Q2 2024 Precision Drilling Corp Earnings Call

Good day and thank you for standing by. Welcome to the Precision Drilling Corporation 2024 second quarter conference call. I would like to hand the call over to Lavonne Zdunich, Vice President of Investor Relations. Please go ahead.

Tim Monachello: Tim, the call over to Lavonne Zdunich, Vice President of Investor Relations, please go ahead.

Operator: Please call over to Lavonne Zdunich, Vice President of Investor Relations. Please go ahead.

Lavonne Zdunich: Thank you and welcome to Precision's second quarter earnings conference call webcast.

Lavonne Zdunich: Thank you and welcome to Precision's second quarter earnings conference call and webcast. Participating on today's call with me will be Kevin Neveu, our President and CEO, and Carey Ford, our CFO. Earlier today or last night, we reported strong second-quarter results, which Carey will review with you, followed by an operational update and outlook commentary from Kevin. Once we have finished our prepared comments, we will open the call to questions. Some of our comments today will refer to non-IFRS financial measures and will include forward-looking statements, which are subject to a number of risks and uncertainties.

Lavonne Zdunich: Participating on today's call with me will be Kevin Neveu, our President and CEO, and Carey Ford, RCFO. Earlier last night, we reported strong second quarter results, which Carey will review with you, followed by an operational update and outlook commentary from Kevin.

Speaker Change: Thank you and welcome to Precision's second quarter earnings conference call and webcast. Participating on today's call with me will be Kevin Neveu, our President and CEO , and Carey Ford, our CFO .

Speaker Change: Earlier, or last night, we reported strong second quarter results, which Carey will review with you, followed by an operational update and outlook commentary from Kevin. Once we have finished our prepared comments, we will open the call to questions.

Lavonne Zdunich: Once we have finished our prepared comments, we will open the call to questions.

Lavonne Zdunich: Some of our comments today will refer to non-IFRS financial measures and will include forward-looking statements, which are subject to a number of risks and uncertainties. Please see our news release and other regulatory filings for more information on financial measures, forward-looking statements, and risk factors. As a reminder, we express our financial results in Canadian dollars, and less otherwise indicated.

Lavonne Zdunich: Some of our comments today will refer to non-IFRS financial measures and will include forward-looking statements, which are subject to a number of risks and uncertainties.

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

Lavonne Zdunich: Please see our news release and other regulatory filings for more information on financial measures, forward-looking statements, and risk factors. As a reminder, we express our financial results in Canadian dollars unless otherwise indicated. With that, I'll pass it over to Carey.

As a reminder, we express our financial results in Canadian dollars unless otherwise indicated. With that, I'll pass it over to Carey.

Carey Ford: With that, I'll pass it over to Carey. Thank you, Lavonne. Precision's Q2 financial results exceeded our expectations for revenue, adjusted deepa earnings and cash flow. The resiliency of our high-performance, high-value business model, geographic diversification, and organizational focus on cash flow and return on capital drove our financial results. Precision's demonstrated commitment to strengthen our balance sheet continues with year-to-date debt reduction and share repurchases of $103 million and approximately $40 million, respectively. For 2024, we expect to reduce debt by $150 million to $200 million and utilize 25% to 35% of free cash flow before debt repayments to repurchase shares.

Carey Ford: Thank you, Lavonne. Precision's Q2 financial results exceeded our expectations for revenue, adjusted EBITDA earnings, and cash flow. The resiliency of our high-performance, high-value business model, geographic diversification, and organizational focus on cash flow and return on capital drove our financial results. Precision's demonstrated commitment to strengthen its balance sheet continues with year-to-date debt reduction and share repurchases of $103 million and approximately $40 million, respectively. For 2024, we expect to reduce debt by $150 million to $200 million and utilize 25% to 35% of free cash flow before debt repayments to repurchase shares. In the longer term, we plan to reduce debt by $600 million between 2022 and 2026, with approximately $240 million remaining over the next two and a half years.

Carey: Thank you, Lavonne. Precision's Q2 financial results exceeded our expectations for revenue, adjusted EBITDA earnings, and cash flow. The resiliency of our high-performance, high-value business model, geographic diversification, and organizational focus on cash flow and return on capital drove our financial results.

Speaker Change: Precision's demonstrated commitment to strengthen our balance sheet continues with year-to-date debt reduction and share repurchases of $103 million and approximately $40 million respectively.

Speaker Change: For 2024, we expect to reduce debt by $150 million to $200 million and utilize 25% to 35% of free cash flow before debt repayments to repurchase shares.

Carey Ford: Longer term, we plan to reduce debt by $600 million between 2022 and 2026, with approximately $240 million remaining over the next two and a half years. We expect to achieve a leverage level of low one-times net debt to either DAW and increase our direct shareholder returns towards 50% over that time period. The progress on these capital allocation targets is clear, and the longer-term trend remains in place as we've reduced debt by over $1.3 billion since the beginning of 2016.

Longer term, we plan to reduce debt by $600 million between 2022 and 2026, with approximately $240 million remaining over the next two and a half years.

Carey Ford: We expect to achieve a leverage level of below one times net debt to EBITDA and increase our direct shareholder returns towards 50% over that time period. The progress on these capital allocation targets is clear, and the longer-term trend remains in place as we have reduced debt by over $1.3 billion since the beginning of 2016. Moving on to Q2 performance, the U.S. drilling route count has declined 15% over the past year, and while this data point is typically used as a proxy for broader oilfield service activity and financial performance, this is not the case for Precision, as we have achieved year-over-year growth and consolidated Q2 revenue, driven by substantial growth in international drilling, Canada drilling, and completion in production services.

Carey Ford: Q2 EBITDA of $115 million included a share-based compensation charge of $10 million. Without this charge, adjusted EBITDA would have been $125 million. Net earnings were $21 million or $1.44 per share, representing the eighth consecutive quarter of positive earnings for percent. Funds provided by operations and cash provided by operations were $112 million and $174 million, respectively. Margins in both Canada and the US were higher than guidance, resulting from higher than expected pricing and cost recoveries, higher ancillary revenues, and improved cost performance.

Carey Ford: Moving on to Q2 performance. The U.S. Drilling recount has declined 15% over the past year, and while this data point is typically used as a proxy for broader oil field service activity and financial performance, this is not the case for Precision as we have achieved year-over-year growth and consolidated Q2 revenue driven by substantial growth in international drilling, Canada drilling, and completion and production services. Q2 EBITDAB $115 million included a share-based compensation charge of $10 million. Without this charge, adjusted EBITDAB would have been $125 million. Net earnings were $21 million or $1.44 per share, representing the 8th consecutive quarter of positive earnings support precision.

