Q1 2024 Precision Drilling Corp Earnings Call

Yes.

[music].

Operator: Good day, and thank you for standing by. Welcome to the Precision Drilling Corporation 2024 First Quarter Conference Call. I would now like to hand the conference over to Lavonne Zdunich, Vice President, Investor Relations. Please go ahead.

Good day and thank you for standing box welcome to the precision drilling Corporation 2024 first quarter conference call I would now like to hand, the conference over to Levonne, Vice President Investor Relations. Please go ahead.

Lavonne Zdunich: Thank you, Operator, and welcome everyone to our first quarter conference call. Today, I'm joined by Kevin Neveu, Precision's President and CEO, and Carey Ford, our CFO.

Lavonne Zdunich: Thank you operator, and welcome everybody to our first quarter conference call today, I'm joined by Kevin W. Precision, President and CEO and carries board our CFO.

Carey Thomas Ford: Earlier today, we reported our first quarter results. To begin our call today, Carey will review these results, and then Kevin will provide an operational update and outlook commentary. Once we have finished our prepared comments, we will open the call for questions. Please note that some of our comments today will refer to non-IFRS financial measures and include forward-looking statements which are subject to a number of risks and uncertainties. For more information on financial measures, forward-looking statements, and risk factors, please refer to our news release and other regulatory filings available on CDAR and EDGAR. As a reminder, we express our financial results in Canadian dollars unless otherwise stated. With that, I will turn it over to Carey.

Carey Thomas Ford: Earlier today, we reported our first quarter results.

Carey: To begin our call today terrible review these results and then Kevin will provide an operational update and outlook commentary.

Carey Thomas Ford: Once we have finished our prepared comments, we will open the call for questions.

Carey Thomas Ford: Please note that some comments today will refer to non <unk> financial measures and include forward looking statements, which are subject to a number of risks and uncertainties for.

Carey Thomas Ford: For more information on financial measures forward looking statements and risk factors. Please refer to our news release and other regulatory filings available on SEDAR and Edgar.

Kevin: As a reminder, we express our financial results in Canadian dollars, unless otherwise stated with that I will turn it over to Terry.

Carey Thomas Ford: Precision's Q1 financial results exceeded our expectations for adjusted EBITDA, earnings, and cash flow. Adjusted EBITDA of $143 million was driven by strong drilling activity, improved pricing, and strict cost control. Justice Ibada's Q1 financial results included a share-based compensation charge of $23 million.

Carey Thomas Ford: Exelon.

Carey Thomas Ford: Precision Q1 financial results exceeded our expectations for adjusted EBITDA earnings and cash flow.

Carey Thomas Ford: Adjusted EBITDA of $143 million was driven by strong drilling activity improved pricing and strict cost control. Our Q1 adjusted EBITDA included a share based compensation charge of $23 million without this charge adjusted EBITDA would have been 100 $166 million, which compares to a $191 million in Q1 2023.

Carey Thomas Ford: Without this charge, Ajat Sivadoss would have been $166 million, which compares to $191 million in Q1 2023, a decrease of 13%. Net earnings were $37 million or $2.53 per share, representing the seventh consecutive quarter of positive earnings for Precision. Funds provided by operations and cash provided by operations were $118 million and $66 million, respectively.

Carey Thomas Ford: <unk> a decrease of 13%.

Carey Thomas Ford: Net earnings were $37 million or $2 53 per share representing the seventh consecutive.

Carey Thomas Ford: A quarter of positive earnings per precision.

Carey Thomas Ford: Funds provided by operations and cash provided by operations were $180 million and $66 million respectively.

Carey Thomas Ford: Margins in the US and Canada were higher than guidance, resulting from higher than expected pricing, higher ancillary revenues, and improved cost performance. The importance of cost management in field margin generation cannot be overstated, and on this front, I am pleased with the performance of the business. Reducing costs remains a high priority for me, and I continue to work closely with the finance, operations, and supply chain teams to demonstrate continued progress in 2020. In the US, drilling activity for precision averaged 38 rigs in Q1, a decrease of 7 rigs from the previous quarter.

Carey Thomas Ford: Margins in the U S and Canada were higher than guidance.

Carey Thomas Ford: <unk> from stronger than expected pricing higher ancillary revenues and improved cost performance.

Carey Thomas Ford: The importance of cost management and field margin generation cannot be overstated and on this front I am pleased with the performance of the business.

Carey Thomas Ford: Leasing cost remains a high priority for me and I'll continue to work closely with the finance operations and supply chain teams to demonstrate continued progress in 2024.

Carey Thomas Ford: In the U S drilling activity for precision averaged 38 rigs in Q1, a decrease of seven rigs from the previous quarter.

Carey Thomas Ford: Daily operating margins in Q1, excluding the impacts of turnkey and IBC, were $11,057, a decrease of $755 from Q4, but significantly higher than guidance. For Q2, we expect normalized margins to be above $10,000 per day. In Canada, drilling activity for precision averaged 73 rigs, an increase of four rigs from Q1 2023.

Carey Thomas Ford: Daily operating margins in Q1, excluding the impacts of turnkey in IPC.

Carey Thomas Ford: We're 11057 U S dollars a decrease of 755 U S dollars from Q4, but significantly higher than guidance for Q2, we expect normalized margins to be about 10000 U S dollars per day.

Carey Thomas Ford: In Canada drilling activity for precision averaged 73 rigs an increase of four rigs from Q1 2023 daily operating margins in the quarter were $15647 an increase of.

Carey Thomas Ford: Daily operating margins in the quarter were $15,647, an increase of $2,089 from Q1 2023. For Q2, our daily operating margins are expected to be between $13,000 and $14,000. Internationally, drilling activity for precision in the current quarter averaged eight rigs.

Carey Thomas Ford: $2089 for Q1 2023.

Carey Thomas Ford: For Q2, our daily operating margins are expected to be between 13000 14000.

Carey Thomas Ford: Dollars.

Carey Thomas Ford: Internationally drilling activity for precision in the current quarter averaged eight rigs international average day rates were $52808, an increase of 2% from the prior year due to rig mix with.

Carey Thomas Ford: International average day rates were $52,808 US dollars, an increase of 2% from the prior year due to rig mix. With the rig activations completed last year, we expect international EBITDA to increase approximately 50% from 2023 to 2020. In our C&P segment, Adjusted EBITDA this quarter was $19 million, up 7% compared to the prior year quarter. Adjusted EBITDA was positively impacted by a 28% increase in well service hours and improved pricing, reflecting higher demand for our services and the impact of the CWC acquisition completed in November. We continue to create value with the CWC business on both sides of the border, and to date, we have achieved $16 million of the projected $20 million of annual synergy.

Carey Thomas Ford: With the rig Activations completed last year, we expect international EBITDA to increase approximately 50, 50% from 2023 to 2024.

Carey Thomas Ford: And our CMP segment adjusted EBITDA This quarter was $19 million up 7% compared to the prior year quarter. Adjusted EBITDA was positively impacted by a 28% increase in well service hours and improved pricing, reflecting the higher demand for our services and the impact of the TWC acquisition completed in November.

Carey Thomas Ford: We continue to create value with the CWC business on both sides of the border and to date, we have achieved $16 million and the projected $20 million of annual synergies.

Carey Thomas Ford: Capital expenditures for the quarter were $56 million and included $14 million for upgrading and expansion and $41 million for maintenance and infrastructure. Our full year 2024 capital plan remains at $195 million and is comprised of $155 million for sustaining infrastructure and $40 million for upgrading and expansion. With increased rig activity materializing and upgrade demands continuing, our capital plan could increase slightly in the second half of the year. As of April 20, April 24, we had an average of 46 contracts in hand for the third quarter, an average of 44 contracts for the full year 2024.

Carey Thomas Ford: Capital expenditures for the quarter were $56 million and included $14 million for upgrade and expansion and $41 million for maintenance and infrastructure.

Carey Thomas Ford: Our full year 2024 capital plan remains at $195 million and is comprised of $155 million for sustaining and infrastructure and $40 million for upgrade and expansion.

Carey Thomas Ford: We've increased rig activity materializes and upgrade demands continue our capital plan could increase slightly in the second half of the year.

Carey Thomas Ford: As of April 20 April 24th we had an average of 46 contracts in hand for the third quarter, an average of 44 contracts for the full year 2024.

Carey Thomas Ford: Moving to the balance sheet, our Q1 results reflect the seasonal working capital build within our business and one time payment highlighted in our pressure during the second quarter. We expect to have a, During the first quarter, we had a slight decrease in cash, as we had lower seasonal activity in Canada during the second quarter and no semi-annual interest payments. However, cash is coming in the door, and we expect to begin reducing debt in Q2. As of March 31st, our long-term debt position net of cash was approximately $900 million, and our total liquidity position was over $600 million, excluding letters of credit.

Carey Thomas Ford: Moving to the balance sheet, our Q1 results reflect the seasonal working capital build within our business and onetime payments highlighted in our press release.

Carey Thomas Ford: During the second quarter.

Carey Thomas Ford: We expect to have a during the first quarter, we had a slight decrease in cash.

