, we believe we will end 2022 with a substantially lower net debt to EBITDA ratio, moving precision much closer to our goal of below 1.5 times leverage.

And activity expectations. We believe we will end 2022 with a substantially lower net debt to EBITDA ratio moving precision much closer to our goal of below one five times leverage.

For 2022, we expect to continue generating free cash flow through operations and do not expect incremental benefit from working capital release as activity is increasing in both U S and Canada.

Speaker 2: 2022 we expect to continue generating free cash flow through operations and do not expect incremental benefit from working capital release as activity is increasing in both US and Canada.

Speaker 2: For 2022, we expect to generate strong free cash flow for the year.

For 2022, we expect to generate strong free cash flow for the year.

Speaker 2: with Q1 cash flow impacted by front-end loaded CapEx, working capital bill, our semi-annual interest payment, and year-end payment.

With Q1 cash flow impacted by front end loaded capex.

Working capital build our semi annual interest payment and year end payments.

Speaker 2: Our year-end target for death reduction in 2022 is at least $75 million.

Our year end target for debt reduction in 2022 is at least $75 million.

For 2022, we expect depreciation to be approximately $270 million.

Speaker 2: For 2022, we expect depreciation to be approximately $270 million. We expect SG&A to be $65 million to $70 million before share-based compensation expense.

SG&A to be 65 million to $70 million before share based compensation expense.

We expect cash interest expense to be below $80 million for the year, and we expect cash taxes to remain low and our effective tax rate to be in the 5% range with that I will turn the call over to Kevin.

Speaker 2: below $80 million for the year, and we expect cash taxes to remain low and our effective tax rate to be in the...

Speaker 3: With that, I will turn the call over to Kevin. All right. Thank you, Kerry. So, beginning in U.S. land, we continue to experience strong demand for our Super Triple Rigs. As Kerry mentioned, our activity and rates have been tracking well, with Q4 activity up 10% for the third quarter, and with 52 rigs running today, Q1 activity is already trending up 12% sequentially and may rise further as our first quarter rig activity approaches the mid-50s.

Thank you Terry so beginning of U S land, we continue to experience strong demand for our Super Triple rigs as Carey mentioned, our activity and rates have been tracking well with Q4 activity up 10% for the third quarter and with 52 rigs running today Q1 activity is already trending up 12% sequentially and May rise further as our first quarter rig activity approaches the bid.

<unk> with current customer interest in bidding activity. It seems that trajectory may continue through the year.

Speaker 3: With current customer interest and bidding activity, it seems this trajectory may continue through the year.

Leading edge rates have for gross progressed to the mid twenties for active rigs and are now moving into the same range for cold rigs.

Speaker 3: Leading-edge rates have progressed to the mid-20s for active rigs and are now moving into the same range for cold rigs due to the rising, industry-wide rising activation costs. While super-spec rigs

Due to the rising industrywide rising activation costs.

While super spec rigs are not fully sold out.

Industry supply is much much tighter than most people believe regional shortages have developed and customers are paying for trucking costs for basin to basin moves between mid December and mid February precision customers upfront of the costs were two basin to basin Super Triple rig moves.

Speaker 3: Industry supply is much tighter than most people believe. Regional shortages have developed, and customers are paying full trucking costs for basin-to-basin moves. Between mid-December and mid-February, Precision's customers have fronted the cost for two basin-to-basin super-triple rig moves.

Speaker 3: Regarding precision as market discipline and pricing strategy, the key pricing signal we can send our customers is a refusal to accept lower-than-threshold day rates, and this means we walk away. I'll tell you that we are not pursuing market share. Our focus is on the economic return for each rig opportunity we pursue.

Regarding precision is market discipline and pricing strategy to achieve pricing signal. We can send our customers is a refusal to accept lower than threshold day rates and this means we walk away I will tell you that we are not pursuing market share. Our focuses on the economic return for each rig opportunity we pursue.

Turning to our Canadian business. The winter drilling season is off to a strong start activity is slightly lower than peak levels. We anticipated, but this was largely due to some customer driven delays, we expect activity will remain firm with seasonal slowdown driven by weather not by budget exhaustion.

Speaker 3: Turning to our Canadian business, the winter drilling season is off to a strong start. Activity is slightly lower than the peak levels we anticipated, but this is largely due to some customer-driven delays. We expect activity will remain firm with a seasonal slowdown driven by weather, not by budget exhaustion.

Speaker 3: Currently, we're running 66 rigs. Four additional rigs are delayed for customer supply chain and location preparation issues. This work should be completed later in the quarter.

Currently we are running 66 rigs four additional rigs are delayed for a customer supply chain and location preparation issues. This work should be completed later in the quarter.

Speaker 3: Customer indications for second quarter look very strong, with spring break-up break demand running 25-30% higher than last year, and early indications are that Q3 activity may again exceed winter activity levels. All of this bodes very well for our Canadian business.

Customer indications for our second quarter look very strong with spring spring break up rig demand running.

Running 25% to 30% higher than last year and early indications are that Q3 activity may again exceed winter activity levels. All of this bodes very well for our Canadian business.

Speaker 3: As Kerry mentioned, we've demonstrated excellent rate direction in Canada during 2021 and we expect that trend to continue in 2022.

Carey mentioned, we've demonstrated excellent rate traction in Canada during 2021, and we expect that trend to continue in 2022.

Speaker 3: I know our customers don't like to hear this, but it is essential that the Canadian services industry recovers to sustainable financial returns.

Under our customers don't want to hear this but it is essential that the Canadian services industry recovers a sustainable financial returns.

Canadian producer Economics are very strong indeed, with Western Canada select currently trading at a highest level since April 2014, and the Canadian dollar exchange rate and the 79 U S range and cash flows for our Canadian customers are all time highs.

Speaker 3: Canadian producer economics are very strong indeed, with Western Canada Select currently trading at its highest level since April 2014, and the Canadian dollar exchange rate in the $0.79 US range, the cash flows for our Canadian customers are all-time highs. This brings me to discuss a specific play in Canada, and while we have often talked about the Montagne, today I want to talk about the Martin Hills Clearwater play.

This brings me to discuss the specific play in Canada, and while we have often talked about the montney today I want to talk about the Marten Hills Clearwater play.

Speaker 3: This is a relatively new heavy oil play which has grown to 21 industry rigs active today from just a handful of rigs in 2019.

This is a relatively new heavy oil play, which has grown to 21 industry rigs active today from just a handful of rigs in 2019.

With horizontal wells and measured depths in the 2800 meter range. The drilling programs are ideally suited to precision high performance Super single pad style rig <unk>.

Speaker 3: With horizontal wells in measured depths in the 2800 meter range, the drilling programs are ideally suited to Precision's high-performance, super-single, pad-style rig.

Speaker 3: Precision currently is operating 11 super single rigs in the Clearwater region, holding a 55% market share. And this has grown from just three rigs in 2019 before the pandemic.

Precision currently is operating 11 Super single rigs in the Clearwater region, holding a 55% market share and this has grown from just three rigs in 2019 before the pandemic.

Speaker 3: We think the Clearwater, like the Montany, has good long-term fundamentals with strong commodity price support, very good geology, and pad-style horizontal drilling where high-efficiency drilling rigs de-risk the F&D costs.

We think the Clearwater like the Montney is a good long term has good long term fundamentals with strong commodity price support very good geology, and pad style horizontal drilling where high efficiency drilling rigs derisked. The F&D costs. So Clearwater will continue to be a strong demand driver for precision Super single rigs.

Speaker 3: The Clearwater will continue to be a strong demand driver for precision super single rigs.

Speaker 3: Now for some, it might be easy to discount or reject the Canadian market, yet with Precision's blanketed Canadian footprint, our super single and super triple rigs combined with our scale efficiency and our high-performance, high-value strategy, Canada remains a strong and key geography for Precision's cash flow generating capabilities.

Now for some it might be easy to discount or rejected Canadian market, yet with precision is blanketed Canadian footprint, our super single and Super Triple rigs combined with our scale efficiency and our high performance high value strategy.

Canada remains a very strong in key geography for precision as cash flow generating capabilities.

Speaker 3: To round out our Canadian business, Curry mentioned our well service group is experiencing very strong customer demand and delivering substantially improved revenue and operating margins.

To round out our Canadian business as Carey mentioned, our well service group is experiencing very strong customer demand and delivering substantially improved revenue and operating margins.

Speaker 3: Customer demand looks to remain strong following several years of low activity and pent-up operator demand for both conventional well-servicing and well-abandonment.