Lavonne Zdunich: We have achieved year over year growth in consolidated Q2 revenue driven by substantial growth in international drilling.

Lavonne Zdunich: Drilling and completion and production services.

Lavonne Zdunich: Q2, EBITDA of $150 million included share based compensation charge of $10 million without this charge adjusted EBITDA would have been $125 million.

Lavonne Zdunich: Net earnings were $21 million or $1 44 per share representing the eighth consecutive quarter of positive earnings for precision.

Carey Ford: Funds provided by operations and cash provided by operations were $112 million and $174 million, respectively. Margins in both Canada and the U.S. were higher than guidance resulting from stronger than expected pricing and cost recoveries, higher in salary revenues, and improved cost performance. In the U.S., drilling activity for precision averaged 36 rigs in Q2, a decrease of 2 rigs from the previous quarter. Daily operating margins in Q2, excluding the impacts of turnkey and IBC, were $10,838 US dollars, a decrease of $219 US dollars for Q1. For Q3, we expect margins to be stable and above $10,000 US dollars per day.

Lavonne Zdunich: Funds provided by operations and cash provided by operations were $112 million and $174 million respectively.

Lavonne Zdunich: Margins in both Canada, and the U S were higher than guidance, resulting from stronger than expected pricing and cost recoveries higher ancillary revenues and improved cost performance.

Carey Ford: In the US, drilling activity for precision averaged 36 rigs in Q2, a decrease of two rigs from the previous quarter. Daily Operating Margins in Q2, excluding the impacts of turnkey and IBC, were 10,838 US dollars, a decrease of 219 US dollars from Q1.

Lavonne Zdunich: In the U S drilling activity for precision averaged 36 rigs in Q2, a decrease of two rigs from the previous quarter.

Lavonne Zdunich: Daily operating margins in Q2.

Lavonne Zdunich: Excluding the impacts of turnkey in I B C were 10838 U S dollars a decrease of 219 U S dollars for Q1 for Q3, we expect margins to be stable and above $10000 per day.

Carey Ford: For Q3, we expect margins to be stable and above 10,000 US dollars per day. In Canada, drilling activity for precision averaged 49 rigs, an increase of 7 rigs or 18% from Q2 2023. Daily operating margins for the quarter were $14,423, an increase of $2,220 from Q2 2023. For Q3, our daily operating margins are expected to be between $13,500 and $14,000 per day. With higher fixed cost absorption and improved pricing, largely offsetting the impact of rigging.

Carey Ford: In Canada, drilling activity for Precision average 49 rigs, increase of 7 rigs or 18% from Q2, 2023. Daily operating margins for the quarter were $14,423 US dollars and an increase of $2,220 US dollars from Q2, 2023. For Q3, our daily operating margins are expected to be between $13,514,000 per day. With higher fixed cost absorption and improved pricing largely offsetting the impact of rig mix. Internationally drilling activity for precision in Q2 average 8 rigs, a 61% increase over Q2, 2023. International average day rates were $55,301 US dollars and an increase of 9% from the prior year due to rig mix.

Lavonne Zdunich: In Canada drilling activity for precision averaged averaged 49 rigs increase of seven rigs or 18% from Q2 2023 daily.

Lavonne Zdunich: Daily operating margins for the quarter were $14423, an increase of $2220 from Q2 2023 for.

Lavonne Zdunich: For Q3, our daily operating margins are expected to be between 13000 514000 per day.

Lavonne Zdunich: With higher fixed cost absorption and improved pricing largely offsetting the impact of break mix.

Carey Ford: Internationally drilling activity for precision in Q2 Everest 8 rigs, a 61% increase over Q2 2023. International average day rates were $55,301 U.S. dollars, an increase of 9% from the prior year due to rigging. In our C&P segment, Ajusti Bedavis' quarter was $12.4 million, up 66% compared to the prior quarter. Adjusted EBITDA was positively impacted by a 44% increase in well service hours, the integration of the CWC acquisition, and improved pricing.

Lavonne Zdunich: Internationally drilling activity for precision in Q2 averaged eight rigs.

Lavonne Zdunich: 61% increase over Q2 2023 International average day rates were.

Lavonne Zdunich: 55301 U S dollars, an increase of 9% from the prior year due to rig mix.

Carey Ford: In our CMP segment, Adjustee Bedada's quarter was $12.4 million, up 66% compared to the prior year quarter. Adjustee Bedada was positively impacted by a 44% increase in well service hours, the integration of the CWC acquisition, and improved pricing. CMP results were further supported by Precision's rental business, which realized an increased demand and utilization for centrifuge equipment on super triple rigs for customers in the money. Our contracted rig fleet continues to support our outlook with average annual rigs under contract for 2024 of 17 in the US, 23 in Canada, and eight internationally.

Lavonne Zdunich: And our CMP segment adjusted EBITDA This quarter was.

Lavonne Zdunich: $12 $4 million up 66% compared to the prior year quarter. Adjusted EBITDA was positively impacted by a 44% increase in well service hours the integration of the CWC acquisition and improved pricing.

Carey Ford: C&P results were further supported by Precision's rental business, which is realizing increased demand and utilization for centrifuge equipment on super triple rigs for customers this month. Our contracted rig fleet continues to support our outlook, with average annual rigs under contract for 2024 of 17 in the US, 23 in Canada, and 8 internationally.

Lavonne Zdunich: CMP results were further supported by precision rental business, which is realized and increased demand and utilization for centrifuge equipment on super Triple rigs for customers in the Montney.

Our contracted rig fleet continues to support our outlook with average annual rigs under contract for 2024 of <unk> 17 in the U S 23 in Canada and eight internationally.

Carey Ford: Moving into the balance sheet, as of June 30, our long term debt position net of cash was approximately $800 million, and our total liquidity position was over $540 million, excluding letters of credit. Our net debt to trailing 12-month Adjustee Bedada ratio is approximately 1.5 times, and our average cost of debt is approximately 7%. We expect our net debt to adjustee Bedada ratio to be approximately 1.25 times by year end when we expect net debt to be between $700 million and $750 million. And our run rate interest expense at that time will be approximately $50 million.

Carey Ford: Moving into the balance sheet, as of June 30, our long-term debt position net of cash was approximately $800 million, and our total liquidity position was over $540 million, excluding letters of credit. Our net debt to trailing 12 month adjusted EBITDA ratio is approximately 1.5 times, and our average cost of debt is approximately 7%. We expect our net debt to adjust to the dollar ratio to be approximately 1.25 times by year end, when we expect net debt to be between $700 million and $750 million, and a run rate interest expense at that time will be approximately $50 million. Moving on to guidance for 2024, depreciation is expected to be approximately $290 million. Cash interest, approximately $75 million. Cash taxes are expected to remain low, and our effective tax rate is expected to be approximately 25%.