Carey Thomas Ford: As we have lower seasonal activity in Canada during the second quarter and no semi annual interest payments.

Carey Thomas Ford: Cash is coming in the door and we expect we expect to begin reducing debt in Q2.

Carey Thomas Ford: As of March 31.

Carey Thomas Ford: Our long term debt position net of cash was approximately $900 million and our total liquidity position was over $600 million.

Carey Thomas Ford: Excluding letters of credits.

Carey Thomas Ford: Our net debt to trailing 12 month EBITDA ratio is approximately 1.5 times, and our average cost of debt is 7%. We expect our net debt to adjust before share-based compensation expense to continue to decline throughout the year, and we are committed to reducing debt by $600 million between 2022 and 2026 and achieving a normalized leverage level of below one. Our debt reduction target for 2024 is $150 million to $200 million, and we plan to allocate 25% to 35% of free cash flow before principal payments directly to shareholders.

Carey Thomas Ford: Our net debt to trailing 12 month EBITDA ratio is approximately one five times and our average cost of debt 7%.

Carey Thomas Ford: We expect our net debt to adjusted EBITDA before share based compensation expense to continue to decline throughout the year.

Carey Thomas Ford: And we are committed to reducing debt by $600 million between 2022 and 2026.

Carey Thomas Ford: And achieving a normalized leverage level is below one times.

Carey Thomas Ford: Our debt reduction target for 2024 is $150 million to $200 million and we plan to allocate 25% to 35% of free cash flow before principal payments directly to shareholders.

Carey Thomas Ford: Based on a robust free cash flow outlook, we repurchased $10 million of shares during the quarter, twice the pace of last year, a pace we plan to meet or exceed throughout 2024. Moving on to additional guidance for the year, which remains largely unchanged from the prior call, we expect depreciation of approximately $290 million, cash interest expense of approximately $75 million, cash taxes to remain relatively low, and our effective tax rate to be approximately 25%, selling general administrative expenses of $100 million before share-based compensation expense.

Carey Thomas Ford: Based on our robust free cash flow outlook, we repurchased $10 million of shares during the quarter twice the pace of last year, a pace, we plan to meet or exceed.

Carey Thomas Ford: Throughout 2024.

Carey Thomas Ford: Moving on to additional guidance for the year, which remains largely unchanged from the prior call. We expect depreciation of approximately $290 million cash interest expense.

Carey Thomas Ford: Approximately $75 million cash taxes to remain relatively low and our effective tax rate to be approximately 25%.

Carey Thomas Ford: Selling.

Carey Thomas Ford: General and administrative expenses of $100 million before share based compensation expense we.

Carey Thomas Ford: We expect share-based compensation charges for the year to range between $40 million and $50 million at a share price range of $80 to $100, and the charge may increase or decrease by up to $15 million based on the share price performance relative to Precision's peer group. With that, I'll turn the call over to Kevin.

Kevin: We expect share based compensation charges for the year to range between $40 million $50 million at a share price range of $80 to $100 and the charge may increase or decrease by up to $15 million based on a share price performance relative to precision peer group.

Kevin A. Neveu: Thank you, Carey, and good afternoon. As Carey described, our business is performing very well. From a market perspective, our customers are in an extended period of increasing technology adoption and rig high grading, which aligns perfectly with our high performance and alpha technology focused competitive strategy. Our team is achieving strong safety execution, excellent rig efficiency, and delivering highly disciplined cost management. We see firm day rates and stable margins across our business with excellent incremental growth opportunities in Canada and the Middle East. We expect normal maintenance investments and some upgrade investments while yielding strong free cash flow for the foreseeable future. For investors, the majority of our heavy lifting on debt reduction is almost complete.

Carey Thomas Ford: With that I'll turn the call over to Kevin.

Speaker Change: Thank you Carrie and good afternoon.

Kevin A. Neveu: As Gary described our business is performing very well.

Kevin A. Neveu: From a market perspective, our customers are in an extended period of increasing technology adoption and rig high grading, which aligns perfectly with our high performance and Alphatec neurology focused competitive strategy.

Kevin A. Neveu: Our team is achieving strong safety execution excellent rig efficiency and delivering highly disciplined cost management.

Kevin A. Neveu: We see firm day rates are stable margins across our business with excellent incremental growth opportunities in Canada, and the middle East.

Kevin A. Neveu: We expect normal maintenance investments and some upgrade investments, while yielding strong free cash flow for the foreseeable future.

Kevin A. Neveu: For investors the majority of our heavy lifting on debt reduction is almost complete and as Carey mentioned, we have prioritized increase the return of capital to shareholders.

Kevin A. Neveu: And, as Carey mentioned, we have prioritized increasing the return of capital to shareholders. I believe all of this demonstrates the success of our long-term strategy and the value we offer our shareholders. Moving on to the lower 48, industry rigged demand remains muted by weak natural gas prices and operator consolidation. While the leading indicators we monitor continue to point to a likely rebound in demand, the timing of that rebound is not clear. Those indicators include oil prices trending in the range of the upper 70s to lower 80s.

Kevin A. Neveu: I believe all of this demonstrates the success of our long term strategy and the value we offer our shareholders.

Kevin A. Neveu: Moving onto the lower 48 industry rig demand remains muted by weak natural gas prices and operator consolidation.

Kevin A. Neveu: While the leading indicators, we monitor continue to point to a likely rebounded demand the timing of that rebound is not clear.

Kevin A. Neveu: Those indicators include oil prices trending in the range of the upper seventies to Laura <unk>.

Kevin A. Neveu: Exhausted inventories of drilled and uncompleted wells, a wave of LNG export facilities set to commence operations late this year and into next, and ongoing operator discussions regarding high-grading rigs once the consolidating transactions are complete. Yet the visibility and timing of Raybond are not clear, and we expect the muted demand will persist during the second quarter.

Kevin A. Neveu: Exhausted inventories of drilled and uncompleted wells a wave of LNG export facility is set to commence operations late this year and its next and ongoing operated discussions regarding high grading rigs, what's the consolidated and transactions are completed.

Kevin A. Neveu: Yet the visibility and timing of a rebound is not clear and we expect a muted demand will participate during the second quarter.

Kevin A. Neveu: Precision's active rig camp has hovered in the 40 range for several quarters. Our team has managed the contract churn very well and remains focused on defending price and margin. Our better-than-expected field margins reflect our efforts to manage our costs, leverage our scale, and drive free cash flow, and we expect these results to continue throughout the year. We have line-of-sight to several seasonal reactivations in the Northern Rockies this quarter, and our team will continue to actively manage near-term rig churn, particularly in the gas basins where we operate. However, I'll not be surprised by somewhat choppy activity levels during the quarter. Turning to Canada, it's a much different story.

Kevin A. Neveu: Precision rig count has hovered in the 40 range for several quarters. Our team has managed their contract churn very well and remain focused on defending price and margins.

Kevin A. Neveu: Now, we're better than average field margins reflect a better than expected field margins reflect our efforts to manage our costs leverage our scale and drive free cash flow and expect these results to continue throughout the year.

Kevin A. Neveu: We have line of sight to several seasonal reactivation in the northern Rockies this quarter now.

Kevin A. Neveu: And our team will continue to actively manage near term rig churn, particularly in the gas basins, where we operate.

Kevin A. Neveu: I will not be surprised by somewhat choppy activity levels during the quarter.

Kevin A. Neveu: Turning to candidates much different story.

Kevin A. Neveu: If the question is, do we see customer interest increasing in anticipation of the Trans Mountain startup? The answer is resoundingly yes. Today we have 48 rigs operating compared to 38 this time last year. 9 of the 10 rigs increased are super singles targeting heavy oil. We see this momentum continuing throughout the summer and exceeding our prior view on Canadian rig demand. With our pad-equipped supersingles fully utilized, several customers are seeking to upgrade additional supersingles to pad-style rigs.

Kevin A. Neveu: If the question is do we see customer interest increasing unit dispersion of the Trans mountain startup.

Kevin A. Neveu: The answer is resoundingly, yes.

Kevin A. Neveu: Today, we have 48 rigs operating compared to 38 this time last year.

Kevin A. Neveu: Nine of the 10 rig increase our Super singles targeting heavy oil.

Kevin A. Neveu: We see this momentum continuing throughout the summer and exceeding our prior view on Canadian rig demand.

Kevin A. Neveu: With our pad equipped Super singles fully utilized several customers are seeking to upgrade additional super singles to pad style rigs these $2 million to $3 million upgrades come with market, leading day rates and long term take or pay contracts.

Kevin A. Neveu: These $2-$3 million upgrades come with market-leading day rates and long-term, take-or-pay contracts. During the winter drilling season, we peaked at 43 super singles operating and surprisingly expect to get back to that range during mid-summer as activity recovers from spring break. However, like the Lower 48, the weak natural gas price has been a drag on some Canadian dry gas activity, with some operators reducing or delaying near-term gas projects.

Kevin A. Neveu: During the winter drilling season, we peaked at 43 Super singles operating a surprisingly you expect to get back to that range during mid summer as activity recovers from spring breakup.