Customer demand looks to remain strong following several years of low activity and pent up operator demand for both conventional well servicing and <unk> and.

Speaker 3: And this demand has been further enhanced by the federally funded WellSite Reclamation Program.

And this demand has been further enhanced by the federally funded well type recognition program.

Speaker 3: Labor challenges are constraining the well-serviced industry, yet our team has performed very well, fully stopping the 50 rigs we have running today, and we expect to have further crew capacity activated for what is looking like a strong second half of 2022.

Labour challenges are constraining, the well service industry, yet our team has performed very well for this stuff into 50 rigs we have running today and we expect to have further crew capacity activated for what is looking like a strong second half of 2022.

The team has worked very hard to justify the value of precision provides our customers and we succeeded in pushing rates in the right direction.

And again.

The service industry hourly rates have improved the lows of 2020, the industry is still need substantially higher prices to be financially sustainable on their own.

Our team is well focused on this challenge and we expect to continue to see continued margin improvement through 2022.

Turning to our international business reduced continued to operate.

Speaker 3: Turning to international business, we continue to operate.

Speaker 3: three rigs in Kuwait and three rigs in Saudi Arabia. We're working with our clients in both markets on upcoming tender specifications and we're bidding for opportunities with other operators in the region that have nothing new to report today. My expectation remains that as OPEC's production limits are fully removed in the coming months, these potential rig activations will materialize.

Three rigs in Kuwait, and three rigs in Saudi Arabia.

We're working with our clients in both markets on upcoming tender specifications and we're bidding for opportunities with other operators in the region, but have nothing new to report today My expectation remains that as Opex production limits are fully removed to the coming months. These potential rig activations will materialize.

Turning to our digital strategy for.

For pad based.

Speaker 3: development-style drilling, the game has changed and the bar has been reset. The days of pushing our crews and equipment faster and harder has run its course.

Development style drilling the game has changed and the bar has been reset the days of pushing our crews and equivalent faster and harder has run its course.

Speaker 3: Today, our most cost efficient customers have adopted our alpha digital automation and digital analytics to optimize and ensure maximum rig efficiency process and cost control.

They are most cost efficient customers have adopted our alpha digital automation and digital analytics to optimize and ensure maximum rig efficiency process and cost control.

Customer acceptance and demand for Alpha digital products continues to grow as we reported in our press release, we are expanding our <unk> automation footprint across our fleet and expect to have fleet coverage up to 70% by the end of this year.

Speaker 3: Customer acceptance and demand for our alpha digital products continues to grow. As we reported in our press release, we are expanding our alpha automation footprint across our fleet and expect to have fleet coverage up to 70% by the end of this year. We also continue to add to our

We also continue to add to our library of Alpha apps.

Speaker 3: and continue to demonstrate the value to our customers. I expect this growth trajectory to continue and further drive our competitive advantage.

And then continue to demonstrate the value to our customers.

This growth trajectory to continue and further drive our competitive advantage.

Speaker 3: Turning to ESG, I'm very excited about the progress they've made in a very short time with their evergreen suite of environmental solutions. As I mentioned earlier today, our customers are increasingly focused on rig emissions and sustainability.

Turning to ESG.

Very excited about the progress we've made in a very short time with our evergreen suite of environmental solutions as I mentioned earlier today, our customers are increasingly focused on rig emissions and sustainability.

Speaker 3: Precision's evergreen technologies encompass several lower CO2 emission combustion power alternatives, hybrid battery power systems, grid power systems, and combustion fuel real-time monitoring systems, offering our customers a range of solutions to monitor and reduce emissions right down to zero.

Decisions evergreen technologies encompass several lower cotwo emissions combustion power alternatives hybrid battery and power systems grid power systems, and combustion fuel real time monitoring systems offering our customers a range of solutions to monitor and reduce emissions right down to zero.

Speaker 3: Customer acceptance and uptake has been strong, with 48% of our operating fleet today equipped with at least one evergreen emission reduction solution.

Customer acceptance and uptake has been strong with 48% of our operating fleet today equipped with at least one evergreen emission reduction solution with.

Speaker 3: With current bookings, we expect to have 10 evergreen combustion fuel monitoring systems installed and running, and six hybrid battery storage systems operating by midyear.

With current bookings, we expect to have 10 evergreen combustion fuel monitoring systems installed and running in six hybrid battery storage systems operating by mid year.

Our expected over the next few years all of our rigs we utilized some combination of evergreen products reduce ghd emissions meeting our customers' targets.

Speaker 3: I expect that over the next few years, all of our rigs will utilize some combination of evergreen products to reduce GHG emissions, meeting our customers' targets.

Speaker 3: Now turning to our annual strategic priorities, I'm very pleased to be completed and delivered on the priorities we outlined at the beginning of 2021, and I thank the employees of Precision for contributing to those priorities.

Now turning to our annual strategic priorities I am very pleased that we completed and delivered on the priorities. We outlined at the beginning of 2021 and I. Thank the employees of precision for contributing to those priorities.

Speaker 3: For 2022, I want to be clear that we've adjusted our capital allocation plans by now also prioritizing targeted capital returns to our shareholders.

For 2022, I want to be clear that we have adjusted our capital allocation plans by now also prioritizing targeted capital returns to our shareholders.

Speaker 3: This is a clear indication that we believe we have a strong and stable capital structure with a sustainable runway of deployable free cash flow.

This is a clear indication that we believe we have a strong and stable capital structure with a sustainable runway of deployable free cash flow.

Speaker 3: We'll continue to reduce debt and de-leverage as guided. Our other priorities, including a strong focus on free cash flow and expanding our technology offerings, will continue in 2022.

We will continue to reduce debt and delever as guided.

Our other priorities, including a strong focus on free cash flow and expanding our technology offerings will continue in 2022.

Speaker 3: So finally, I want to thank the people of Precision out in our rigs, in our support centers, and in our offices for the safety and the work execution that underpins everything we do as an oil service provider. With that, I'll now turn the call back to the operator for comments, questions.

So finally I want to thank the people of precision rigs in our support centers in their offices for the safety and the <unk> execution that underpins everything we do is oil service provider.

I will now turn the call back to the operator for comments and questions.

Thank you, ladies and gentlemen, I'd like to ask a question at this time. Please press. The Star then the one key on your Touchtone telephone.

Speaker 1: Thank you ladies and gentlemen. If you'd like to ask a question at this time, please press the start and the 1 key on your touch-tone cell phone. To withdraw your question, you may press the pound key. Please stand by while we compile the Q&A roster.

A question you May press the pound key.

That will be from Bob Kenny roster.

Speaker 1: Now, first question coming from the line of Erin McNeil with TV Security, your line is now open.

Now first question coming from the line of Mike.

<unk> with TD Securities. Your line is now open.

After the hardest things for taking my.

Speaker 4: Afternoon all thanks for taking my questions. You've mentioned the leading edge day rates in the mid 20s matching

Questions.

You've mentioned, the leading edge day rates in the mid 20 matching.

A lot of your peers that have reported over the last few weeks I guess I'm just wondering how much of that is.

Speaker 4: lot of your peers that have reported over the last few weeks. I guess I'm just wondering, you know, how much of that is...

Keeping up with cost inflation and how much of it would be.

Speaker 4: keeping up with cost inflation and how much of it would be, you know, capturing more economic rent given the improvement in the.

Capturing more economic rents given the improvement in the sector.

Hey, Aaron it's Karen So I would say that part of it is a labor increase that we implemented in December which was about $800. A day I think that's kind of standard for.

Speaker 2: Hey Aaron, this is Kerry. So I would say that part of it is a labor increase that we implemented in December , which

Speaker 2: about $800 a day. I think that's kind of standard for, if we're talking about the U.S. market, kind of standard for our peers. We do have some reactivation costs that we're still absorbing. We reactivated six rigs in Q4, and we plan to reactivate another six rigs in Q7.

If we were talking about U S market kind of standard for our peers. We do have some reactivation cost that were still absorbing we reactivated six rigs in Q4, and we plan to reactivate another six strengthen in Q1 and Thats kind of trending at 150 to $200000 a day thats, pushing pushing cost up a little bit and when.

Speaker 2: Q1, and that's kind of trending at $150,000 to $200,000 a day, so that's pushing costs up a little bit. And we do have a little bit of inflation, I think it's a lot lower than other segments of the oil field service sector, but we do have a little bit of inflation. So all in all, you know, it might be, let's call it...

You have a little bit of inflation I think it's a lot lower than other segments of the oilfield service sector, but but we do have a little bit of inflation. So all in all it might be.