Lavonne Zdunich: Moving to the balance sheet as of June 30, our long term debt position net of cash was approximately $800 million and our total liquidity position was over $540 million excluding letters of credit.

Lavonne Zdunich: Our net debt to trailing 12 month adjusted EBITDA ratio is approximately one five times and our average cost of debt is approximately 7%.

Lavonne Zdunich: We expect our net debt to adjusted EBITDA ratio to be approximately 1.25 times by year end, when we expect net debt to be between $700 million $750 million and our run rate interest expense at that time will be approximately $50 million.

Carey Ford: Moving on to guidance for 2024, depreciation is expected to be approximately $290 million, cash interest is approximately $75 million, cash taxes are expected to remain low, and the expected tax rate is approximately 25%. SGNA is expected to be approximately $100 million before a share-based compensation expense. And we expect share-based compensation charges for the year to range between $40 million and $60 million at a share-priced range of between $80 and $120 per share. And the charge may increase or decrease by up to $20 million based on the share-priced performance relative to Precision's Pure Group. Given Precision's share-priced performance year-to-date, we have increased the upper end of our guidance from $100 to $120 per share to provide increased visibility for our investors.

Lavonne Zdunich: Moving on to guidance for 2024 depreciation are.

Lavonne Zdunich: I expected to be approximately $290 million cash interest approximately $75 million cash taxes are expected to remain low and our effective tax rate to be approximately 25%.

Carey Ford: SG&A is expected to be approximately $100 million before share-based compensation expense, and we expect share-based compensation charges for the year to range between $40 million and $60 million at a share price range of between $80 and $120 per share, and the charge may increase or decrease by up to $20 million based on the share price performance relative to Precision's peer group. Given Precision's share price performance year to date, we have increased the upper end of our guidance from $100 to $120 per share to provide increased visibility for our investors. With that, I will now turn the call over to Kevin.

Lavonne Zdunich: SG&A is expected to be approximately $100 million before share based compensation expense and.

Lavonne Zdunich: And we expect share based compensation charges for the year to range between $40 million $60 million at a share price range.

Lavonne Zdunich: Between $80 and $120 per share.

Lavonne Zdunich: And the charge may increase or decrease by up to $20 million based on the share price performance relative to precision peer group.

Kevin Neveu: Given precision share price performance year to date, we have increased the upper end of our guidance from $100 to what her $20 per share to provide increased visibility for our investors with that I'll now turn the call over to Kevin.

Kevin Neveu: With that, I will now turn the call over to Kevin. Thank you, Gary, and good morning. As Carey mentioned, we are very pleased with the strong cash floor businesses generating. We're thrilled with the progress we made with our international and Canadian units, while our U.S. Segment is stable; activity is a little slower than we would like. In the lower 48, customer demand appears to have dropped. The combined drag effects of capital-discipline, low natural gas prices, operator consolidation, and delayed drilling plans seems to bottomed out. We're noting an increase in customer conversations regarding drilling programs and plans or considerations to pick up rigs and modestly increase activity later this year and into 2025.

Kevin Neveu: Thank you, Carey, and good morning. As Carey mentioned, we are very pleased with the strong cash flow our business is generating. We're thrilled with the progress we've made with our international and Canadian units. While our U.S. segment is stable, activity is a little slower than we would like. In the lower 48, customer demand appears to have dropped.

Kevin Neveu: Thank you Carrie and good morning.

Kevin Neveu: Terry mentioned, we are very pleased with the strong cash flow business is generating and we're thrilled with the progress we made with our international and Canadian units, while our U S segments are stable activity is a little slower than we would like.

In the lower 48 customer demand appears to have trust.

Kevin Neveu: The combined drag effects of capital discipline, low natural gas prices, operator consolidation, and delayed drilling plans seem to have bottomed out. We're noting an increase in customer conversations regarding drilling programs and plans for considerations to pick up rigs and modestly increase activity later this year and into 2025. As the E&P consolidation transactions draw to a close, and those operators commence integration of the drilling teams, we expect the drilling contractor mix to shrink to fewer and larger, more capable drillers rather than the fractured vendor base used by many of those acquisition targets.

Speaker Change: The combined drag effects of capital discipline, low natural gas prices, operator consolidation and delayed drilling plans seems to have bottomed out there, we're noting the increase in customer conversations regarding drilling programs and plans or considerations to pick up rigs and modestly increased activity later this year and into 2025.

Kevin Neveu: As the E&P consolidation transaction is drawn to a close, and those operators commence integration of the drilling teams, we expect a drilling contractor mix to shrink to fewer and larger, more capable drillers, rather than the fractured vendor base used by many of those acquisition targets. Some of this contractor rationalization is already underway, and we are encouraged by this fiscated customer interest in our alpha automation, safety performance, and overall rig performance. We believe Precision is very well positioned to grow market share over the next several quarters. We also see some of these acquired drilling teams falling out of the transactions and reforming with private equity and looking to utilize the most technologically advanced drilling rigs they can find.

Speaker Change: As the E&P consolidation transactions draw to a close and those operators commenced integration of the drilling teams, we expect a drilling contractor mix to shrink to fewer and larger more capable drillers rather than the fractured vendor base used by many of those acquisition targets.

Kevin Neveu: Some of this contractor rationalization is already underway. We are encouraged by the sophisticated customer interest in our alpha automation, safety performance, and overall rig performance. We believe Precision is very well positioned to grow market share over the next several quarters. We also see some of these acquired drilling teams falling out of the transactions and reforming with private equity and looking to utilize the most technologically advanced drilling rigs they can find. One of the rigs we added this month was contracted to one of these new private equity startups, and the drilling team is well familiar with Precision's capabilities. Additionally, we are in discussions with several of our Haynesville customers who are in the early stages of planning and anticipating increasing LNG export demand.

Speaker Change: Some of this contractor rationalization is already underway. We are encouraged by the sophisticated customer interest that our elfa automation safety performance and overall rate performance.

Speaker Change: We believe precision is very well positioned to grow market share over the next several quarters.

Speaker Change: We also see some of these acquired drilling team is falling out of the transactions and reforming with private equity and looking to utilize the most technologically advanced drilling rigs they can find it.