Kevin A. Neveu: However, like the lower 48, the weak natural gas price has been a drag on some Canadian dry gas activity with some operators, reducing or delaying near term gas projects.

Kevin A. Neveu: The impact on precision has been negligible as super triple demand remains very strong, with year over year activity for precision flat, and our fleet essentially fully utilized. Despite the weak eco-pricing, customer sentiment for NatGas remains surprisingly positive. The Coastal Gas Link pipe is complete, and LNG Canada is targeting final commissioning later this year with first gas shipments to follow, based on preliminary customer conversations. LNG shipments will reinforce demand for our super triples like we've experienced in heavy oil with our super singles.

Kevin A. Neveu: The impact on precision has been negligible as Super Triple demand remains very strong with year over year activity for precision flat and our fleet essentially fully utilized.

Kevin A. Neveu: Despite the weak coal pricing customer sentiment for Natgas remains surprisingly positive.

Kevin A. Neveu: The coastal gasoline pipe is complete and LNG, Canada is targeting final commissioning later this year with first gas shipments to follow.

Kevin A. Neveu: Based on preliminary customer conversations LNG.

Kevin A. Neveu: LNG shipments will reinforce demand for our Super triples, like we've experienced in heavy oil with our Super singles.

Kevin A. Neveu: It appears that customer demand will exceed super triple rig supply, and we may have the opportunity to mobilize additional capacity from the U.S. back to Canada early next year. Currently, we have 48 rigs running and expect to trend to the mid-60s by the end of June and into the 70s in July, well ahead of last year's pace. Keep in mind that during the Canadian spring and summer, weather and forest fires may have a temporary impact on activity, but should that happen, we expect it would serve to increase demand later in the year as those delayed projects pile up.

Kevin A. Neveu: It appears that customer demand will exceed super Triple rig supply and we may have the opportunity to mobilize additional capacity from the U S back to Canada early next year.

Kevin A. Neveu: Currently we have 48 rigs running and expect to trend to the mid <unk> by the end of June and into the seventies in July well ahead of last year's pace.

Kevin A. Neveu: Keep in mind that during the Canadian spring and summer weather enforced fires may have a temporary impact on activity, but should that happen. We expect it would serve to increase demand later in the year as those projects delayed projects pile up.

Kevin A. Neveu: On our February earnings call, we mentioned that we deployed in the field the NOV, ADAM, RIG4, and DEREC robotic pipe handling system. This is essentially a bolt-on robotic system that can be installed on any precision super triple drilling rig. The FIRST system is performing much better than I expected, with 97% of all rig floor and derrick pipe handling operations fully automated. We have no people working on the rig floor or up on the rocking board.

Kevin A. Neveu: On our February earnings call, we mentioned that we deployed to the field the it'll be Adam rig floor, and Derek robotic pipe handling system.

Kevin A. Neveu: This is essentially a both bolt on robotic system, which can be installed on any precision super triple drilling rig.

Kevin A. Neveu: First system is performing much better than I expected with 97% of all rig floor and Derek pipe handling operations fully automated.

Kevin A. Neveu: No people working on the rig floor or up in the Rocky Board.

Kevin A. Neveu: Now, of course, this is a highly sophisticated system. We expect several more months of field hardening to fully commercialize this product. However, in just the first 65 days of operations, we've drilled over 15,000 meters, and that's 50,000 feet for our U.S. listeners. We've tripped over 60,000 meters, or almost 200,000 feet of drill pipe.

Kevin A. Neveu: Now of course this is a highly sophisticated system, we expect several more months of field hardening to fully commercialize this product.

Kevin A. Neveu: Wherever in just the first 65 days of operations, we've drilled over 15000 meters. That's 50000 feet for U S. Listeners, we've tripped over 60000 meters or almost 200000 feet of drill pipe.

Kevin A. Neveu: We've completed eight whole sections and run the casing for all those sections of the robotic system. We believe that once we have fully field-hardened a commercialized atom, we will match or exceed the maximum efficiency possible with manual pipe handling, and will eliminate human work from the red zone on the drill rig floor and in the mast while ensuring our customers safe, consistent, predictable, and highly efficient rig floor performance. Our early operational success with the NOV robotic system mirrors the technical success we've previously achieved with our Alpha Automation, Alpha Apps, and Evergreen initiatives.

Kevin A. Neveu: We've completed eight hole sections and run the casing for all those sections with a robotic system.

Kevin A. Neveu: We believe that once we are fully field hardened and commercialized Adam we will match or exceed the maximum efficiency possible manual pipe handling.

Kevin A. Neveu: We'll eliminate human work from the Red zone on the drill rig floor into the mast, while ensuring our customers safe consistent predictable and highly efficient rig floor performance.

Kevin A. Neveu: Our early operational success with the <unk> robotic system mirrors. The technical success. We've previously achieved with our Elfa automation elfa apps and evergreen initiatives. Most importantly demonstrates our approach to new technology development.

Kevin A. Neveu: Most importantly, it demonstrates our approach to new technology development. I'll remind you that our technology strategy has been to collaborate with industry partners who invest in product R&D, while we focus on field deployment and field hardening. Our technology team is comprised of highly experienced engineers and operations experts who work hand-in-hand with our field operations management team to ensure new technology is deployed with a well-supported, highly structured process. The process is designed to learn and solve deployment challenges quickly and efficiently with minimal cost overhead.

Kevin A. Neveu: I'll remind you that our technology strategy has been to collaborate with industry partners, who invest in the product R&D will refocus on field deployment and field hardening.

Kevin A. Neveu: Our technology team is comprised of highly experienced engineers and operations experts, who work hand in hand, with our field operations management team to ensure new technology is deployed with a well supported highly structured process.

Kevin A. Neveu: The process is designed to learn and solve deployment challenges quickly and efficiently with minimal cost overheads.

Kevin A. Neveu: Our robotics system is well on this path, and we are the industry's first mover with field robotic technology. We believe that the comprehensive skills and operational IP we are developing as we field harden this system reinforces our first mover competitive advantage and does so with virtually no overhead burdening our financial performance. Now turning to our Canadian Well Service Group, the TMX tailwind is having a similar impact on well servicing demand. During the first quarter, Precision Well Servicing averaged 82 active rigs, with peak utilization exceeding 100 rigs several times.

Kevin A. Neveu: Our robotic system as well on this path and we are the industry's first mover with field robotic technology.

Kevin A. Neveu: We believe that the comprehensive skills and operational IP, we have developed because we field harden the system reinforces our first mover competitive advantage and does so with virtually no overhead burdening our financial performance.

Kevin A. Neveu: Now turning to our Canadian well service group the <unk> tailwind is having a similar impact on well servicing demand during the first quarter precision well servicing averaged 82 active rigs with peak utilization of exceeding 100 rigs several times.

Kevin A. Neveu: On a snapshot in time basis, today we are running 65 well service rigs, which compares to approximately 40 rigs for Precision and CWC combined at the same time last year. We expect this demand profile to continue. With the CWC acquisition, our team has leveraged our scale, with significantly increased access to labor and a larger customer base. We have widely expanded our capabilities across Western Canada's sedimentary basin. Customer demand through the year is expected to remain strong, driven by improved oil price differentials, supporting activity in oil-focused areas, and increased abandonment spending for the remainder of 2024 and into 2025.

Kevin A. Neveu: On a snapshot in time basis today, we are running 65, well service rigs, which compares to approximately 40 rigs for precision and CWC combined at the same time last year and we expect this demand.

Kevin A. Neveu: <unk> profile to continue.

Kevin A. Neveu: With the CWC acquisition, our team has leveraged our scale with significantly increased access to labor and a larger customer base, we have widely expanded our capabilities across western Canada sedimentary basin.

Kevin A. Neveu: Customer demand through the year is expected to remain strong driven by the improved oil price differentials supporting activity in oil focused areas and increase the betterment spending for the remainder of 2024 and into 2025.

Kevin A. Neveu: Moving to our international business, in Kuwait in the Kingdom of Saudi Arabia, we continue to bid our idle rigs for opportunities in both markets and also for other opportunities in the region. However, competition in these regions has increased as other international drillers are looking to enter the Middle East. The eight precision rigs currently running are delivering a 40% activity growth for precision. We believe there are good opportunities to activate additional rigs this year or early next year as we look to continue our growth in that region.

Kevin A. Neveu: Moving to our international business in Kuwait, and the Kingdom of Saudi Arabia, we continue to bid our idle rigs for opportunities in both markets and also for our other opportunities in the region.

Kevin A. Neveu: While competition in these regions has increased as other international drillers are looking to enter the middle East.

Kevin A. Neveu: The precision rigs currently running are delivering a 40% activity growth through precision. We believe there are good opportunities to activate additional rigs this year or early next year as we look to continue our growth in that region.

Kevin A. Neveu: So I'll wrap up our comments by thanking the people of Precision for their hard work and dedication and the excellent results they're achieving for our customers, for our investors, and for the company. With that, I'll now hand the call back to the operator for your question. Thank you, ladies and gentlemen.