Call it $500 a day of increased costs that we're passing through.

Speaker 2: $1,500 a day of increased cost that we're passing through.

Speaker 2: The rest of it would be margin expansion, and as we mentioned in our last call, we thought that Q3 would mark the bottom or the top of the cycle for margins, and we showed increasing margins in Q4. We expect to continue.

The rest of it would be margin expansion as we mentioned on our last call we thought that.

Q3 would mark the bottom or the trough of the cycle for margins and we showed it.

<unk> margins.

In Q4, we expect to continue to show increasing margins in Q1 and Q2.

So we would we would be capturing more of the more of the margin through higher day rates.

Speaker 2: capturing more of the margin through higher day rates than we saw through most of 2020.

And we saw through most of 2021.

Speaker 4: Understood. And acknowledging your January press release, you know, with the guidance for Q1. But, you know, since that time, we've seen companies like Exxon and Chevron announced they're going to start growing again and the Permian.

Understood.

And acknowledging your January press release.

The guidance for Q1, but.

Since that time, we've seen companies like Exxon and Chevron announced theyre going to start growing again in the Permian.

Speaker 4: I guess my question for you is, on the margin, have your expectations for the activity outlook in both Canada and the U.S. changed since you put that press release out? And if so, could you provide any order of magnitude?

Yes. My question for you is on the margin of your expectations for the activity outlook.

Both Canada and the U S changed since you put that press release out in <unk>.

If so could you provide any order of magnitude.

Speaker 3: Aaron, I'd say, yeah, they have changed. And I'd say, you know, we're kind of modestly shifting, or moderately shifting, more and more positive as we kind of go through each, you know, almost each month that passes with these stronger commodity prices.

Aaron I would say, yes, they have changed.

And I would say.

We're kind of modestly shifting.

A moderately shifting more and more positive as we can kind of go through each.

Almost each months in passives, but the stronger commodity prices.

Speaker 3: But I would say that our guidance on activity into the back half of the year, particularly in my comments both for the U.S. and Canada, kind of reflect that optimism. There's no question this cycle is different than previous cycles. We're not seeing our customers overshoot the commodity price. We're seeing a very well-managed and kind of controlled...

I would say that our guidance on activity into the back half of the year.

Particularly in my comments, both in the U S and Canada kind of reflect that optimism.

There's no question this cycle is different than previous cycles rotating our customers overshoot the commodity price, we're seeing a very well managed and kind of controlled.

Speaker 3: had back-of-rigs, you know, at the beginning of the super-majors and making small announcements, but it really feels like with the activity we have in our bidding team and our sales team right now that the gains that we were showing in Q1 and into Q2 we expect to carry on to the balance of the year. And we think there could be upside to that, but it just depends how quickly our customers pivot back to bringing in some small amounts of growth.

Pat back of rigs.

Beyond the Super majors that making small announcements, but it really feels like with the activity we have in our bidding team and our sales team right now.

The gains that we were showing in Q1 and into Q2, we expect to carry on to the balance of the year and we think there could be upside to that but it just depends how how quickly our customers pivot back to <unk>.

Bringing in some small amounts of growth.

Speaker 4: Understood, seems like we're in the early stages of an equipment upgrade cycle. I don't know if you agree or disagree, but.

Understood.

Seems like we are in the early stages of an equipment upgrade cycle I don't know if you agree or disagree but.

Speaker 4: It also seems like among the four or five top North American drillers that there's discipline on returns and that remains largely intact. But I guess I'm wondering, is that also true of some of your smaller competitors?

It also seems like among the 445 top North American drillers that theres disciplined on returns and that remains largely intact, but I guess I'm wondering is that also true in some of your smaller competitors that we may not be tracking this closely.

It's.

Speaker 3: You know, it's kind of hard to say. Generally, when we're competing with a customer these days, it's almost always a case where it's just us and one or two others. We don't often see a lot of the smaller competitors. That's especially true in Canada. We're talking about super triples. But in the US, it'll be us and one of the other two or three other large drillers competing. So we're really not getting a good sense of what the smaller drillers are doing. So you know what, we just don't see a lot of competition from those smaller drillers.

Kind of hard to say.

Generally when we're competing with the customer these days, it's almost always the case, where it's just us a one or two others. We don't often see a lot of the smaller competitors, that's especially true in Canada were talking about super triples, but in the U S. It will be us that one of the other two or three other large draws competing so we're really not giving you a good sense of what the smaller drillers are doing.

So we just don't see a lot of competition from those smaller drillers.

That's helpful. Carey on the capital program you mentioned in your prepared remarks that it would be.

Speaker 4: helpful. Carrie, on the capital program, you mentioned your prepared marks that it would be front-end loaded, and I guess it sort of begs the question, that $42 million that's earmarked for expansion and upgrades, is that all committed or mostly committed at this point, or is it a placeholder? And, you know, what I'm ultimately trying to drive at is, could we see that number expand throughout the year if activity levels are higher?

The front end loaded and I guess, it sort of begs the question.

That's $42 million, that's earmarked for expansions and upgrades is that all committed are mostly committed at this point or is it a placeholder and what I'm ultimately trying to drive that is could we see that number expand throughout the year.

Activity levels are higher than you expect.

Okay. So on the on the growth capital some of it is committed.

Speaker 2: Okay, so on the growth capital, some of it's committed. I think we've made some commitments to kit out 70 of our super triples with alpha technologies. So that part is committed and then we have some long lead items that we've committed for some near term upgrades. But you're right, if activity does grow faster than we expect and there are more economic upgrade opportunities, that number could go up throughout.

Well I think we've made some commitments to to kit out 70 of our Super triples with Alpha technologies. So that part is committed and then we have some long lead items that we've committed.

For some near term upgrades, but you are right if activity does grow faster than we expect and there are more.

Economic upgrade opportunities that number could go up throughout the year.

Speaker 4: Understood. And last question for me, I've already asked, so I'll turn it over. But it's just been such an unusual winter here in Alberta. So just any comments that you could provide on the shape of spring breakup or potential road ban.

Understood and last question from the Internet.

Okay.

It's just been such an unusual winter here in Alberta. So just any comments that you can provide on the shape of spring breakup for potential road activities would be helpful.

Speaker 3: No guidance yet, certainly it's quite warm this week and we've already run into some situations where we have some rigs that can't get onto location yet, so it's causing a few delays.

No guidance, yet certainly it's quite warm this week.

We've already run in some situations, where we have some rigs that can't get onto location, yes, thats, causing a few delays.

My sense is if there is if there is early weather breakup that pushes a lot more work and pricing tension into acute until late Q2 Q3.

Speaker 3: My sense is, if there's an early weather breakup, that pushes a lot more work and pricing tension into late Q2, Q3.

<unk>.

Speaker 3: You know, it might be a short-term drag on activity, but probably a net positive for the year.

It might be a short term drag on activity, but probably.

Net positive for the year.

Speaker 4: Okay, that makes sense. Yes, it makes sense. I'll turn it over. Thanks. Thanks a lot, Aaron.

Okay that makes sense.

Makes sense I'll.

I'll turn it over thanks, Thanks, a lot Eric.

Speaker 1: Our next question coming from the line of James West with Evercore ISI. Your line is open.

Our next question coming from the line of James West with Evercore ISI. Your line is open.

Hey, Kevin Perry are you doing.

Speaker 5: James, how are you? I'm doing well. First question on North America. What do you see as the biggest constraint to your growth at this point? Is it needing to upgrade rigs for specifications? Is it labor? Is it supply chain? I mean, it seems to me like we're going to see a nice pickup in the rig count. I'm curious on what you see as the impediment to that.

Hi, James how are you.

Im doing well.

Quick question on North America.

Do you see as the biggest constraint to your growth at this point is it.

We need to upgrade rigs first thats. The case is it labor and supply chain.

It has to be like Youre going to see.

Pick up in the rig count.

But curious what you would see the impediments to that.

Speaker 3: Well, I would tell you that I think that the it's a bit of a good news, good news story. I think we're going to run out of super spec rigs in our fleet during this calendar year.

Well I would tell you that I think that.

It's a bit of a good news good news story I think we're going to run out of Super spec rigs in our fleet during this calendar year.

Speaker 3: And, you know, we have another group of rigs, about 15 rigs, that are really strong upgrade candidates. That would probably take day rates that have a three in them.

And we have another group of rigs about 15 rigs that are really strong upgrade candidates.

That would probably take day rates would have a three on the left hand side.