Kevin Neveu: One of the rigs we added this month was contracted to one of these new private equity startups, and the drilling team is well familiar with Precision's capabilities. Encouragingly, we are also in discussions with several of our Haynesville customers who are in the early stages of planning and anticipating increasing LNG export demand. The Haynesville is a region that has traditionally been a strong hole for Precision's super triple rigs. We currently have six available rigs in the region, and it seems plausible we will have some additional reactivations before year end. Currently in the US, we have 38 rigs operating and expect to hold in the upper 30s through the third quarter, with a modest increase perhaps to the low 40s in the late fall.

Speaker Change: One of the rigs we added this month was contracted to one of these new private equity startups and the drilling team is well familiar with precision capabilities.

Speaker Change: Encouragingly, we are also in discussions with several of our Haynesville customers, who are in the early stages of planning and anticipating increasing LNG export demand.

Kevin Neveu: The Hainesville is a region that has traditionally been a stronghold for Precision's Super Triple Rigs. We currently have six available rigs in the region, and it seems plausible we will have some additional reactivations before year-end. Currently, in the U.S., we have 38 rigs operating and expect to hold in the upper 30s through the third quarter with a modest increase perhaps to the low 40s in the late fall. Super Triple Leading Edge rates have remained stable in the low 30s per day.

Speaker Change: These haynesville the Haynesville is a region that has traditionally been a stronghold for decisions Super Triple rigs. We currently have six available rigs in the region and it seems plausible who will have some additional reactivation is before year end.

Speaker Change: Currently in the U S. We have 38 rigs operating and expect to hold in the upper <unk> through the third quarter with a modest increase perhaps to the low forties in the late fall.

Kevin Neveu: Super triple leading edge rates have remained stable in the low 30s per day. However, we did activate a couple of legacy CWC rigs in Wyoming, and while these are AC rigs, they are not super spec, and as a result, the day rates are a little bit lower. Turning to our international segment, Precision's activity revenue EBITDA will increase approximately 50% as compared to last year. While we have no new contracts to report, we remain very active bidding archival rigs. I will remind the listeners that we have three active rigs in Saudi Arabia. These are deep, high-capacity drilling rigs operating in the strategic Manifa oil field for Ramco.

Speaker Change: Super Triple leading edge rates have remained stable in the low thirties per day. However.

Kevin Neveu: However, we did activate a couple of legacy CWC rigs in Wyoming. And while these are AC rigs, they are not super-spec. And as a result, the day rates are a little bit lower. 32nd International Segment.

Speaker Change: However, we did activate a couple of legacy CWC rigs in Wyoming, and while these are AC rigs, they're not super spec and as a result, the day rates are a little bit lower.

Speaker Change: Turning to our international segment.

Kevin Neveu: Precision activity revenue EBITDA will increase approximately 50% as compared to last year. While we have no new contracts to report, we remain very active bidding on our idle rigs. I'll remind the listeners that we have three active rigs in Saudi Arabia. These are deep, high-capacity drilling rigs operating in the strategic Minifa oil field for Ramco. The rigs have been on a long-term contract since 2010 and are currently contracted up for several more years.

Speaker Change: Precision is activity revenue EBITDA will increase approximately 50% as compared to last year.

Speaker Change: We have no new contracts to report we remained very active bidding our idle rigs.

Speaker Change: I will remind the listeners that we have three active rigs in Saudi Arabia. These are deep high capacity drilling rigs operating in the strategic maneuver oilfield for remco the rigs have been a long term contract since 2010 and are currently contracted out for several more years.

Kevin Neveu: The rigs have been a long-term contract since 2010 and are currently contracted up for several more years. In Kuwait, we have five super triple 3000 horsepower ultra-large drilling rigs all operating on long-term contracts. We renewed most of the rigs last year, including spending the maintenance capital last year to recertify those rigs. We expect a long runway of strong and sustained free cash flow from international rigs and will continue to bid archival rigs, including potential redeployed US rigs, but only at rates that meet our return expectations and deliver free cash flow over the full contract duration.

Kevin Neveu: In Kuwait, we have five super triple 3000 horsepower, ultra large drilling rigs all operating on long-term contracts. We renewed most of the rigs last year, including spending the maintenance capital last year to recertify those rigs. We expect a long runway of strong and sustained free cash flow from international rigs, and we'll continue to bid our idle rigs, including potential redeployed U.S. rigs, but only at rates that meet our return expectations and deliver free cash flow over the full contract duration. Our Canadian businesses, both drilling and well servicing, are performing at the highest levels in over a decade. Starting with our Canadian Drilling Group.

In Kuwait, we have five Super Triple 3000 horsepower ultra large drilling rigs all operating on long term contracts.

Speaker Change: We renewed most of the rigs last year, including spending on maintenance capital last year to recertify those risks.

Speaker Change: We expect a long runway of strong and sustained free cash flow from our international rigs.

Speaker Change: Continue to bid our idle rigs, including potential redeployed U S rigs, but only at rates that meet our return expectations and deliver free cash flow over the full contract duration.

Kevin Neveu: Our Canadian businesses, both drilling and well servicing, are performing at the highest levels in over a decade. starting with our Canadian Drilling Group. To update you, we have activated three more rigs today, raising our active rig to 77 from the 74 mentioned in our press release last night. Customer demand has been substantially stronger than we anticipated earlier this year, and we have been more than pleasantly surprised by the acceleration in heavy oil drilling across the full spectrum of clear water, man-bill, conventional heavy oil, and sag-dee. The precision super single rig is a clear market leader with 26 different heavy oil customers using our rigs.

Speaker Change: Our Canadian businesses, both drilling and well servicing are performing at the highest levels over a decade.

Speaker Change: Starting with our Canadian drilling group.

Kevin Neveu: To update you, we have activated three more rigs today, raising our active rig count to 77 from the 74 mentioned in our press release last night. Customer demand has been substantially stronger than we anticipated earlier this year, and we have been more than pleasantly surprised by the acceleration in heavy oil drilling across the full spectrum of Clearwater, Manville, conventional heavy oil, and SAG-D. The Precision Super Single Rig is a clear market leader with 26 different heavy oil customers using our rig.

Speaker Change: <unk>, we have activated three more rigs today, raising our active rig to 77% from the 74 mentioned in our press release last night.

Speaker Change: Customer demand has been substantially stronger than we anticipated earlier this year and we have been more than pleasantly surprised by the acceleration in heavy oil drilling across the full spectrum of Clearwater Manville conventional heavy oil and Sag D.

Speaker Change: The precision Super single rigs as a clear market leader with 26 different heavy oil customers using our rigs.