Kevin A. Neveu: So I'll wrap up our comments by taking the people of precision for their hard work and dedication and the excellent results are achieving for our customers for our investors and for the company.

Kevin A. Neveu: With that I'll now hand, the call back to the operator for your questions.

Speaker Change: Ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.

Operator: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 11 again. We will pause for a moment while we compile our Q&A list. Our first question comes from Aaron MacNeil with TD Cowan. Your line is open.

Operator: Yes.

Aaron MacNeil: Our first question comes from Aaron Macneil with TD Cowen Your line is open.

Aaron MacNeil: Afternoon, and thanks for taking my questions.

Aaron MacNeil: You think about the sort of outperformance in the U S relative to margin guidance and then the guidance for that step down in Q2 10.

Aaron MacNeil: Afternoon and thanks for taking my questions. As we think about the sort of outperformance in the U.S. relative to margin guidance and then the guidance for that step down in Q2 to I think $10,000 per day, what are the sort of puts and takes for the sequential decrease. Like, is it pricing? Are costs increasing? Or are you just sort of embedding some continued conservatism in the guidance?

Aaron MacNeil: $10000 per day.

Aaron MacNeil: What are the sort of puts and takes.

Aaron MacNeil: For the sequential decrease in the pricing or costs, increasing or are you just sort of embedding. Some continued conservatism in the guide.

Aaron MacNeil: And I think it's a little bit of all of the above a little bit of pricing pressure and just.

Aaron MacNeil: Maintaining a little bit more fixed cost with the lower activity level puts a bit of pressure on the margins, but we feel pretty good about being able to exceed the $10000 a day mark.

Carey Thomas Ford: Hey Aaron, I think it's a little bit of all of the above, a little bit of pricing pressure, and just maintaining a little bit more fixed costs with the lower activity level puts a bit of pressure on the margins, but we feel pretty good about being able to exceed the $10,000 mark.

Aaron MacNeil: Got it Okay and then maybe just a clarification question for you Gary I know obviously the shareholder returns piece is becoming a bigger focus I'm. Just wondering could you define how you calculate free cash flow. So we can sort of make our own assumptions around.

Carey Thomas Ford: Got it. Okay. And then maybe just a clarification question for you, Carey. I know, obviously, the shareholder returns piece is becoming a bigger focus. Just wondering, could you define how you calculate free cash flows so we can sort of make our own assumptions around it? You know, what, like, what the order of magnitude might be on the buyback.

Carey Thomas Ford: How like what.

Carey Thomas Ford: What the order of magnitude might be on the buyback.

Carey: Yes, I mean I think in <unk>.

Carey: <unk> terms think of it as kind of a $50 million to $100 million is probably the range in dollar terms, but we look at free cash flow as EBITDA less interest less capex.

Carey Thomas Ford: And that.

Carey Thomas Ford: That is what we have available for debt reduction and share buybacks.

Speaker Change: Excellent I will turn it back thanks.

Carey Thomas Ford: Yes, I mean, in dollar terms, think of it as kind of a 50 to 100 million dollars. That is probably the range in dollar terms, but we look at pre-cash flow as EBITDA, less interest, less capex, and that is what we have available for debt reduction and share buyback.

Speaker Change: Thanks Aaron.

Carey Thomas Ford: Our next question comes from coal power coal Pereira with Stifel. Your line is open.

Speaker Change: Afternoon, all sure U S outlook is largely similar to your peers, but I'm. Just wondering can you give some color on how customer conversations are going and your big differences between public and private oil versus gas et cetera.

Cole J. Pereira: Our next question comes from Cole Pereira with the CFO. Your line is open.

Kevin A. Neveu: Afternoon all. Sir, the U.S. outlook is largely similar to your peers, but I'm just wondering, can you give some color on how customer conversations are going? Any big differences between public and private, oil versus gas, etc.

Kevin A. Neveu: Hey, Paul it's Kevin so.

Cole J. Pereira: Fewer conversations on gas and oil these days.

Kevin A. Neveu: ?

Kevin A. Neveu: Hey Cole, it's Kevin. So there are fewer conversations about gas than oil these days, and that might be like three or four to one. I'd say there isn't a lot of difference in the type of conversations, but there is one unique piece. So we're in conversations with many of the companies that are involved in transactions on the buy side, and there's going to be a real push to move to higher technology rigs and consolidate vendor groups.

Kevin A. Neveu: And that might be like three or four to one.

Kevin A. Neveu: I'd say there isn't a.

Kevin A. Neveu: A lot of difference in the type of conversations, but there is one unique piece so ridden conversations with many of the.

Kevin A. Neveu: Companies are involved in transactions on the buy side.

Kevin A. Neveu: And there's going to be real push to move to higher technology rigs consolidated vendor groups.

Kevin A. Neveu: So I'd say that there is a high level of engagement right now with some of the larger EMPs in the US looking to understand how successful we've been with Evergreen and with Alpha and even with our robotics automation. And, I think as those transactions close and they begin to rationalize the rig plates, I feel quite good about our positioning right now.

Kevin: So I'd say that there's a high level of engagement right now with some of the larger e&ps in the U S. Looking to understand how successful we've been with evergreen and with alpha and even with our robotics automation.

Kevin A. Neveu: I think as those transactions close and they begin to rationalize their rig fleets I feel quite good about our positioning right now.

Cole J. Pereira: Okay, I got it. Thanks.

Unknown Speaker: And talked about a higher year over year rig count in Canada. I'm just wondering, do you see that for both heavy oil focused and gas focused rigs in your fleet? Or is there kind of a shift more towards the heavy oil side? And then are you willing to say, on average, what those two different classes of rigs might be generating right now from a margin per day standpoint?

Speaker Change: Okay got it thanks and talked about a higher year over year rig count in Canada I'm. Just wondering do you see that for both heavy oil focused and gas focus rigs in your fleet or is there kind of a shift.

Unknown Speaker: More towards the heavy oil side.

Unknown Speaker: Then are you willing to say.

Unknown Speaker: On average what are those two different classes of rigs might be generating right now from a margin per day standpoint.

Unknown Speaker: Unknown Speaker

Kevin A. Neveu: I'll touch on the activity and I'll let Carey make comments on the margin, but cool, so the Delta in activity so far has been oil-based, so it's really kind of built up almost following the announcement that the pipeline had a firm start date. And I think that's removed any uncertainty from anybody's mind. Certainly, the WCS discounts have been in place for a little while now.

Speaker Change: I'll touch on the activity ill, let Terry make comments on the margin, but cool so the delta in activity. So far has been oil based so it's really kind of built up.

Kevin A. Neveu: Almost following the announcement of the pipeline.

Kevin A. Neveu: <unk> start date.

Kevin A. Neveu: And I think thats removed any uncertainty from anybody's mind certainly the.

Kevin A. Neveu: WCS discounts has been in place for a little while now.

Kevin A. Neveu: I think you've got better cash flows for oil. You have very low geological risk for heavy oil drilling, very predictable drilling programs, and highly efficient rigs. So I think it's been an easy decision for our customers to very quickly get back to the drill bit and get back on programs that were running back in that 2010, 2011, 2012 timeframe, and do it now with the confidence of better takeaway capacity, good marginal discounts, and a good supportive exchange rate. On the gas side right now, I'll be quite clear, we haven't seen any drag due to natural gas prices. Our super-trivial activity remains firm and strong in the Montaney.

Carey: So I think you've got better cash flows for oil <unk>.

Kevin A. Neveu: <unk> got.

Kevin A. Neveu: Very low geological risk and heavy oil drilling.

Kevin A. Neveu: Very predictable drilling programs highly efficient rigs. So I think it's been an easy decision for our customers to very quickly get back to the drill bit and get back on programs that were running back in that 2010 to 11 2012 timeframe.

Kevin A. Neveu: And do it now with the confidence of our better takeaway capacity.

Kevin A. Neveu: Good.

Kevin A. Neveu: Marginal discounts at a run of good supported by exchange rate on the gas side right now.

Kevin A. Neveu: I'll be quite clear, we haven't seen any drag due to natural gas prices are super triple activity remains firm and strong in the Montney.

Kevin A. Neveu: It does look like from conversations that once we're closer to export startup, that we'll start to see a response on increased demand for Montany Riggs. So that's why we think that the day LNG Canada announced that they were commissioning and they're going to be launching their first shipments, I think we'll see a response on the gas side.

Kevin A. Neveu: It does look like from conversations that once we are closer to export startup that we'll start to see response on increased demand on.

Kevin A. Neveu: Montney rigs so that's why we're thinking that.

Kevin A. Neveu: The day, LNG, Canada announced that their commissioning and theyre going to be launching their first shipments I think we'll see response from the guests.

Carey Thomas Ford: Yeah, no, I'll follow on there on the margin question. I think if you go back three or four or five years ago, we had a pretty big difference in margin between super triples and super singles. That has changed as we're close to 100% utilization on the super triples and very high utilization on the super singles now. Super singles have a little bit lower operating cost, and they're in demand. So the interest rates are pretty strong.

Kevin A. Neveu: Yes.

Carey Thomas Ford: All in there on the margin question I think.