Speaker 3: And we do see some good long-term contracts, you know, probably two- to three-year contracts. But a high-quality problem for precision would be running out of superspec rigs in calendar year 22.

Okay, and with you to see some good long term contracts pseudo probably two to three year contracts.

High quality problem for precision to be running out of Super spec rigs in calendar year 'twenty two.

Speaker 2: Yeah, I always said that when we talk about operating leverage within precision, what we're talking about is the spare capacity that we have to address the super spec market in the calendar year where limited upgrades are required. You know, we're still – the upgrades we're doing are adding off-automation, adding high-torque drill pipe or pumping capacity, and you're still kind of in the low single digits, millions of dollars, so we don't – we don't think that we're –

Kevin when we talk about operating leverage within precision what we're talking about is the spare capacity that we have to address the super spec market in the calendar year. We're limited upgrades are required.

Still that rates were doing are adding alpha automation, adding.

<unk> drill pipe for our pumping capacity and are still kind of in the low single digits millions of dollars. So.

So we don't.

We don't think that we're going to have to spend a whole lot of capital to address the market that carry we have 55 rigs running or 52 rigs running today and we have 67 Super spec rigs available in the U S. That's right.

Okay. That's very helpful. Thanks, guys and then maybe just one more for me on the Middle East will clearly going to have a call of additional production at some point.

The big large versus you work for are aware of that and that's why of course, there are tendering to al could you.

Speaker 5: are aware of that, and that's why, of course, they're tendering now. Could you comment on the magnitude of, if you were to be successful in some of these tenders, or when you are successful, how many more rigs you might commit to the region? If those would be, you would move rigs, or would those be upgrades, and how would that impact your capital program?

Comment on those.

The magnitude of this successful tender.

When you are successful how.

How many more rigs, but commit to the region.

It would be.

You would move rigs or would those be upgrades, how would that impact your capital program.

There is a fair amount of bidding activity right now going on so we've got the three idle rigs in Kuwait that we expect to get reactivated during the year.

Got one idle rig on the ground in Saudi that could be activated this year three more idle rigs in Kurdistan and Georgia that erect.

Speaker 3: Actually, one of those rigs is looking like it might end up in Dubai, right?

Actually one of those rigs is looking like it might be end up in <unk> or in Dubai right.

Speaker 3: So two in Georgia, two in Kurdistan, one in Dubai that could be activated. And we've had some tenders recently where we're looking at possibly utilizing some of our super singles and some other tenders that might be in the 1500 horsepower class. However, if we're utilized in North America, we would probably back away from those tenders.

So.

Two in Georgia.

Curtis down wanted.

Dubai, there can be activated.

And we've had some tenders recently, where we're looking at possibly utilizing some of our Super singles and some other tenders that might be in the 1500 horsepower class. However, if were utilized North America, we would probably back away from those centers.

Okay got it.

Speaker 2: Okay. Okay. Got it. Thanks, Gary. I just had another comment there, kind of along that operating leverage theme. You know, the most likely rig activations near term would be the three Kuwait rigs, which are all, you know, they're all super spec AC deep capacity rigs that are six years old and won't require a whole lot of capital to go into a new contract, you know, kind of in the $4 million range per rig. Okay. Okay. Got it. Thanks, Gary.

Just add another comment there kind of along that operating leverage than most most likely rig activations near term would be the three rigs which are all.

They're all Super spec AC.

Deep capacity rigs that are six years old.

And what require a whole lot of capital to go into a new contract kind of in the.

$4 million range per rig.

Okay. Okay.

Okay.

Thanks.

Speaker 1: Our next question coming from the line of Taylor Gershom with Tudor Picker & Hold, your line is open.

Our next question coming from the line of Taylor.

<unk> <unk> with Tudor Pickering Holt Your line is now open.

Speaker 6: Hey Kevin and Kerry, good afternoon. First question on Canada, over the past two weeks down here in the U.S., there's been so much talk about significant pricing improvements.

Hey, Kevin and Karen good afternoon.

First question on Canada over the past really the past two weeks down here in the U S has been so much talk about a significant pricing improvements.

Speaker 6: Again, for the U.S. market, you echoed some of those comments and prepared remarks today. So, I'm curious if you could just compare and contrast what's going on from a pricing perspective in the U.S. with what you're seeing in Canada. Obviously, a number of different rig classes up there in Canada. And just curious where we sit from a pricing improvement standpoint for each of those rig classes up against Canada.

Again for the U S market you exited some of those comments in the prepared remarks today. So I'm curious if you could just compare and contrast, what's going on from a pricing perspective in the us with what Youre seeing in Canada, obviously, a number of different rig classes up there in Canada.

Just curious where we sit from a pricing improvement standpoint for for each of those rig counts rig classes up in Canada.

Yes, Taylor, so I think the pricing move in Canada is probably a quarter or two ahead of the U S.

Speaker 3: Yeah, Taylor, so I think the pricing movement in Canada is probably a quarter or two ahead of the US.

Speaker 3: And there's a couple reasons for that. One, the market's a bit tighter on the super spec side. It's fully utilized.

And there is a couple of reasons for that one of the markets a bit tighter on the Super spec side is fully utilized.

Speaker 3: It's also more consolidated with primarily just two drillers that have the balance of the fleet for super spec rigs, super triples that is in Canada. And then our super singles rig in Canada is kind of at a cost of its own, there really isn't a strong competitor for precision super single rigs.

It's also a more consolidated with primarily just two drillers have the balance of the fleet for Super spec rigs Super triples that is in Canada, and then our Super singles rig in Canada as kind of a class of its own really is in a strong competitive for precision super single rigs.

Speaker 3: and it's a highly efficient rig, so we've had opportunities with rising demand and tight utilization to move those prices a bit sooner, and there's a seasonality component that comes with the Canada. There's kind of a spring seasonality component.

And it's highly efficient rigs. So so we've had opportunities with rising demand and tight utilization to move those prices a bit sooner.

And there is a seasonality component that comes into Canada, Theres kind of a spring.

Spring for summer Q3 type pricing circle with sometimes a second pricing around that happens in the fall to the coming winter season. So there's kind of some natural windows, when we engage with customers and.

Speaker 3: spring, fall, summer, Q3 type pricing circle. There's sometimes a second pricing round that happens in the fall for the coming winter season. So there's kind of some natural windows when we engage with customers.

Speaker 3: And there's a third factor in Canada that kind of has driven tension, and that's crewing.

And there's a third factor in Canada has driven tension thats crewing, it's been particularly hard to recruit Brazil, and Canada, and that's created a lot of attention right across oil services space. So I think all of those things have kind of.

Speaker 3: It's been particularly hard to recruit personnel in Canada, and that's created a lot of tension right across the oil services space. So I think all of those things have kind of...

Speaker 3: work to help move rates back into kind of a sustainable range, which we're not quite at yet in Canada, but we're hoping to get there in 2022. I think some of those factors are now coming into play in the U.S., you know, the superspec rig market is getting

Worked to help move rates back into.

Kind of a sustainable range, which are not quite there yet in Canada, but we are hoping to get there in 2022.

I think some of those factors now coming into play in the U S. The other super spec rig market is getting.

Speaker 3: Essentially, it's not sold out, but between regional dislocations and various differences in rig spec, it's almost sold out, and I think you'll see it.

Essentially.

It's not sold out but between regional dislocations and.

Various differences in rig spec is almost sold out.

Youll see it.

Speaker 3: effectively sold out the next few weeks or a couple of months.

Effectively sold over the next.

The next few weeks or a couple of months. So I do think the U S gets on the same track that we've seen in Canada.

Speaker 3: So I do think the U.S. gets on the same track that we see in Canada between Q1 and Q2, and you're hearing the front-end piece of that today from us.

Between Q1, and Q2 and you're hearing the front end piece of that today from us.

Speaker 6: Yeah, good to hear. And against that backdrop, you just mentioned Superspec market's going to be pretty fully utilized here pretty soon, not just for your fleet, but for the broader market. I'm curious, how are

Okay, good to hear and against that backdrop, you just mentioned the Super spec market is going to be a pretty fully utilized here pretty soon not just for your fleet, but for the broader market.

I'm curious.

Our customer conversations going with respected term contract duration. It doesn't feel like many of the larger land drillers, including yourself have had significant term contract coverage at least not beyond 2022, and I was just wondering if.

Speaker 6: customer conversations going with respect to term contract durations. It doesn't feel like many of the larger land drillers, including yourselves, have significant term contract coverage, at least not beyond 2022, and I just wonder if the customer urgency is there to go ahead and lock up some of these rigs, even if it's at much higher pricing over the course of 2023.