Kevin Neveu: Our Canadian super single rig fleet includes 48 rigs, with 43 running, and a third of those are cat equipped, significantly increasing the value for our customers and for Precision. Now, as a refresher for the listeners, the Precision Super Single Rig was specifically designed for shallow to medium depth, high efficiency slant and horizontal drilling and has its origins in the early 1990s. Between 2010 and 2016, we built out and upgraded our current fleet of 48 fully standardized super single rigs. All precision super singles are manufactured or upgraded in our in-house manufacturing facilities in Calgary and NISQ. Our comprehensive vertical integration on the super single underpins the low operating cost we maintain.

Kevin Neveu: Our Canadian super single rig fleet includes 48 rigs, with 43 running, and a third of those are CAD equipped, significantly increasing the value for our customers and for precision. Now, as a refresher for the listeners, the Precision Super Single Rig was specifically designed for shallow to medium depth, high efficiency slant and horizontal drilling and has its origins in the early 1990s. Between 2010 and 2016, we built out and upgraded our current fleet of 48 fully standardized super single rigs.

Speaker Change: Our Canadian Super single rig fleet includes 48 rigs with 43 running at a third of those are pad equipped significantly increasing the value for our customers and for precision.

Speaker Change: As a refresher for the listeners the precision super single rigs with specifically designed for shallow to medium depth high efficiency sleds and horizontal drilling and has its origins in the early 19 nineties.

Speaker Change: Between 2010 and 2016, we built out an upgraded our current fleet of 48 fully standardized super single rigs.

Kevin Neveu: All Precision Supersingles are manufactured or upgraded in our in-house manufacturing facilities in Calgary and Niskiu. Our comprehensive vertical integration on the Supersingle underpins the low operating costs we maintain. This high efficiency design is based on a mechanical drive system with hydraulic controls that enables precise horizontal drilling control and extremely precise wellbore placement.

Speaker Change: All precision Super singles are manufactured or upgraded in our in house manufacturing facilities in Calgary and miscue, our comprehensive vertical integration on the Super single underpins the low operating cost we made.

Kevin Neveu: This high efficiency design is based on a mechanical drive system with hydraulic controls that enables precise horizontal drilling control and extremely precise well bore placement. These rigs also incorporate fully mechanized drilling and pipe handling operations. Super singles are safe, efficient, and highly reliable, with the lowest operating cost of any rigs in our fleet. These rigs can be moved well to well under one hour and pad to pad in just a few hours, requiring as few as 21 truckloads, almost 10 fewer than similarly capacity rated tele doubles. The rigs can be easily upgraded to increase drilling torque, increase hydraulic capacity, or add padwalking systems for significantly less capital than any competitive rig.

Speaker Change: This high efficiency design is based on mechanical drive system with hydraulic controls that enables precise horizontal drilling control at extremely precise wellbore placement. These.

Kevin Neveu: These rigs also incorporate fully mechanized drilling and pipe handling operations. Super singles are safe, efficient, and highly reliable, with the lowest operating costs of any rigs in our fleet. These rigs can be moved from well to well in under one hour and pad to pad in just a few hours, requiring as few as 21 truckloads, almost 10 fewer than similarly capacity rated tele-doubles. The rigs can be easily upgraded to increase drilling torque, increase hydraulic capacity, or add padwalking systems for significantly less capital than any competitive rig.

Speaker Change: These rigs also incorporate fully mechanized drilling pipe handling operations.

Speaker Change: Super singles are safe efficient and highly reliable with the lowest operating costs of any rigs in our fleet.

Speaker Change: These rigs can be moved well to well under a one hour and pad to pad in just a few hours requiring as few as 21 truckloads almost 10 fewer than similarly.

Speaker Change: <unk> rated tele doubles.

Speaker Change: The rigs can be easily upgraded to increase drilling torque increased hydraulic capacity, whereas pad walking systems for significantly less capital than any competitive rig.

Kevin Neveu: This combination of versatility, precision drilling capabilities, safety and efficiency is made our super single rig the market leader in all complex shallow to medium depth drilling applications from Manitoba to Northeastern British Columbia. While we do not break down our revenue and margins by rig type, I'm confident to quote based margins of the range of $7,000 to $14,000 per day, with the upper end of the range typical for pad equipped super singles. This overlaps with our triple margins, which start in the $12,000 range and move up from there. During the second quarter, Precision Evergreen team introduced two new evergreen products which improved the fuel efficiency, reduced emissions, and improved the safety and versatility of our super single rigs.

Kevin Neveu: This combination of versatility, precision drilling capabilities, safety, and efficiency has made our super single rig the market leader in all complex shallow to medium-depth drilling applications from Manitoba to northeastern British Columbia. While we do not break down our revenue and margins by rig type, I'm confident to quote base margins in the range of $7,000 to $14,000 per day, with the upper end of the range typical for pad-equipped super singles. This overlaps with our triple margins, which start in the $12,000 range and move up from there.

Speaker Change: This combination of versatility precision drilling capabilities safety inefficiency has made our super single rig the market leader in all complex Sheldon <unk> medium depth drilling applications from Manitoba to northeastern British Columbia.

Speaker Change: While we do not break down our revenue and margins by rig type and confidence quote based margins in the range of 7% to $14000 per day with the upper end of the range typical for a pad equipped super singles this overlaps with our triple margins, which.

Speaker Change: In the 12000, Orange and move up from there.

Kevin Neveu: During the second quarter, Precision's Evergreen team introduced two new Evergreen products that improve fuel efficiency, reduce emissions, and improve the safety and versatility of our super single rigs. We began rolling these products out to the field and have equipped nine rigs with our hydrogen injection combustion catalyst system, which offers our customers fuel savings and emissions reductions in the 6% to 8% range. In addition, Precision's high-mass lighting system has also been adapted to our super-single rigs, and we've deployed four of these to the field.

Speaker Change: During the second quarter precision evergreen team introduced two new evergreen products, which improve the fuel efficiency reduce emissions and improve the safety and versatility of our Super single rigs and we began rolling these products out to the field and are equipped nine rigs with our hydrogen injection combustion catalyst system, which offers our customers fuel savings at <unk>.

Kevin Neveu: We began rolling these products out to the field and have equipped nine rigs with our hydrogen injection combustion catalyst system, which offers our customers fuel savings and emissions reductions in the 6 to 8 percent range. Further, Precision's high mass lighting system has also been adapted to our super single rigs, and we've deployed four of these to the field. We expect both of these evergreen systems to roll out across the full super single fleet over the next 12 months, adding over $500 per day of additional incremental margin. Leveraging this across our super single fleet results in a $6 to $7,000,000 annualized incremental margin run rate.

Speaker Change: <unk> reductions in the 6% to 8% range.