Carey Thomas Ford: If you go back.

Carey Thomas Ford: Three or four or five years ago, we had.

Carey Thomas Ford: Pretty big difference in margin between Super triples, and Super singles.

Carey Thomas Ford: That has changed as we're close to 100% utilization on the Super triples and.

Carey Thomas Ford: And very high utilization on the Super singles now Super singles have a little bit lower operating cost and they're in demand. So the rates are pretty strong. So that difference is there is still a bit of a difference there, but its a lot narrower band than it used to be but the activity difference between 2023, and 2024 is going to be.

Carey Thomas Ford: So that difference is still a bit of a difference there, but it's a lot narrower band than it used to be. But the activity difference between 2023 and 2024 is going to be made up of super singles and a few of the tele doubles that we acquired in the CWC acquisition.

Carey Thomas Ford: Laid up.

Carey Thomas Ford: Super singles and a few of the Tele doubles that we acquired in the TWC acquisition.

Kevin A. Neveu: Okay, got it, thanks. Then, just kind of circle back on some of your comments. Fair to say that even with a bit of weakness in natural gas, you're not really seeing any pricing pressure on those rigs.

Speaker Change: Okay got it thanks, and then just kind of just circle back on some of your comments fair to say that even with a bit of weakness in natural gas you are not really seeing any pricing pressure for those rigs.

Kevin A. Neveu: I think in the super single range and out well, there's no impact whatsoever, and on the triple side. You know, we're in negotiations with clients right now. We are getting lots of rhetoric back and forth around price tension with our customers like we always do. I think we're working hard to make sure we keep our customers happy right now.

Kevin A. Neveu: I think in the Super single regional oil Theres, no impact whatsoever and on the Triple side.

Kevin A. Neveu: Negotiations with clients right now we are getting.

Kevin A. Neveu: Getting lots of rhetoric back and forth around price tension with our customers like we always do.

Kevin A. Neveu: I think we're working hard to make sure we keep our customers happy right now.

Cole J. Pereira: Got it. That's all for me. Thanks. I'll turn it back.

Speaker Change: Got it that's all for me Thanks, I'll turn it back thanks Paul.

Luke Lemoine: Our next question comes from Luke Lemoine with Piper Sandler. Your line is open.

Cole J. Pereira: Our next question comes from Luke Lemoine with Piper Sandler Your line is open.

Luke Lemoine: Yeah, hey, good afternoon. Kevin, just wanted to clarify. You talked about the Canadian recount being in the 60s in June and 70s in Canada. That's correct.

Luke Lemoine: Yes, Hey, good afternoon, Ken.

Luke Lemoine: Kevin just wanted to clarify you talked about.

Luke Lemoine: The Canadian rig count being at <unk> in June and <unk> in Canada is that correct.

Kevin A. Neveu: That's correct. Probably the mid-60s by the end of June and then into the mid 70s by mid summer. There's always a comment about whether if it rains hard, we lose rigs very quickly, so forest fires could cause an impact. But I'll just leave those kind of on the sidelines for a moment. Customers have plans to activate rigs, and they're booking our rigs, and they're having us get our crews lined up to get in the range of 65 rigs by the end of June and 75 rigs in mid-summer. It's unusual to see the rig count get that close to the winter rig count in the summertime. I mean, I'm quite surprised.

Luke Lemoine: That's correct.

Kevin A. Neveu: Probably the mid Sixty's by the end of June and into the mid Seventy's by.

Kevin A. Neveu: By mid summer there is always a.

Kevin A. Neveu: The comment about whether if it rains hard we lose rigs very quickly so far.

Kevin A. Neveu: Forest fires could cause of impact, but ill just leave those kind of at the sidelines for a moment customers have plans to activate rigs and they're booking their rigs and they are having us get our crews lined up to get in the range of 65 rigs by the end of June 75 rigs in mid summer.

Kevin A. Neveu: It's unusual to see the rig count get back close to the winter rig counts in the summertime I mean I'm quite surprised.

Kevin A. Neveu: Yeah, and then you, we've talked about on previous calls before, and you alluded to it again, possibly bringing rigs up from the U.S. to Canada. You know, I guess what the Canadian rig count is, surprising here, is there the possibility you can move more rigs? Unknown Executive, Keith MacKey, Precision Drilling Corp.

Speaker Change: Yes, and then you.

Kevin A. Neveu: Talking about on previous calls before and.

Kevin A. Neveu: You alluded to it again, possibly bringing rigs up from the U S to Canada.

Kevin A. Neveu: I guess, what kind of a Canadian rig counts surprising here is there the possibility you can move more rigs to Canada from the us than you previously expected or what do you think the outlook is for that next year.

Kevin A. Neveu: You know, it's a little hard to say because, frankly, I've been a bit surprised by the response on the oil side to Trans Mountain. Certainly, we weren't planning to see 46 rigs or 48 rigs running in mid-April. It's been a pleasant surprise.

Kevin A. Neveu: It's a little hard to say, because frankly, a bit surprised by the response on the oil side to Trans mountain.

Speaker Change: Lee we were not we were planning to see 46 rigs or 48 rigs running in mid April.

Kevin A. Neveu: It does show you how quickly our customers here can respond to a better macro. On the gas side, you know, I wouldn't be surprised if we were requested by customers to move two or three more rigs up from the US in 2025. We'd want them to pay the move cost, we'd want them to pay for any recertifications or upgrades to Canadian requirements, and we want day rates that are in the upper 30s.

Speaker Change: Pleasant surprise.

Kevin A. Neveu: It does show you how quickly our customers you can respond to a better macro.

Kevin A. Neveu: On the gas side.

Kevin A. Neveu: You know I wouldn't be surprised if we were.

Kevin A. Neveu: Requested by customers to move two or three more rigs up from the U S. In 2025, we would want them to pay the mobe cost we'd want them to pay for any.

Kevin A. Neveu: Re certifications or upgrades to Canadian requirements, and we want day rates that are in there for 30, so we've been quite clear on that.

Kevin A. Neveu: So we've been quite clear on that. We certainly do not want to oversupply the market in Canada. That's proven to be really, really poor for our returns. We need to maintain decent returns for our shareholders. So ensuring that if we bring rigs out, they're coming in at the same rate of return we're getting on our current rigs is really important.

Kevin A. Neveu: We certainly do not want to oversupply the market in Canada, that's proven to be.

Kevin A. Neveu: Really really poor for our returns we need to maintain decent returns for our shareholders. So.

Kevin A. Neveu: Ensuring that we bring rigs that they're coming in at the same rate of return we're getting on our current rigs is really important.

Kevin A. Neveu: Okay.

Kevin A. Neveu: And then on the US recount, you know, totally get the choppiness. I think you're 39 right now, switching on the press release. And you talked about, you know, adding one to two in the DJ here, coming up this quarter. Is the right way to think about the two-tiered recount just kind of oscillating around this number? Or, you know, how should we handicap it? Yeah.

Kevin A. Neveu: Dan.

Kevin A. Neveu: On the U S rig count totally get the Choppiness.

Kevin A. Neveu: 39, right now switching on our press release and you talked about.

Kevin A. Neveu: Adding one or two in the DJ here coming up this quarter.

Speaker Change: It's the right way to think about the <unk> rig count just kind of oscillating around this number or how should we candy Catherine yeah, I'd like to see it stay above 40, but I think it will oscillate around 40.

Kevin A. Neveu: Yeah, I'd like to see it stay above 40, but I think it'll oscillate around 40.

Carey Thomas Ford: Okay, and then sneak one more in. Carey, on U.S. margins, you talked about a mixture of, you know, fixed costs, just kind of a lower recount, less absorption there, and then some rate pressure as well. I mean, would you characterize the rate pressure as pretty minimal at this point? Yes.

Speaker Change: Okay and then.

Carey Thomas Ford: Sneak one more in carry.

Carey Thomas Ford: On the U S margins.

Carey Thomas Ford: You talked about a mixture of.

Carey Thomas Ford: Fixed cost is kind of a lower rig count less absorption there.

Carey Thomas Ford: And then some rate pressure as well I mean would you characterize the rate pressure is pretty minimal at this point yes.

Carey Thomas Ford: I think that kind of our guidance reflects that it's a little bit of higher cost and a little bit of rate pressure, but you know it's less than $1,000 a day.

Carey: Yes, I think that's kind of our guidance reflects that it's a little bit of higher cost and a little bit of rate pressure, but it's.

Carey Thomas Ford: Yes.

Speaker Change: Less than $1000 a day.

Luke Lemoine: Luke, I'll just clarify.

Speaker Change: Okay got it thanks, so much.

Kevin A. Neveu: Luke, I'll just clarify one thing for you, if you don't mind. You mentioned DJ Basin. We're actually looking kind of in the northern Rockies into the Wyoming area for those rig additions.

Speaker Change: Look I'll just clarify one thing for you. If you don't mind, you mentioned the D. J basin, and we're actually looking kind of northern Rockies into the Wyoming area for those rig additions.

Speaker Change: Okay. Thank you okay. Thank you.