Customer urgency is there to.

Go ahead and lock up some of these rigs even if it even if it's at much higher pricing.

Over the course of 2023.

Speaker 3: Well, you know, I think we've seen opportunities to contract rigs anywhere from pad to pad, all the way up to two years. I'd say that this, this tightening has been kind of sneaking up on everybody a little bit in that I think the drillers know it well, but I don't think any of the customers really fully understand how tight the market really is.

Well I think we've seen opportunities to contract rigs anywhere from pad to pad all the way up to two years.

I would say that this this tightening has been kind of sneaking up on everybody a little bit in that I think the drillers noelle, but obligated customers really fully understand how tight the market really is.

Speaker 3: And, Taylor, nobody has a 2023 budget approved yet, like none of our customers do, so there's not a huge preponderance of people looking at long-term. I would say that there's just a handful of customers looking to try to lock in lower rates maybe for a longer term, not necessarily locking in higher rates. So I think that certainly in our case, we've been reluctant to jump at those opportunities, looking more at shorter-term, higher-rate opportunities and the ability to reprice as the market tightens.

And Taylor Nobody has a 2023 budget approved yet like none of our customers do so those are the huge preponderance of people looking at long term I would say that there's just a handful of customers looking to try to lock in lower rates, maybe for a longer term not necessarily walking at higher rates. So I think that the <unk>.

Certainly in our case, we've been reluctant to to jump on those opportunities looking more shorter term higher rate opportunities and the ability to reprice as the market tightens.

Speaker 6: Got it, and then one last quick question for me. You're basically talking about going from 50 alpha systems to roughly 70 by year end, and I'm just curious how the demand pool works for those sorts of systems. I imagine some of those are gonna be outfitted on rigs that are already in the field today, and so, I mean, do we go through a trial phase where you put the system on a rig, the operator tries it out, and then starts paying for it, or do you expect to get compensated for that almost immediately?

Got it and then one last quick question from me Youre basically talking about going from 50 Alpha systems.

Roughly 70 by year end and I'm, just curious how the demand pool works for those sorts of systems I imagine some of those are going to.

The outfit it on rigs that are already in the field today.

I mean do we go through a trial phase where you put the system on a rig operator tries it out and then start paying for it or do you expect to get compensated for that almost immediately.

Speaker 3: We expect to be compensated for it almost immediately. You know, we've got a handful of contracts that are performance-based where if we achieve certain performance levels, you know, we'll earn more. So in that case, you could say that we have to earn the compensation, but those are working quite well. The majority of the applications are the a la carte pricing where we put the system on, we run it, and we deliver value, and the customers see the value, we move on.

We expect to be compensated for it almost immediately.

We've got a handful of contracts that are performance based where if we achieve certain performance levels.

Earn more so in that case.

You can see that we have to earn the compensation, but those are working quite well. The majority of the applications are the Ala carte pricing, where we put the system on we run it and we deliver value and the customers see the value we move on.

Understood. Thanks for the answers Kevin.

Speaker 3: Great. Just, Taylor, on that deployment, you asked about customer pull. We're working closely with our partners. We've always been kind of standardized on how we do this. Part of what we've done is lock in low capital costs for that acquisition for an extended period by committing to those installations over the course of the year. So it's both balancing the risk on the inflation side, so we keep the cost low, but also getting the systems across our fleet as fast as possible. Yeah, it makes sense. Thank you.

Great.

Taylor on that on that deployment, you asked about customer pull.

We're working closely with our partners that we've always been kind of standardized how we do this in a part of what we've done is lock in.

Low capital costs for that acquisition for an extended period by committing to those installations over the course of the year. So it's both balancing the risk on the inflation side. So we keep the cost low but also getting the systems across our fleet as fast as possible.

Yes, it makes sense. Thank you great.

Great. Thank you.

Speaker 1: Our next question coming from the line of Bukhar Saeed with ATB Capital. Your line is now open. Thanks for taking my question.

And our next question coming from the line of Mccarthy with.

With ATB capital your line is now open.

Thanks for taking my question.

Speaker 7: Kerry, the potential reactivation cost for the Kuwait rigs, are they included in the CAPEX number or not yet?

Kelly.

The potential reactivation costs for the Kuwait rigs are they included in the Capex number or not yet.

Speaker 2: Yeah, we haven't we haven't specified. I think we've got a basket of upgrades that we see on on the board and we're trying to put a percentage

Yes, we haven't we haven't specified I think we've got a basket of upgrades that we see on the board and.

To put a percentage of.

Speaker 2: likelihood of securing those upgrades, so you can say that it's somewhat included in that basket.

Likelihood of securing those upgrades. So you can say, they're somewhat included in that basket.

Are there candidates.

Speaker 7: Kevin, one of your competitors today mentioned that there is further segmentation of the super spec rig market in the U.S., and that customers are demanding rigs that have rig floors with very high clearance, 21 to 23 foot, and drawbacks on the rig floors. Are you seeing the same kind of differentiation as well as you talk to your customers?

Alright.

Kevin one of your competitors today mentioned that there is a further segmentation of the Super spec rig market in the U S and that customers are demanding.

Rigs that have rig flows with very high net into 'twenty, one to 'twenty three foot.

And dropbox on the rig flows.

Are you seeing the same kind of differentiation as well.

You talked to your customers.

Speaker 3: So, Bukhar, first of all, I guess the good thing and the bad thing is there is no API definition of SuperSpec.

So.

First of all I guess, the good thing or a bad thing is there is no API definition of Super spec.

Speaker 3: And I would say that each drilling contractor has an interpretation of what they view as the optimum rig design. And you know, whether that includes skidding or walking can be a debate, whether it includes three-month pumps or two-month pumps can be a debate. In our case, we actually have a wide fleet of...

<unk>.

I would say that each drilling contractor has an interpretation of what they view as the optimum rig design and.

Whether that includes skidding or walking can be a debate whether it includes three mud pumps or or two mud pumps can be a debate.

So we actually have a wide fleet of.

Speaker 3: Superspec rigs that have elevated rig floors with the drawworks up on the rig floor. In fact, a split LER drive assembly so that we keep all the rig controls up on the rig floor. So that particular need we can meet with our super triple rigs.

Super spec rigs that have elevated rig floors with the drove our stuff on the rig floor and factor.

Split.

<unk> drive assembly, so that we keep all the rig controls up on the rig floor. So that particular need we can meet with our <unk>.

Super Triple rigs.

Speaker 7: Okay, but is there a differentiation in day rates for those regs versus those that do not have that capability and still super spec?

But is there a differentiation in dayrates for those <unk> those net.

Do not have that capability and super spec.

Speaker 3: What it comes down to is if you have a client who has a pad where he wants to maybe walk the rig over existing wellheads, he might want that extra clearance.

What it comes down to is if you have a client who.

Has a pad where he wants to maybe walk the rig over existing wellheads he might want that extra clearance.

Speaker 3: If you've got a pad which is a new pad and you're drilling it in a line, you may not need that clearance. It just depends. I'd say it's more customer specific than industry specific.

If you've got a pad, which is a new pad youre drilling. It in line you may not need that clearance. So it just depends I would say, it's more customer specific.

The industry specific.

Speaker 3: Okay, great. And then... We have some of those rigs walking over wellheads that are existing. Other ones where we have clear pads we're drilling new wells on.

Okay, Great and then.

We have we have some of those rigs walking over wellheads are existing other ones, where we have clear pads, where drilling new wells on.

Speaker 7: Okay, great. And then in the international market, you have, you know, SixFix currently working with two contract expirations coming up. Do you see any downtime before they start up again or do you think they're, you would be able to renegotiate the contracts before the current contracts expire? We expect to see some downtime.

Okay, and then in the international markets you have six.

<unk> currently working with two contract explorations coming up.

Do you see any downtime before the startup again or do you think there.

You would be able to renegotiate the contracts before the floor.

The current contracts expire.

We don't expect we expect no downtime.

Speaker 7: Okay, and then for the Kuwait rigs, do you see them, Kuwait typically tenders get delayed. Do you think that this year they may happen relatively quickly?

Okay, and then fund the Kuwait rigs do you see them.

The COVID-19 .

Typically does get delayed do you think that this year.

Happen relatively quickly.