Speaker Change: Further precision high mass lighting system is also been adapted to our Super single rigs and we've deployed four of these to the field.

Kevin Neveu: We expect both of these evergreen systems to roll out across the full super single fleet over the next 12 months, adding over $500 per day of additional incremental margin. Leveraging this across our super single fleet results in a $6 to $7 million annualized incremental margin run rate. Now turning to our two super triples and the Montigny gas condensate play in Canada, our current fleet of 30 rigs is virtually fully committed, with just a few windows available for activity this quarter, which we expect to fill with short-term customer programs.

Speaker Change: We expect both of these evergreen systems to rollout across the full Super single fleet over the next 12 months, adding over $500 per day of additional incremental margin leveraging this across our Super single fleet results in a $6 million to $7 million annualized incremental margin run rate.

Kevin Neveu: Now it's turning to our two super triples and the Monteney Gas Condensate play in Canada. Our current fleet of 30 rigs is virtually fully committed, with just a few windows available in activity this quarter, which we expect to fill with short-term customer programs. Rates remain strong and the low to mid 30s for the base rig, with alpha automation in evergreen and other extras pushing those rates in the mid to upper 30s. I mentioned earlier that we've been somewhat surprised by surging customer and demand in heavy oil following the TMX opening. It seems we may experience a similar Monteney surge once LNG Canada is fully commissioned and shipping LNG at capacity this time next year.

Speaker Change: Now turning to our Super triples in the Montney gas condensate play in Canada. Our current fleet of 30 rigs is virtually fully committed with just a few windows available in activity this quarter, which we expect to fill with short term customer programs.

Kevin Neveu: Rates remain strong in the low to mid-30s for the base rig, with Alpha Automation in Evergreen and other extras pushing those rates in the mid to upper 30s. I mentioned earlier that we've been somewhat surprised by a surging customer demand for heavy oil following the TMX opening. It seems we may experience a similar Montana surge once LNG Canada is fully commissioned and shipping LNG at capacity this time next year.

Speaker Change: Rates remain strong in the low to mid <unk> for the base rig with Alpha automation and evergreen another extra is pushing those rates in the mid to upper Thirty's.

Speaker Change: I mentioned earlier that we've been somewhat surprised by surging customer demand and heavy oil following the <unk> opening.

Speaker Change: It seems we may experience a similar one new surge once LNG, Canada is fully commissioned and shipping LNG capacity. This time next year.

Kevin Neveu: It's conceivable that the market may be several rigs short. Recent customer contracting activity and particularly the contractor racing customers are seeking seem to support the notion of a prospective rig shortage. And as I've mentioned in the past, we have idle fully winterized super triple 1200s in a DJ Basin. We will consider redeploying some of those rigs to Canada if the contracted rates are in the upper 30s and the customers pay the full mobilization cost. We expect to have better visibility on this opportunity later this year and into 2025. As I mentioned earlier, we have 77 active rigs today and expect to be in the range of 75 to 80 through August and could see our rig activity trend further upwards in September and through the fall as our customers prepare for what looks like a very busy 2025.

Kevin Neveu: It's conceivable that the market may be several rigs short. Recent customer contracting activity, and particularly the contract duration customers are seeking, seem to support the notion of a prospective rig shortage. And as I've mentioned in the past, we have idle, fully winterized Super Triple 1200s in the DJ Basin.

Speaker Change: It's conceivable that the market may be several rig short.

Speaker Change: Recent customer contracting activity and particularly the contract duration customers are seeking seem to support the notion of a prospective briggs shortage.

Speaker Change: As I've mentioned in the past, we have idle fully winterized Super Triple 12, hundreds of DJ Basin, who will consider redeploying some of those rigs to Canada. If the contracted rates are the upper thirties, when the customers pay the full mobilization costs.

Kevin Neveu: We will consider redeploying some of those rigs to Canada if the contracted rates are in the upper 30s and the customers pay the full mobilization cost. We expect to have better visibility on this opportunity later this year and into 2025. As I mentioned earlier, we have 77 active rigs today and expect to be in the range of 75 to 80 through August and could see our rig activity trend further upwards in September and through the fall as our customers prepare for what looks like a very busy 2025.

Speaker Change: Expect to have better visibility on this opportunity later this year and into 2025.

Speaker Change: As I mentioned earlier, we have 77 active rigs today and expect to be in the range of 75 to 80 through August and could see our rig activity trend further upwards in September and through the fall as our customers prepare for what looks like a very busy 2025.

Kevin Neveu: In our well Canadian well servicing operations, we see much of the same customer demand and fundamentals. Additionally, government-mandated well abandonment activity is a 22% and growing wedge in that business. We have fully integrated the CWC fleet into Precision and the results are clear in our average rates, our margins, and our total activity. Now well servicing activity can be heavily influenced by weather, namely rain and by forest fires. Through the second quarter, now into July, on any given day, we may have had anywhere from five to 20 rigs delayed or postponed due to those issues. Typically, if these deferrals are material, it will push demand later into the fall when drier and lower fire conditions normally persist.

Kevin Neveu: In our Canadian well-servicing operations, we see much of the same customer demand and fundamentals. Additionally, government mandated well abandonment activity is a 22% and growing wedge in that business. We have fully integrated the CWC fleet into Precision, and the results are clear: their average rates, our margins, and our total activity. Now, well servicing activity can be heavily influenced by weather, namely rain and forest fires. Through the second quarter now into July, on any given day, we may have had anywhere from five to 20 rigs delayed or postponed due to those issues. Typically, if these deferrals are material, they will push demand later into the fall when drier and lower fire conditions normally persist.

Speaker Change: And our Canadian well servicing operations, we see much of the same customer demand and fundamentals.

Speaker Change: Italy government mandated well abandonment activity is a 22% and growing which in that business.

Speaker Change: We have fully integrated the CWC fleet its precision and the results are clear and our average rates our margins that our total activity.

Speaker Change: Now well servicing activity can be heavily influenced by weather, namely rain and by forest fires.

Speaker Change: Through the second quarter and now into July on any given day, we may have had anywhere from 5% to 20 rigs delayed or postponed due to those issues.

Speaker Change: Typically if these deferrals are material it will push demand later into the fall when drier and lower fire conditions normally persists.

Kevin Neveu: Today we're operating 71 service rigs; they expect to be in the range of 70 to 85 rigs for the belts of the third quarter and expect the higher end of that range may trend closer to 95 in the fourth quarter.