Keith Mackey: Our next question comes from Keith Mackey with RBC Capital Markets. Your line is open.

Kevin A. Neveu: Our next question comes from Chief Mathew with RBC capital markets. Your line is open.

Keith Mackey: Hi and thank you. Maybe we could start out on the shareholder returns front. So, 25 to 35% of free cash flow you plan to return to shareholders this year. How does that change as you get closer to your debt target? I think the release mentioned getting close to that 50% mark. How do you think about that in terms of actual timing versus achieving your debt reduction targets? Do you move it up before you actually get to the $600 million of debt reduction in 2026? Or do you think about it moving sooner than that? Just anything you can do to help us frame the timing on that would be great.

Keith Mackey: Hi, and thank you.

Keith Mackey: Maybe just if we could start out on shareholder returns, Brian So 25% to 35% of free cash flow you plan to return to shareholders. This year, how does that change as you get towards your debt target I think the release mentioned getting closer to that 50% Mark.

Keith Mackey: How do you think about that in terms of.

Keith Mackey: In terms of actual timing in it.

Keith Mackey: Versus achieving your debt reduction targets do you move it up before you actually get to the.

Keith Mackey: $600 million of debt reduction in 2026, or do you think about it moving sooner than that just just anything you can do to help us frame the timing on that would be great.

Carey Thomas Ford: Sure. Keith, the goal here is to get that down to below one times normalized level. So that's going to depend on kind of where our EBITDA is between 25 and 26 or where we think it's going to be. But there's a good chance we're in that range next year. And if you look at to date, in the last two years, we've paid down $258 million of debt. If you take the midpoint of where we're guiding this year, it's called $175 million of additional debt reduction.

Keith Mackey: Sure Keith.

Carey Thomas Ford: The goal here is to get that down to below one times normalized level.

Carey Thomas Ford: So that's going to depend on kind of where our EBITDA is in 'twenty, five and 26%, where we think it is going to be but there's a good chance where in that range next year and if you look at to date.

Carey Thomas Ford: Last year, as we pay down $258 million of debt. If you take the midpoint of where we're guiding this year, let's call it $175 million of additional debt reduction.

Carey Thomas Ford: You know, we're Unknown Executive, Keith Mackey, Precision Drilling Corp. ShareBuyBack, and we're already getting more confident in taking some of that free cash flow and using it to give direct payments to shareholders. So I think that type of thinking will continue into 2025. And I can't promise that we'll be at 50% next year, but I think I can promise that we're going to increase the allocation.

Carey Thomas Ford: Sure.

Speaker Change: We are.

Carey Thomas Ford: In a low <unk> low to mid fours there on debt reduction at the end of this year on a $600 million target. So I think we're going to be well on our way and.

Carey Thomas Ford: <unk> effectively doubling our allocation to on a percentage basis our allocation to.

Carey Thomas Ford: Share buybacks.

Carey Thomas Ford: And we're already getting more confident in taking some of that free cash flow and using it to give direct payments to shareholders. So I think that that type of thinking will continue into 2025.

Carey Thomas Ford: And.

Carey Thomas Ford: I can't promise that we'll be at 50% next year, but I think I can promise that we're going to increase the allocation next year.

Carey Thomas Ford: Got it. Okay, that's helpful. And just to follow up on that, then, Carey, is it likely that you'll continue along with a buyback in that scenario? Or do you think about a dividend as well? Or is it too early to tell?

Speaker Change: Got it Okay. That's helpful and just a follow up on that then Kerry.

Carey Thomas Ford: Hi.

Carey Thomas Ford: Is it is it likely that Youll continue along with the buyback in that scenario or or do you think about a dividend as well or is it too early to tell.

Keith Mackey: So we'll have conversations with our board every quarter about capital allocation and the form of the capital allocation. This year, it looks like it's going to be share buybacks. But I think that as we move closer to our long-term goal of getting below one times, a dividend becomes more likely in one form or another.

Carey: So we will have conversations with our board every quarter about capital allocation in the form of the capital allocation. This year. It looks like it's going to be share buybacks, but I think that as we move closer to our long term.

Keith Mackey: Goal of getting below one times, a dividend becomes more likely in one form or another.

Keith Mackey: Okay, thanks very much. That's it for me.

Speaker Change: Okay. Thanks, very much that's it for me.

Waqar Syed: Our next question comes from Waqar Syed with ATB Capital Markets. Your line is open.

Speaker Change: Great. Thanks.

Waqar Syed: Our next question comes from a car side with <unk> capital markets. Your line is open.

Kevin A. Neveu: Thank you for taking my question. Kevin, in the heavy oil basins, you see more and more bad drilling. Do you think that you could see maybe customer demand for tele-doubles with pad drilling capability kind of pick up more because you can, you know, store more pipe? Do you expect to see that trend?

Kevin A. Neveu: And thank you for taking my question.

Kevin A. Neveu: Kevin.

Kevin A. Neveu:

Kevin A. Neveu: And the heavy oil basins, you'll see more and more.

Kevin A. Neveu: Drilling.

Kevin A. Neveu: Do you think that you could see maybe customer demand for tele doubles with pad drilling capability kind of pick up more because you can.

Kevin A. Neveu: Still more pipe.

Kevin A. Neveu: Do you expect to see that trend.

Kevin A. Neveu: I'll look at this a couple of different ways, Waqar. First of all, we can store almost infinite pipe on a super single because pipes are all racked horizontally on pipe racks. So we're not limited on racking capacity. The super single is an extremely efficient rig, and it's got the pipe in the pipe arm right up against the well center line just before you need it. So it's a really efficient rig. It doesn't require anybody in the derrick to handle that pipe. So it's efficient and it's safe.

Kevin A. Neveu: Look at this a couple of different ways with car first of all we can store almost infinite pipe on a super single, because <unk> only and pipe racks. So we're not limited on racking capacity.

Kevin A. Neveu: The Super singles extremely efficient rig and it's got the pipe in the pipe arm right up against the well centerline just before you need it. So it's a really efficient rig it doesn't require anybody in the derrick to handle the pipe. So it's sufficient.

Kevin A. Neveu: We can drill the first hole faster than a tele-double because we're not having to build double stands as we go. So we're drilling heads all the time. If it's a single bit run type well, which a lot of these are, we can drill those faster than tele-doubles most of the time. There were, and there have been some questions in the past about the torque capabilities. We're addressing that; the rigs are being hydraulically upgraded to handle the torque.

Kevin A. Neveu: <unk>.

Kevin A. Neveu: We can we can drill the first hole faster than a tele double because we're not having to build double standards as we go through our drilling head all the time, if it's a single bit run type well, which a lot of these are we can drill those faster than tele doubles most of the time.

Kevin A. Neveu: There was there has been some question in the past about the torque capabilities, we're addressing that the rigs are being hydraulic we upgraded to handle the torque.

Kevin A. Neveu: You know, this has been a rig that has had an approaching 40-year history in heavy oil as a highly efficient rig, and when you look at those drilling times, those racking times, tripping times, and then combine that with either the walking time to walk well-to-well or the time to move the rig, we can move that entire rig in four to five hours. That's if we're moving it location-to-location. It is just an amazingly efficient rig.

Kevin A. Neveu: This has been a rig which has a.

Kevin A. Neveu: Approaching a 40 year history in heavy oil is a highly efficient rig.

Kevin A. Neveu: When you look at those drilling times, those Rocky times Tripping times, and then combine that with the either the walking time to walk well to well with starting to move the rig we can move that entire rig in four to five hours.

Kevin A. Neveu: That's it for moving it location to location. It is just amazingly efficient rig.

Kevin A. Neveu: So, I think that... You know, I don't ignore competition. We only have 55% market share. We don't have it all together, but I'm pretty okay with that.

Kevin A. Neveu: So I think that.

Kevin A. Neveu: I don't ignore competition, we only have 55% market share we don't have at all but I'm pretty happy with what we have.

Waqar Syed: Now just to clarify, I was talking about having two strands of pipe vertically, you know, held up in the derrick, so that's kind of what I meant with that. But when you start the well, you don't have two strands of pipe in the derrick. You've got all the pipe in the pipe rack. You're going to bring that pipe in one joint at a time. On a super single, you're always bringing it in 45 feet at a time for drilling. But now, but on a pad, like moving between wells, that's what I'm doing.

Speaker Change: Okay and then just.

Waqar Syed: I was talking about.

Waqar Syed: Having to do.

Waqar Syed: Just as a pipe vertically held up on the <unk>, So thats kind of what I meant with that.

Waqar Syed: But right now.

Waqar Syed: You start to well you don't have to stand the pipe in the dark, but all the pipe and the pipe rack.

Waqar Syed: Going to bring that pipe in one joined at a time on it.

Waqar Syed: On a super single you always bring you did 45 feet at a time.

Waqar Syed: So we're drilling right now but.

Waqar Syed: Bad like moving between between Wells Thats, what I meant.

Kevin A. Neveu: But my other comment is that we have that single joint of pipe up in the pipe arm right up against the well center just before they need the pipe. So it's still very efficient drilling ahead compared to a tele-double. And we can pull data from our analytics group and show how we can drill wells, first well, last well on a pad. Every bit is efficient, or sometimes more efficient than Tele-Devils.