Speaker 3: Well, I've been talking about that tender, I think, almost all of 2021 and now into 2022. So, it's already delayed one year from my early conversations and, you know, the other thing I'd say is it seems like every time I make a projection, about four weeks later, a new variant pops up and slows down decision making. So, I'm really reluctant to try to predict what's going to happen in Kuwait. But, Bakar, I would say that if Kuwait has their production curtailments removed,

Well I've been talking about that tender I think almost all of 2021 and now into 2022.

So I've already delayed one year from my early conversations.

The other thing I would.

Say as it seems like every time they make a projection about four weeks later, new variant Pops up and slow down decision, making so I'm really reluctant to try to predict what's going to happen in Kuwait, but <unk> I would say that if.

Kuwait has.

Their production curtailments removed.

Speaker 3: I think those tenders go ahead very quickly. Yeah. I should say, when they have their production curtailments removed, I think those tenders move quickly. Right. Right. Right. Makes sense. Thank you very much for all of my questions.

I think those those tenders go ahead very quickly yes.

Or I should say when they have their production curtailments removed I think those tenders move quickly.

Alright.

Makes sense.

Thank you very much does but all my questions.

Thanks.

And our next question coming from the line of Ian Macpherson with Piper Sandler Your line is open.

Speaker 1: Our next question coming from the line of Ian Meckerson with Piper Sandler. Your line is open. Thanks. Good afternoon, Kevin and Kerry. Hey, Ian. I appreciate the description of...

Thanks, Good afternoon, Kevin and Carrie.

And.

I appreciate the description of <unk>.

What's happening in.

The Martin Hill.

Speaker 8: The Martin Hill, clear, well play, and I think it was asked a little bit, but I wanted to ask again, if you could talk about your.

Clear well play and.

I think it was asked a little bit, but I wanted to ask again, if you could talk about your.

Speaker 8: your breakout of super singles versus super triples in Canada and speak maybe a little bit more to the

Your breakout of Super singles versus Super triples, in Canada, and speak maybe a little bit more to that.

Speaker 8: The differential and day rates or margins between the two, if that's a material consideration for us as we.

The differential in day rates or margins between the two if thats.

Material consideration for us as we.

Speaker 8: as we think about that play folding into your mix.

As we think about that play.

Folding into your mix.

Speaker 3: Sure, I'll give a bit of coverage and carry, just fill in the gaps where I missed something here. The Precision Single Rig was developed back in 1992, specifically for heavy oil drilling, I mean exactly for this type of play. They were designed to be...

Sure I'll give a bit of coverage in carry just filling the gaps ray Miss something here.

The precision Super single rig was developed back in 1992, specifically for heavy oil drilling I mean exactly for this type of play they are designed to be.

Speaker 3: small, fast-moving, light, pad-capable rigs that have a small footprint, can run throughout spring break-up if necessary, and have a really low efficient operating cost. So it's a really cool design that's really kind of stuck with us the last 30 years now and really kept that competitive edge out there. So the rig fits that market very well. Kerry, operating costs of that rig would typically be about $4,000 or $5,000 less than a Super Triple? Correct.

Small fast moving light pad capable rigs that have a small footprint can run.

I kind of threw out spring breakup, if necessary and have a really low efficient operating cost. So it's really cool design that's really.

Kind of stuck with US last 30 years, now and really kept the competitive edge out there.

So the rig fits our market very well.

Cary operating cost of that rig would typically be about $45000 less than our super triple correct in that.

Speaker 3: And, uh, you know, we're getting day rates for that rig now in the mid to upper teens. Uh, and, uh, and pushing those.

<unk>.

And we're getting dayrates that rig down in the mid to upper teens.

And pushing those levels.

Okay.

Speaker 3: Great. And that rig actually does overlap with what in Canada is called the tele-double. So people will try to use the tele-double to compete with us, which typically has a slightly higher operating cost and, again, probably needs a higher day rate to get the same margin.

So and.

And Thats the rig actually does overlap with what in Canada is called the tele double so people will try to use <unk>.

With us, which typically has a slightly higher operating cost.

Again, probably needs a higher day rate to get the same margins okay.

Speaker 3: In Canada we have 27 super triples, they're all fully utilized right now and we've given guidance on those rates. Those rates are in the low to mid-20s range right now for the base rig. Technology charges are above that and a lot of the things you put on the rig are also above that.

Jonathan we have 27 Super triples, Theyre, all fully utilized right now and.

And you'll be giving guidance on those rates those rates are in the low to mid twenties range right now for the base rig technology charges are above that and a lot of the things you put on the rig are also above that.

Okay.

Speaker 8: That's great. Thank you. Sort of a simple high-level question for the U.S. market. If you were able to pro forma your fleet for all of the upgrades that you're planning for this year,

That's great. Thank you.

Sort of.

Simple high level question for you for the U S market.

You were able to.

Pro forma year fleet for all of the upgrades that you're planning for this year.

Speaker 8: and where that takes your fleet-wide spec at the end of this year.

And where that takes your fleet wide.

Back at the end of this year.

Speaker 8: And the market pricing stopped moving today, and you repriced everything at leading edge and absorbed all your reactivation costs.

And the market market pricing stopped moving today and you repriced everything is leading edge and absorbed all your reactivation costs.

Speaker 8: Yes, wouldn't your pro forma cash margin easily be above $10,000 on that hypothetical basis?

Yes.

Duke model for you yes.

Your pro forma cash margin easily be above 10000 on that hypothetical basis.

Speaker 2: I think if you're looking at leading edge being in the mid-twenties and we're getting better fixed cost absorption and we don't have any reactivation cost.

I think if youre looking at.

Leading edge being in the.

In the mid twenties.

We're getting better fixed cost absorption and we don't have any reactivation cost.

Daily operating costs, probably go go down a bit from from where we're reporting right. Now. So I think you could see here see the fleet generating on average above $10000 a day margin yes.

Speaker 2: daily operating costs probably go down a bit from where we're reporting right now. So I think you could see the fleet generating on average above $10,000.

Speaker 8: Yeah, I think so. I just the one thing I want to be careful with is not extrapolating.

Yes, I think so I guess, the one thing I would be careful with is not extrapolating.

Speaker 8: your sort of tip of the spear data point on pricing and inappropriately extrapolating it across the entire fleet. But it seems to me that your whole fleet or the vast majority will be at that leading edge capability and probably with higher saturation of alpha and other a la carte add-ons that it would not be unfair to...

You're sort of tip of the spear data point on pricing and inappropriate extrapolating it across the entire fleet, but it seems to me that your whole fleet or the vast majority will be.

At that leading edge capability, and probably with higher saturation of of.

Of Alpha and other Ala Carte add ons that.

Would not be unfair to.

Speaker 2: To project that, so I just wanted that sanity check. Yeah, I think that if you if you go back to 2018 and you looked at where our, our superspec.

To project that so I just wanted to sanity check.

Okay.

If you go back to 2018, and you looked at where are our super spec rigs for pricing.

Speaker 2: and, you know, getting one and two, in some cases, three-year contracts without Alpha, we were well above.

Getting one and two in some cases three year contracts without alpha.

We were well above $10000 a day in margin on that segment of our fleet.

Yes.

Thanks, and then the other one for me.

Speaker 8: Thanks. And then the other one for me, I don't know if we've talked about this already on the call, have you discussed the...

I don't know if we've talked about this already on the call.

Discuss the.

Speaker 8: the framework to which you're examining dividends versus buybacks with the capital return plan.

The framework through which you are examining dividends versus buybacks with the capital return.

Glen.

Speaker 2: So it's, it's a four year plan for the first couple of years. This is almost exclusively going to be a share buyback.

So it's it's a four year plan. After the first couple of years. This is almost exclusively going to be share buybacks.

And as we get closer to the target leverage level and there is little bit more visibility in that business.

Speaker 2: And as we get closer to the target leverage level, and there's a little bit more visibility in the business, a dividend becomes more likely. But for the first couple of years of this capital framework plan, assume it's gonna be share buybacks. Got it.

And becomes more likely but for the first couple of years of this.

Capital framework plan.

Assume it's going to be share buybacks.

Got it.

Thanks, Gary Thanks, Kevin Thank.

Thank you.

Speaker 1: As a reminder, ladies and gentlemen, to ask a question, please press star 1. Our next question coming from the line of corporate with Stifo, your line is open.

Your line, ladies and gentlemen to ask a question. Please press star one.

Next question coming from the line of Paul <unk> with Stifel. Your line is open.

Speaker 9: Afternoon, everyone. So, some pretty good colors so far on Canada versus the U.S. In a couple of quarters, you highlighted that the outlook for Canada was especially bright relative to the U.S. in the near term. Just wondering if you really currently see either Canada or the U.S. as being relatively stronger right now, obviously factoring in some of the seasonality in Canada.