Kevin Neveu: Today we're operating 71 service rigs and expect to be in the range of 70 to 85 rigs for the balance of the third quarter, and expect the higher end of that range may trend closer to 95 in the fourth quarter. So to wrap up, we have many Precision employees who listened in on this earnings call, and we encourage our staff to do so. I want to thank all the Precision people who once again delivered a strong quarter of safety performance for their intense focus on operational efficiency and their outstanding efforts on cost control. So great work to the PD team, and thank you all. I'll now turn the call back to the operator for questions. Thank you, ladies and gentlemen.

Speaker Change: Today, we're operating 71 service rigs, we expect to be in the range of 70 to 85 rigs for the balance of the third quarter.

Speaker Change: And we expect a higher end of that range may trend closer to <unk> 95 in the fourth quarter.

Kevin Neveu: So, to wrap up, we have many precision employees who listen on this earnings call, and we encourage our staff to do so. I want to thank all the precision people who once again delivered a strong quarter of state due formats for their intense focus on operational efficiency and their outstanding efforts on cost control. So great work to the PD team, and thank you all.

Speaker Change: So to wrap up we have many precision employees, who listened in on this earnings call and we encourage our staff to do so I want to thank all the precision people, who once again delivered a strong quarter of safety performance for their intense focus on operational efficiency and their outstanding efforts on cost control. So great work to the PD team and thank you all.

Lavonne Zdunich: I'll now turn the call back to the operator for questions. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered, you wish to move yourself from the queue. Please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.

Speaker Change: I'll now turn the call back to the operator for questions.

Operator: Thank you. 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'll pause for a moment while we compile our Q&A list. Our first question comes from Kurt Hallead with Benchmark. Your line is open.

Speaker Change: Thank you 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 our Q&A roster.

Kurt Hallead: Our first question comes from Kurt Heli with Benchmark. Your line is open. Hey, hey, good morning, everybody. Good afternoon, if you're in Houston. So yeah, Kevin, yeah, things really playing out, as you mentioned, better than expected in, you know, in Canada, despite some dynamics of play with wildfires.

Speaker Change: Okay.

Kurt Hallead: Our first question comes from Kurt <unk> with benchmark your line is open.

Kurt Hallead: Hey, good morning, everybody. [inaudible] Good afternoon, if you're in Houston.

Kurt Hallead: Hey, Hey, good morning, everybody.

Kevin Neveu: So yeah, Kevin, things are really playing out, as you mentioned, better than expected in, you know, Canada, despite obviously some dynamic to play with with wildfires. So I don't know, can you just give us an update on what you think kind of triggered this acceleration, if you will, in overall customer activity and then, I know you kind of referenced some additional things that are, you know, coming up for 2025. But, you know, is the customer base at this juncture as concerned about a shortage of rigs as you seem to be?

Speaker Change: Alright, Thank you Kurt.

Kurt Hallead: Good afternoon, if you're in Houston.

Kevin Neveu: So yes, Kevin.

Kevin Neveu: Yes. Thanks.

Kevin Neveu: Really playing out as you.

Speaker Change: You mentioned better than expected in Canada. Despite obviously some dynamics at play with quick wildfires.

Kevin Neveu: So, I don't know, can you just give this, give us an update on what you think kind of triggered this acceleration, if you will. You know, in an overall customer, you know, activity. And then, I know you kind of reference some additional things that are, you know, coming up for 2025, but, you know, is the customer base at this juncture as concerned about a shortage of rigs as do you seem to be?

Yes.

Speaker Change: Okay can you just give us an update on what you think kind of triggered.

Speaker Change: Yes.

Speaker Change: Acceleration, if you will and overall customer activity and then.

Speaker Change: I know you kind of referenced some additional things that are.

Speaker Change: Coming up for 2025, but it's.

Speaker Change: As the customer base at this juncture as concerned about a shortage of rigs that is as you seem to be.

Kevin Neveu: I'll start with kind of why I think we're a little surprised by the activity and what I think we underestimated. So, first of all, the math for our customers works out quite well right now. You know, they're realizing, you know, somewhere between $77 and $83 a barrel US minus the Canadian discount, which has shrunk with the opening of Trans Mountain expansion. So they're realizing somewhere typically around $65 US for oil, but you can read that Canadian dollars are between $90 and $100, depending on the range.

Kevin Neveu: I'll start with kind of why I think we're a little surprised by the activity, and I think what we underestimated. So, first of all, the math for our customers works out quite, quite well right now. You know, they're realizing, you know, somewhere between 77 and $80 a barrel, US minus the Canadian discount, which is shrunk with the opening of Trans Mountain expansion. So, they're realizing somewhere typically around $65 US for oil. And you can read that Canadian dollars is $30, $90, and $100 to getting on the range. So, it's the highest realized returns they made in oil a little long time.

Speaker Change: I'll start with.

Speaker Change: Why I think we're a little surprised by the activity and I think what we underestimated. So first of all the math for our customers works out quite quite well right now.

Speaker Change: Realizing somewhere between 77% and $80 a barrel U S minus the Canadian discount.

Speaker Change: Which is shrunk with the opening of Trans Mountain.

Speaker Change: Expansion, so theyre, realizing somewhere typically around $65 U S for oil when you compare the Canadian dollars is between 90 and $100 depending of the range. So it's the highest.

Kevin Neveu: So it's the highest realized returns they've made on oil in a long time. But I think what this really means now is that they've got certainty of export capacity, and there's no uncertainty; they're not relying on train cars to move oil out; they've got a pipeline that's flowing, and they can move the oil. So I think besides having a firm and better price than they've ever realized in the past, they also have certainty of export capacity.

Speaker Change: Realized returns they made it a little long time, but I think what this really means now is they've got certainty of export capacity and there is no uncertainty they're not relying on on train cars to move oil out they've got a pipeline slowing they can move to oil so I think.

Kevin Neveu: But I think what this really means now is that they've got certainty of export capacity, and there's no uncertainty; they're not relying on train cars to move oil out. They've got a pipeline flowing; they can move the oil. So, I think, besides having a firm and better price they've ever realized in the past. They also have certainty of export capacity. So, I think when you reduce the risk and the uncertainty increase the price, it unlocked more drilling demand than we expected. So, that's been crilly our experience in the oil side.

Speaker Change: Besides having a firm and.

Speaker Change: Better price ever realized in the past. They also have certainty of export capacity. So I think when you reduce the risk and the uncertainty increased the price is unlocked more drilling demand that we expected.

Kevin Neveu: So I think when you reduce the risk, and the uncertainty, and increase the price, it unlocks more drilling demand than we expected. So that's been clearly our experience on the oil side, and my comments on LNG Canada opening up. So there's been an awful lot of drilling that's gone on over the past three years in the Montagne. Most of it's been funded by the condensate that's produced by those wells, and that condensate gets sold into the heavy oil market to help ship heavy oil down the pipeline.