Waqar Syed: But my other comment is that we have we have that single joint of pipe.

Kevin A. Neveu: In the pipe arm right up against the wall centered just before they need the pipe. So it's still very efficient.

Kevin A. Neveu: Drilling ahead compared to a tele double and we can pull data from our analytics group and show how we can drill wells first of all last well on the pad.

Kevin A. Neveu: Every bit as efficient or sometimes more efficiently than tele doubles.

Waqar Syed: Sure, now that's really interesting, and you know another thing about the automation looks to be a very interesting opportunity set for you. Do you see the application, or lacrosse not?

Kevin A. Neveu: Sure.

Waqar Syed: Interesting.

Speaker Change: On the automation looks to be a very interesting opportunity set for you.

Speaker Change: Do you see the application all across North America, you see the market better in Canada versus U S. And then also do you see that.

Kevin A. Neveu: I think we'll see technology adoption in North America for this type of technology earlier.

Unknown Speaker: https://youtu.beo.com

Unknown Speaker: <unk> in the middle East market as well.

Unknown Speaker: Formation.

Kevin A. Neveu: Drilling. So I think that's where automation technology will have its early traction. But we also do expect that Saudi Arabia and Kuwait never want to be left behind in technology. So they're going to, you know, they're going to view themselves as not a fast follower but a follower. But I certainly see, you know, super majors, large cap EMPs that are highly focused on predictable, repeatable, and safety as the early adopters of automation technology like this. We have a we have a little ways to go before we're commercial on this yet, but certainly have a line of sight to believe that could happen inside this calendar year.

Speaker Change: Yes, sorry, I'm sorry, yeah for automation, so I think so yes.

Kevin A. Neveu: Yes, I think we will see technology adoption in North America on this type of technology earlier.

Kevin A. Neveu: There is a huge focus on safety is a huge focus on consistent predictable repeatable, which really plays into any type of pad drilling.

Kevin A. Neveu: So I think that's where the automation technology will habits.

Kevin A. Neveu: It's early traction, but we also do expect that.

Kevin A. Neveu: Saudi Arabia, and Kuwait don't never want to be left behind in technology. So its going to theyre going to view themselves as not a fast follower, but a follower.

Kevin A. Neveu: Yes.

Kevin A. Neveu: But I certainly see.

Kevin A. Neveu: Super majors large cap e&ps that are highly focused on predictable repeatable.

Kevin A. Neveu: And safety.

Kevin A. Neveu: Being the early adopters of automation technology like this.

Kevin A. Neveu: We have a we have a little ways to go before were commercial loan this yet but.

Kevin A. Neveu: Certainly have line of sight to believing that could happened inside this calendar year.

Waqar Syed: That's good. Well, thank you very much.

Speaker Change: Okay, well. Thank you very much thank you.

Kurt Hallead: Thank you, Waqar. Our next question comes from Kurt Hallead with Benchmark. Your line is open.

Kurt Hallead: Thank you <unk> next question comes from Kurt <unk> with benchmark. Your line is open.

Kurt Hallead: Hey everybody, good afternoon. Hey Kevin, yeah, I just wanted to touch base again on, you know, discussions that we've had in the past and you've had about, you know, Unknown Speaker. And then it's a play where the Canadian EMP companies are looking to lock in rates for longer duration contracts to basically take advantage of the OIG's export capacity. It sounds like there's maybe a little bit of a lull in that dynamic in the near term here because of the natural gas prices, but really just looking to kind of calibrate that and get an update for you on how much conviction you still have in that structural change.

Kurt Hallead: Hey, everybody good afternoon.

Kevin: Hey, Kurt.

Kurt Hallead: Hey, Kevin Yeah, I just wanted to.

Kurt Hallead: Touch base again on.

Kurt Hallead: Okay.

Kurt Hallead: In the past when you've had about the dynamics at play where.

Kurt Hallead: Canadian E&P companies are looking to lock in rates for a longer duration contracts.

Kurt Hallead: Basically take advantage of the <unk>.

Kurt Hallead: Export capacity it sounds like there may be a little bit above.

Kurt Hallead: And that dynamic in the near term here because of the natural gas pricing.

Kurt Hallead: It was really just looking at kind of calibrate that give an update for you.

Kurt Hallead: And how much conviction you still have a structural.

Kevin A. Neveu: Kurt, that's actually a really good question. So I'll break it up into two halves. So you talked about LNG. Let me start with heavy oil and super singles. We have more contracts on super singles today than we've ever had in our history on super singles when we didn't have a new build cycle, and that's for oil plays and tied to oil export through Trans Mountain. So that activity continues. We've got a number of upgrades right now that will be tied to long contracts with the pad upgrades. That momentum is continuing.

Kurt Hallead: Structural change in the Canadian market.

Kevin A. Neveu: That's actually a really good question, so I'll break it up into two half. So you talked about LNG, let me start with heavy oil and Super singles, we have more contracts on Super singles today than we've ever had their history on Super singles. When we didn't have a newbuild cycle and Thats for oil plays and tied to oil exports through Trans mountain. So.

Kevin A. Neveu: That activity continues we've got a number of upgrades right now will be tied to long contracts with the pad upgrades that momentum is continuing.

Kevin A. Neveu: I believe we have the right portion of our triples fleet for gas contracts, so we're not looking to add more contracts. We want to maintain some exposure to the spot market as that market continues to improve. We have some renewals coming up right now. We're working through those with our customers. But I think the proportion of rigs that are locked in with term contracts in Canada and the proportion that are exposed to spot are the right proportion right now.

Kevin A. Neveu: I believe we have the right portion of our triples fleet for gas contracted.

Kevin A. Neveu: So we're not looking to add more contracts, we want to maintain some exposure to spot market as that market continues to improve.

Kevin A. Neveu: We have some renewals coming up right now we're working through those with our customers. So I think the proportion of rigs that are locked in with term contracts in Canada and the proportion of that are exposed to spot or the right proportion right now.

Kevin A. Neveu: We're not disclosing what that number is. We don't like to give out too much macro information on a rig fleet of 30 rigs. But I feel really good about our contract book, and I feel that we'll maintain a solid contract book and backlog of contracts with our super triples. Likely, if we're right, and the LNG shipments start late this year or the next year and demand increases, if we move more rigs from the U.S. up to Canada, they're probably going to be contracted rigs.

Kevin A. Neveu: Not disclosing what that number is we don't like to give out too much macro information on our rig fleet to 30 rigs, but I feel really good about our contract book and I feel that will.

Kevin A. Neveu: We will maintain a solid contract booking backlog of contracts with our Super triples.

Kevin A. Neveu: Likely if we're right.

Kevin A. Neveu: The LNG shipments start late this year early next year and demand increases.

Kevin A. Neveu: We moved more rigs in the U S up together, they're probably gonna be contracted rigs.

Kurt Hallead: Right, okay. Great.

Kevin A. Neveu: And then going back to one of your other answers from earlier, in the context of pricing dynamics in Canada, I think I heard you reference that you're trying to keep your customers happy. Some might interpret that as, you know, being willing to discount prices. Could you provide some clarity on that?

Speaker Change: Alright, Okay, Okay, great and then sort of going back to one year other answers from earlier.

Kevin A. Neveu: The context of.

Kevin A. Neveu: I think pricing dynamics in Canada.

Kevin A. Neveu: I think I think I heard you reference that youre trying to keep their customers happy.

Kevin A. Neveu: Some might interpret that as well.

Kevin A. Neveu: Being willing to discount price could you provide some clarity on that.

Kevin A. Neveu: Yeah, you know, I tell you that our customers are always looking for discounts. We're always looking for an increase.

Kevin A. Neveu: Yes, I would tell you that our customers are always looking for discounts. We're always looking for to increase the debate of the debate goes on every single deal whether it's a long term contract or a short term contract.

Kevin A. Neveu: That debate goes on in every single deal, whether it's a long-term contract or a short-term contract. You know, if you look at our market shares, we're in a strong position in kind of every segment we participate in. And we want to make sure we maintain good, productive relationships with their customers. So we have to be mindful of their cost drivers also. Carey gave guidance on margins. We don't expect any margin erosion, and, in fact, margins are still trending upwards. I'll leave that lack of clarity on the answer.

Kevin A. Neveu: If you look at our market shares were to we're in a strong position in kind of every segment we participate.

Kevin A. Neveu: And we want to make sure we maintained good.

Kevin A. Neveu: Productive relationships with our customers so we have to be.

Kevin A. Neveu: Mindful of their cost drivers also.

Kevin A. Neveu: Gary gave guidance on margins, we don't expect any margin erosion.

Kevin A. Neveu: And in fact margins is it still trending upwards. So.

Kevin A. Neveu: I'll leave that.

Kevin A. Neveu: That lack of clarity on the answer.

Kevin A. Neveu: That's good. All right, last one for me, just on the international side, we got a couple of rigs that are still, you know, in the region. You mentioned the possibility of maybe getting something for those rigs later this year or the next year. Can you give us an update on what the range of costs it might be to kind of get those rigs ready to go? Yeah.