Afternoon, everyone saw some pretty good color so far on Canada versus the U S and a couple of quarters you highlighted that the outlook for Canada was especially bright relative to the U S. In the near term just wondering if you really currently see either Canada or the U S as being relatively stronger right now obviously fact.

<unk> in some of the seasonality in Canada.

I think coal.

Speaker 3: I think coal, what kind of drives me to believe that is they go a little farther down the pricing trajectory with our Canadian customers, so that's helping make Canada look better. I think part of that is the...

And that drives me to leave that as it grew a little farther down the.

The pricing trajectory with our Canadian customers. So that's helping mid Canada look better.

Part of that is the.

Speaker 3: The tighter market consolidation in those two rig areas, in the super triple area and in our heavy oil super singles area, so you've got a much more rational market with generally public players that are more rational in their thinking. So it's just a...

The tighter market consolidation in those in those two rig areas than the Super Triple area and in our heavy oils Super singles area. So <unk> got a much more rational market with generally public players that are more rational there theyre thinking so it's just.

Speaker 3: It behaves more industrial or more structured and more disciplined than...

It behaves more base more industrial or more.

We're structured and we're disciplined then.

Speaker 3: the less mature markets. That's the way it feels right now. Does that make sense?

The less mature markets, that's the way it feels right now does that makes sense.

Speaker 9: Yeah, that's a good color. Thanks. And so you kind of touched briefly on Q1 in Canada, talking about some customer logistics issues, maybe putting a bit of a lid on activity. I'm just curious. I mean, have you seen labor really be much of a restriction into getting rigs activated in the quarter?

Yes, thats good color, thanks, and so you kind of.

Touch briefly on Q1 in Canada talking about some customer logistics.

Issues, maybe putting a bit of a lid on activity I'm just curious I mean have you seen labor.

It really be much of a restriction into getting rigs activated in the quarter.

Speaker 3: On the drilling side, it's been a pretty heavy lift for our team, and I know some of them are listening today. They've worked pretty hard, but they've met the objective in drilling. It's been much, much tougher in well servicing, and there's a couple of good reasons for that.

On the drilling side, it's been a pretty heavy lift for our team and I know some of them are listening today, they work pretty hard but they missed the objective and drilling has been much much tougher in well servicing and there is a couple of good reasons for that.

Speaker 3: The drilling jobs have a slightly higher hourly rate, but the work is more consistent and repeatable and they typically get a lot more overtime and more consistent overtime. So the total pay is much higher, it attracts people that stick a little more to drilling. While servicing, it could be good or it could be bad, it's call-out work, it's sort of day-to-day work and it's been much tougher to recruit.

The drilling jobs have a slightly higher hourly rate, but the work is more consistent and repeatable and they typically get.

LIBOR overtime and more consistent over time. So the total pay is much higher that attracts attracts people to stick a little more to drilling and well servicing it could be good or it could be bad. It is call out work, it's sort of day to day work and it's been much tougher to recruit a lot like a lot of the other oil field callout services, so and drilling no hard work for our team.

Speaker 3: a lot like a lot of the other oil field callout services. So in drilling, no hard work for our team, but they've accomplished the task in drilling. In well servicing, really hard work. The guys have done a great job. We've got 50 rigs staffed up right now.

Dave accomplish the task in drilling and well servicing really hard work you guys have done a great job. We've got 50 rigs stuffed up right now expect to have more stepped up for Q for Q3, after breakup, but but I would say that in well servicing is loaded activity.

Speaker 3: Expect to have more stepped up for Q3 after breakup.

Speaker 3: But I would say that in well servicing, it's limited activity.

Okay perfect. That's great. Thanks, and so just to clarify on the on the International rig Awards I mean reasonable to think that maybe an announcement might occur by midyear or is there still just not enough clarity on time lines.

Speaker 9: Okay, perfect. That's great, thanks. And so just to clarify, on the International Reg Awards, I mean, reasonable to think that maybe an announcement might occur by mid-year, or is there still just not enough clarity on timeline?

Speaker 3: No clarity on timeline, but this has been, I mean, the entire process has been imminent for several quarters now, and I recognize that imminent in the Middle East means slightly different terms than imminent in North America.

No clarity on timeline, but this is Ben.

The entire process of inhibited.

For several quarters now recognize that.

<unk> in the middle East being slightly different terms inhibited in North America, but.

But theres a lot of work that's gone into these tenders behind the scenes.

Speaker 3: But there's a lot of work that's gone into these tenders behind the scenes at our customer. We know they're ready and we know that they're, I think, waiting for the right oil production signals to start making the next step. Okay.

Customer we know they are ready and we know that there I think waiting for the right.

The rate of oil production signals to start making the next step.

Okay perfect. That's all from me, Thanks, I'll turn it back.

Thanks, Paul.

Speaker 1: Our next question coming from the line of Keith Mackey with RBC Capital. The line is open.

Our next question coming from the line of Keith Mackey with RBC capital. Your line is open.

Hi, good afternoon, and thanks for taking my questions.

Speaker 4: I just wanted to start off, Kevin, I think I heard you say Q2 looks like it's going to be 20 or break out or break up anyways is going to be 25 to 30% higher than last year and then I thought to.

I just.

Wanted to start off Kevin and I think I heard you say Q2 looks like it's going to be.

20 or breakdown of breakouts in anyway, there is going to be 25% to 30% higher than last year, and then I asked.

Speaker 4: He said Q3 is going to be strong as well, potentially stronger than the winter level. Did I hear that right, or what was the comment there?

In Q3 is going to be strong as well potentially stronger than in the winter level did I hear that right or what was that what was the comment there Kevin.

Speaker 3: Well, you heard it right. I guess all that I'll say is that the previous projections I've given that after Q3 and Q4 seems like a few weeks after I gave the projection, another COVID variant popped up and

Well you heard it right I guess all that I'll say is the previous projections ive given that after Q3 and Q4. It seems like a few weeks. After I gave the projection to another COVID-19 variant popped up and slow down decision, making so barring any kind of macro dislocation.

Speaker 3: So, you know, barring any kind of macro dislocation, I think those projections are what I said. I think Q2 looks like it's 25 percent or maybe a little more, better than last year. And once again, we could see Q3 matching or exceeding Q1 activity levels, again, barring any kind of macro dislocation. So, I think that's it.

I think those.

Those projections are what I've said I think Q2.

Looks like its 25% or maybe a little more better than last year and once again, we could see Q3 matching or exceeding Q1 activity levels.

Again, barring any kind of macro dislocation.

Yeah for sure I appreciate that it certainly is difficult to forecast.

Speaker 4: Yeah, for sure. I appreciate that it's certainly as difficult to forecast what's happening in the macro these days, but certainly that would be an incredibly strong level for Q3. Can you maybe just talk about what gives you the confidence, based on what we know today to say that, and maybe just talk a little bit about the rig types that will make up the gap? Will the mix be similar to Q1, do you think, or will it be different based on the seasonal drilling at that time?

What's happening in the macro these days, but certainly that would be an incredibly strong level for for Q3 can you maybe just talk about what gives you the confidence.

Just on what we know today to say that and maybe just talk a little bit about the rig types that will that will sort of make up the gap will the mix be similar to Q1, do you think or will be.

Different based on the seasonal drilling at that time.

Speaker 3: Yeah, so let me qualify good, great, and better. So it does look pretty good compared to 2020 and 2021. It's going to go back to 2016 or 2014. We're still well below those levels.

Yeah, So I'll just be qualify.

Good great and better so it does look pretty good compared to 22020 in 2021. This is kind of go back to 2026 here in 2014 were still well below those levels. So.

Speaker 3: While it looks like a pretty strong year relative to what we've just been through, it wasn't very long ago where it's a much, much better year.

While it looks like a pretty strong year relative to what we've just been through.

It wasn't very long ago, where it's a much much better times, so keep that in mind.

Speaker 3: So keep that in mind. But the mix would look like the winter mix right now. We'd have our super triples pretty much fully utilized.

But the mix it looks like the winter mix right now we'd have our super triples pretty much fully utilized.

Speaker 3: You know, we have a potential to maybe bring one more Super Triple up out of the U.S.

We have a potential to maybe bring one more super triple up out of the U S.

Speaker 3: We're working with customers to see if that happens so we could add one more super triple in Canada But but that's fully that'll be fully maxed out and then with the super singles

Fewer customers to see if that happens so we could add one more super triple in Canada, but that's fully that'll be fully maxed out and then we'll see Super singles.