Speaker Change: Thank you.

Kevin A. Neveu: Thats good Okay. All right last one from me just on the international side to get a couple of.

Kevin A. Neveu: Rigs that are still in a region you mentioned the possibility of maybe getting something for those rates later this year early next year.

Kevin A. Neveu: Can you give us an update on what the range of cost that might be to kind of get those.

Kevin A. Neveu: Yeah, in the range of $6 to $12 million for each one.

Kevin A. Neveu: As rigs ready to go.

Kevin A. Neveu: Yes.

Kevin A. Neveu: Gotcha. Thank you. So it sort of depends on which opportunity we're successful on. If it's $12 million, it'll be a higher day rate, and it'll pay back within the first year, roughly. If it's $6 million, it'll be a lower day rate, but it will still pay back within the first year.

Kevin A. Neveu: <unk> of $6 million to $12 million for each rig.

Kevin A. Neveu: Got you. Thank you so it's sort of it depends which opportunity were successful line. If it's $12 million it will be a higher day rate and it will pay back within the first year roughly at $6 million it'll be a lower day rate, but still payback within the first year.

Kurt Hallead: Excellent. Thanks, Kevin. Great. Thanks a lot.

Speaker Change: Excellent thanks, Kevin.

Tim Monticello: Great, thanks a lot. Our next question comes from Tim Monticello with ATB Capital Markets.

Tim Monticello: Thanks, a lot.

Tim Monticello: Next question comes from Tim Marcelo with ATB capital markets your.

Tim Monticello: I just wanted to compare and contrast the Canadian and US outlook. I guess, 12 months out, you've got some good alignment to LNG exports and additional rig demand. It sounds like the super triple market in Canada is pretty tight. But you're probably, you know, I would think that you'll see some upside in U.S. activity as well. Are those triples that you're talking about? Would those be coming out of an idle fleet or rigs that haven't worked in a long time in the U.S., or would that be reducing your optionality for additional rigs to go back to work? Uh, Kim, those would be...

Speaker Change: Your line is open.

Speaker Change: Hey, good afternoon.

Tim Monticello: I just wanted to compare and contrast, I guess slow the Canadian and U S outlook, I guess 12 months out <unk> got some good alongside Q LNG exports and additional rig demand it sounds like the Super Triple market in Canada is pretty tight.

Kim: You've probably.

Tim Monticello: I would think that youll see some upside in U S activity as well.

Tim Monticello: Are those triples that youre talking about.

Tim Monticello: Would those be coming out as an idle fleet are rigs that haven't worked in a long time in the U S or would that be reducing your optionality for additional rigs to go back to work.

Kevin A. Neveu: Tim those would be in the US. We have two categories of super triples. We have the ST 1200, which is more common in the DJ basin in the Marcellus. And then we have the ST-1500, which is a 15 to 1800 horsepower rig that's common in the Permian, and a little bit in the Marcellus, and a little bit in the Haynesville. We would not be moving any ST-1500s, probably Okay, I got it.

Tim Monticello: Tim those are b and the.

Kevin A. Neveu: The U S. We have two categories of Super Triple we have the S. T 200, which is more common in the DJ basin and the Marcellus.

Kevin A. Neveu: The Ft, 500, which is a 15 to 1800 horsepower rig that's common in the Permian and a little bit in the Marcellus and a little bit in the Haynesville.

Kevin A. Neveu: We would not be moving any FTE five hundreds probably all the <unk> hundreds.

Speaker Change: Okay got it.

Kevin A. Neveu: I don't think it really reduces our optionality in the U.S. We think that the first movers in the U.S. will be Permian for oil, if there's an oil response. If there's a natural gas response, it'll be Hainesville, where we're very well positioned with our 50...

Kevin A. Neveu: And so I don't think it really reduces or optionality in the U S. We think that the first movers in the U S will be Permian for oil if there's oil response and if there is a natural gas responsibility, hence haynesville, we're very well positioned with a 1500.

Tim Monticello: Okay, got it. And then, an interesting comment about how busy Q3 in the summer could be in Canada. Is that strength across rig classes? Like, are you seeing, I guess, the heavy doubles you picked up in the CWC acquisition, you know, incremental demand for those as well? Or is it mostly in the higher tier?

Tim Monticello: Okay got it.

Tim Monticello: And then.

Tim Monticello: Interesting comment about how busy Q3 in the summer can be in Canada.

Tim Monticello: Is that strength across rig classes like are you seeing.

Tim Monticello: <unk> picked up in the CWC.

Tim Monticello: The acquisition.

Tim Monticello: Incremental demand for those as well or is it mostly in the higher tier.

Unknown Speaker: Unknown Speaker, So I expect our activity in triples in 2020 and the summer of 2024 will look like it did in summer 2023. So, generally flat on our triples and essentially fully utilized. I think most of the incremental activity will be in our super singles year over year. Okay, and are those doubles performing well?

Speaker Change: So patients I.

Unknown Speaker: I expect our activity and triples in 'twenty 'twenty summer of 'twenty 'twenty four will look like you did some years 2023 so generally flat on our triples, and essentially fully utilized I think most of the incremental activity will be.

Unknown Speaker: Our Super singles year over year.

Unknown Speaker: Okay and are those double is performing well.

Kevin A. Neveu: Oh yeah, we're doing both doubles. It's a little more price competitive, but I think if you look at our activity in Q1, we had, I think we had 12 doubles working during Q1. It's just it's more competitive, and you know we're not getting the uh double digit even a margin.

Kevin A. Neveu: Yeah, we're doing Walter doubles, its a little more price competitive.

Kevin A. Neveu: Yes.

Kevin A. Neveu: But I think if you look at our activity in Q1, we had I think we had 12 doubles working during Q1.

Kevin A. Neveu: Okay. It's just it's more competitive and youre not getting the.

Kevin A. Neveu: Double digit EBITDA margins on those rigs.

Tim Monticello: Great. Okay. Well, I appreciate it.

Speaker Change: Great Okay.

Speaker Change: Good color yes.

John Gibson: Our next question comes from John Gibson with BMO Capital Markets. Your line is open.

Tim Monticello: Our next question comes from John Gibson with BMO capital markets. Your line is open.

John Gibson: Afternoon all, I just had one, and it's kind of more high level. I guess just looking at the US market and recent M&A, you touched on a little bit on it in the call here. Voto M&A could drive additional high grading. How have conversations gone in terms of changing lateral length? Like I've kind of heard that maybe we could be seeing another step change on this front, and I'm just kind of wondering what you're hearing in that regard. Well, I'll try.

John Gibson: Afternoon all.

John Gibson: I had one and it is kind of more high level I guess, just looking at the U S market and recent M&A you touched a little bit on it in the call here.

John Gibson: M&A can drive additional high grading our conversations gone in terms of changing lateral length.

Speaker Change: <unk> heard that we've made.

John Gibson: We could be seeing another step change on this front and just kind of wondering later.

John Gibson: In that regard.

Kevin A. Neveu: Well, I'll answer the question a bit differently. So we don't design the well; our customers design the wells. We've got rigs that have drilled out to 20,000 feet. Those are not very common. We're hearing, you know, talk about more of that, but they don't seem very common.

John Gibson: Well.

Speaker Change: I'll answer the question little bit differently. So we don't design, the well our customers design the wells.

Kevin A. Neveu: We've got rigs that are drilled out to 20000 feet. Those are not very common we're hearing them talk about more of that but don't seem very common.

Kevin A. Neveu: 15,000 foot laterals are more common. Everybody wants to have the optionality to drill that length of well, but few people continue doing it. So it looks like the range is somewhere between 10,000 and 15,000. It depends on land holdings and how consolidated the land is. But a full superspec rig today that's got three mud pumps, four generators, 30,000-foot rocking capacity, and a high-torque top drive has the capacity to drill out to 15,000 or more feet.

Kevin A. Neveu: <unk> thousand foot laterals are fairly more common.

Kevin A. Neveu: Everybody wants to have the optionality to drove that length of well, but few people continue doing it so it looks like the range of somewhere between 10% and 15000.

Kevin A. Neveu: It depends on land holdings in whole consolidated land is.

Kevin A. Neveu: But a full super spec rig today, that's got three mud pumps four generators 30000 foot racking capacity high torque top drive has capacity to drill up to 15000 or more feet.

Lavonne Zdunich: And I'm not showing any further questions at this time. I'd like to turn the call back over to Lavonne for any closing remarks.

Lavonne Zdunich: Okay, Great I'll turn it back.

Lavonne Zdunich: <unk>.

Lavonne Zdunich: And I'm not showing any further question at this time I would like to turn the call back over Levade for any closing remarks.

Lavonne Zdunich: Thank you everyone for attending today. If you have any follow-up calls or questions, please feel free to call the Investor Relations Group. Thank you.

Lavonne Zdunich: Thank you everyone for attending today, if you have any follow up calls or questions. Please feel free to call the investor Relations here. Thank you.

Operator: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.

Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Operator: Yes.

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: Okay.