Speaker 3: Got a pretty good mix right now with kind of this resurgence in heavy oil kind of driven by clear water.

We've got a pretty good mix right now its kind of this resurgence in heavy oil kind of driven by Clearwater.

Speaker 3: But I think there's a little more room to run there. We certainly have more super singles and.

But I think theres, a little more room to run there, we certainly have more super singles and.

Speaker 3: to reactivate the other 5, 10 or 15 super singles as well within our current opportunity cycle.

To reactivate another 510 or 15 Super singles as well within our our current opportunity cycle.

Speaker 4: I think there was another couple that moved around basins in the U.S. Can you just talk about some of those regional tightnesses in rig supply and where you're seeing things be the most tight? Canada, I imagine, is the super-triple category. Maybe you could then just talk about the U.S. as well and where you're seeing that tightness and where you think rigs could move as a result.

Okay.

Just maybe a follow up.

Additionally, a reality.

And I think there was another couple that moved around basins in the U S. Can you maybe just talk about some of those regional tightened.

In rig supply and where youre seeing things EBIT power.

Most tightened in Canada.

Canada I imagine its the Super Triple category and maybe if you could then just talk about the U S as well and kind of where youre seeing that tighten instantly rigs could could move as a result.

Speaker 3: That's a really great question, I'm actually glad you raised it because probably the biggest surprise I've had in 2022 was a customer asking if they could move one of our rigs from Oklahoma to the Permian Basin.

That's a really great question I'm actually glad you raised it because.

Probably the biggest surprise I've had in 2022 was a customer asking if they can move one of our rigs from Oklahoma to the Permian Basin.

I thought there was still some slack capacity in the Permian basin, but for.

Speaker 3: I thought there was still some slot capacity in the Permian Basin, but for this particular customer that we're looking for, they're paying to move one of our rigs from Oklahoma to the Permian. Last year, late in December , we moved a rig from the Permian to Eagleford. We're looking at some opportunities right now maybe to redeploy some rigs into the Haynesville. So it seems like that regional tightness is kind of coming on everywhere. The only place we have a couple of excess rigs right now is DGA Basin.

This particular customer that we're working for their pain to move one of our rigs spoke a little bit of the Permian.

Last year late in December we moved a rig from the Permian to Eagle Ford.

We're looking at some opportunities right now maybe to redeploy some rigs into.

The haynesville so it seems like it seems like a regional tightness is kind of coming on every we're the only place we have a couple of excess rigs right those DJ basin.

Got it okay and just on the tech adoption.

Speaker 4: Got it. Okay. Very good. And just on the tech adoption, I know historically, I think you've talked that U.S. customers were a little quicker to adopt than Canada. Has that changed? Has Canada caught up? And maybe as a follow-on to that, has the Evergreen line gained traction faster in Canada or the U.S., or has it been fairly similar as well?

And historically I think you've talked that.

U S customers were a little quicker to adopt in Canada has that changed since candidate caught up or.

And maybe as a follow on to that has the evergreen line.

Gain traction faster in Canada, or the U S or has it been fairly fairly similar as well.

Speaker 3: So first the evergreen lines have been actually getting good traction in both markets with almost no differentiation and I'd say that ESG emissions responsibility focus is universal across particularly our public customers but actually most of our private customers too so that's a trend we're seeing right across the customer mix and geographic mix. On the technology piece.

So firstly evergreen lines, but actually getting good traction in both markets with almost no differentiation and let's.

I'd say that.

ESG emissions responsibility focus.

Universal across particularly our public customers, but actually most of our private customers too so.

That's a trend we're seeing right across the customer mix and geographic mix on the technology piece.

Speaker 3: So the simple answer is this, on longer duration wells...

So the simple answer is this.

On longer duration wells.

Speaker 3: technology has more room to show clear improvements. So in shorter duration wells, whether they're shallower or faster, the gains tend to be a little bit narrower for the customer and maybe a little tougher sell. So Canadian wells tend to be a little shallower. And there are some areas that are really short duration wells. Tougher sell in the short duration wells, much easier sell long duration wells.

Technology has more room to.

Show clear improvements so on shorter duration wells, whether the shallower faster.

The games tend to be a little bit narrower for the customer and maybe a little tougher sell so Canadian wells tend to be a little shallower and there are some areas that are really short duration wells.

Tougher sell in the short duration wells much easier sell long duration wells.

Got it.

Thanks, so much.

Speaker 3: By the way, when I'm talking about long and short, long would be eight days and short would be four days.

And by the way, but I'm talking about long and short long would be eight days and short would be four days.

Okay.

Speaker 1: Great. Thank you. And next question coming from the...

Great. Thank you our next question coming from them.

Our next question coming from the line of John Daniel Daniel Energy Partners. Your line is open.

Speaker 1: Our next question, coming from the line of John Daniel of Daniel Energy Partners. Your line is open.

Hi, good afternoon guys.

Speaker 10: Hey, John . Kevin, just one quick one for me. There's obviously lots of people in our space talk about us being potentially at the start of a multi-year cycle. I think as we look at just the commodity backdrop, and I'm curious.

Hey, John .

Okay, and then just one quick one for her name obviously lots of people in our space talk about.

As being that potentially at the start of a multiyear cycle I think as we look at the commodity backdrop and I am curious.

Speaker 10: If customers, if they're looking at it the same way, are they actually...

If a customer if they are looking at it the same way or they actually.

Speaker 10: talking to you about multi-year arrangements if that belief is true, because I see you can provide some color on how they're viewing life beyond this.

Talking to you about multi year arrangement that belief.

If you can provide some color on.

How they are viewing like beyond this year.

Speaker 3: John , short answer is not really, other than a few customers looking at trying to lock in low rates for longer, I would say that there isn't a lot of long-term planning that's transmitted down to the land drillers yet around long-term contracts, take or pay. We have a handful of customers, I'd say less than a half dozen, where they are seriously making plans beyond one year, but I wouldn't call it a trend.

John short answer is not really.

Other than a few customers looking at trying to.

It will lock in low rates for longer I would say that there isn't.

There is a lot of long term planning thats transmitted down to the land drillers yet.

Around long term long term contracts take or pay.

We have we have had.

Full of customers is a less than a half dozen where they are seriously, making plans beyond one year, but I wouldn't call that a trend.

Speaker 10: Fair enough, but do you suspect that's just because of just how...

Fair enough.

And do you suspect that just because of just how.

The recent volatility because it seemed to me.

Speaker 10: the recent volatility, because it seemed to me, and it's kind of a bit of a follow-on to Ian's questions, when you look at where the business is today, the pricing trends and all of that, if all else being equal, it seems your rates are going higher next year if this commodity price environment stays where it is. Why wouldn't you want to be proactive in mitigating that risk if you're the customer? It's kind of a thought.

Instead of a follow on to answer questions. When you look at where the business is today, the pricing trends and all of that.

All else being equal it seems your rates are going higher next year as the commodity price environment remains where it is.

Why wouldn't you want more.

Proactive in mitigating that risk for the customer.

Thought.

Speaker 3: colorbe would be great. Well well, you know, John partamit, might be that the drilling rig on these high efficiency wells is still just a very small fraction of the cost of the total wellalth. So they they re focused on an area where they have a lot of financial exposure. It would be sand proppant, it would be pressure pumping. That probably wouldn't be the Rick.

Color would be great well, John part of it might be that the drilling rig on this high efficiency wells is still just a very small fraction of the cost of the total wealth. So if there are further focused on an area, where they have a lot of financial exposure.

Sand proppant it would be pressure pumping it probably wouldnt be the rig.

Speaker 10: OK, fair enough. I appreciate the time as always, Kevin. Thanks.

Okay fair enough.

I appreciate kind of noise.

Okay. Thank you.

I'm showing no further questions at this time I would now like to turn the call back over to Mr. Carey Ford for any closing remarks.

Speaker 1: I am showing no further questions at this time. I would now like to turn the call back over to Mr. Carey Ford for any closing remarks.

Speaker 2: Okay, thank you for joining us this afternoon. We look forward to connecting with you on our Q1 conference call in April .

Okay. Thank you for joining us. This afternoon, we look forward to connecting with you on our Q1 conference call in April .

Good day.

Speaker 1: Ladies and gentlemen, that does it for our conference for today. Thank you for your participation. You may now disconnect.

Ladies and gentlemen that does go conference for today. Thank you for your participation you may now disconnect.