Speaker Change: So thats been <unk> been clearly our experience in the oil side and my comments on LNG, Canada opening up. So there is an awful lot of drilling that's gone on over the past three years in the Montney most of its been funded by the condensate that's produced by those wells in that condensate gets sold into actually the heavy oil market to help shift have you all done pipeline slip.

Kevin Neveu: And my comments on LNG Canada opening up. So, there's an awful lot of drilling that's gone on over the past three years in the Montany. Most of it's been funded by the condensate that's produced by those wells, and that condensate gets sold into actually heavy oil market to help ship heavy oil down the pipeline. So, the condensate is driven by the economics. The gas is actually kind of oversupply the system, but they've built up an inventory of gas supply now for the opening of LNG Canada. No question about that. But, but we're sensing that once that plant gets running and sustained operations, they'll need to continue drilling and probably increase drilling.

Kevin Neveu: So the condensate's driving the economics; the gas has actually kind of oversupplied the system. But they've built up an inventory of gas supply now for the opening of LNG Canada, no question about that. But we're sensing that once that plant gets running and sustains operations, they'll need to continue drilling and probably increase drilling. So that's why we're sensing that there's probably going to be kind of a further step up in rig demand once that plant's running, which would be about mid next year when it's at full capacity.

Speaker Change: Condensate has driven the economics of gas is actually kind of oversupplied the system, but they built up an inventory of gas supply now for the opening of LNG, Canada No question about that but.

Speaker Change: We're sensing that once that plant gets running and sustained operations they'll need to continue drilling and probably increase drilling. So that's why we're sensing that there's probably going to be kind of a further step up in rig demand once that plant is running which should be mid next year when its at full capacity.

Kevin Neveu: So, that's why we're sensing that there's probably going to be kind of a further step up in rig demand once that plant's running, which would be by mid next year when it's at full capacity. When we combine that with the behavior of our customers around trying to contract rigs, lock them in, you know, maybe when doing right now, but getting the rigs going again on January the first. It really seems like there's a behavior pushing towards increased activity in 2025.

Kevin Neveu: When we combine that with the behavior of our customers around trying to contract rigs, lock them in, maybe windowing right now, but getting the rigs going again on January 1st, it really seems like there's a trend pushing towards increased activity in 2025.

Speaker Change: When you combine that with the behavior of our customers around trying to contract rigs locked them in.

Speaker Change: Maybe when doing right now, but given the rigs going again on January 1st.

Speaker Change: It really seems like yours behavior pushing towards increased activity in 2025.

Kevin Neveu: Okay, that's great color. Now, maybe maybe a follow-up to that would be, you know, I think, in past calls and discussions, you mentioned the prospect for some of these rigs that are going to be filling that LNG export capacity to be booked on some sort of long-term contract dynamic. I think you referenced there might be kind of a limit to how many of those rigs might ultimately be on a long-term contract. Could you just give us an update on your thoughts on that?

Kurt Hallead: That's great color. Now maybe a follow-up to that would be, you know, I think in the past calls and discussions, you've mentioned the prospect for some of these rigs that are going to be still in that LNG export capacity to be booked on some sort of long-term contract dynamic.

Speaker Change: Okay. That's good that's great color now maybe maybe a follow up to that would be I think in past calls and discussions you've mentioned.

Speaker Change: Aspect for some of these rigs that are going to be filling that LNG export capacity to bolt on some sort of long term contract dynamic I think you referenced there might be kind of a limit to how many how many of those rigs might ultimately be on a long term contract can you just give us an update on your thoughts with that.

Kevin Neveu: I think you reference or might be kind of the limit to how many of those rigs might ultimately be on a long-term contract. You just give us an update on your thoughts with that.

Kevin Neveu: Yeah, Kurt, that contracting strategy has kind of got two parts. It's got our willingness to contract rigs and the customer's desire to take contracts. I'd say that the Canadian, Canadian industry has been really cautious over the past decade. You've been through; they've been through tech and back with commodity prices and pipeline constraints, and they're finally getting a bit of room to run right now. But as a result, Canadian customers have been reluctant to sign too many long-term contracts because of the long-term uncertainty that would take face the past 10 years.

Kevin Neveu: Yeah, Kurt, that contracting strategy has kind of got two parts. It's got our willingness to contract rigs and the customer's desire to take contracts. I'd say that the Canadian industry has been really cautious over the past decade. They've been through hell and back with commodity prices and pipeline constraints, and they're finally getting a bit of room to run right now. But as a result, Canadian customers have been reluctant to sign too many long-term contracts because of the long-term uncertainty that we've faced for the past 10 years. But that is changing now.

Kurt Hallead: Yeah Kurt.

Speaker Change: Contracting strategy is because we've got two parts, it's got our willingness to contract rigs and the customers' desire to take contracts I would say that the Canadian Canadian industry has been really cautious over the past decade <unk> been through they've been through second back with commodity prices and pipeline constraints, they're finally, getting a bit of room to run right now but as a.

Speaker Change: <unk> Canadian customers have been reluctant to sign to many long term contracts because of the long term uncertainty the IDEXX faced the past 10 years.

Kevin Neveu: We see, certainly for development drilling in Montigny, more and more of a trend for long-term contracts. So they're more willing to sign those contracts than they might have been a few years ago. And we wanna remain and keep some of the fleet with optionality for increased rates. So we're not anxious to tie up the entire fleet with long-term contracts, but a blend of, you know, half the rigs contracted, half the rigs exposed, maybe a little more contracted is kind of how we look at things.

Kurt Hallead: That is changing now. We see certainly for development, drilling the Montany, more and more of a trend for long-term contracts. So they're more willing to sign the contracts that might have been a few years ago. And we want to remain and keep some of the fleet with optionality for increased rates. So we're not anxious to tie up the entire fleet with long-term contracts, but blend, you know, half the rigs contracted, half the rigs exposed. Maybe a little more contracted is kind of how we look at things. That's great color. Thank you. Great. Thanks for it.

Speaker Change: That is changing now we see certainly for development drilling in the Montney more and more of a trend for long term contracts and so they're more willing to sign the contracts there might've been a few years ago.

Speaker Change: And we want to remain.

Speaker Change: Keep some of the fleet with Optionality for increased rates. So we're not anxious to tie up the entire fleet.

Speaker Change: Long term contracts, but blend of rigs.

Speaker Change: <unk> contracted half the rigs exposed maybe a little more contracted is kind of how we look at things.

Kevin Neveu: That's a great color. Thank you. Good. Thanks, Kurt.

Speaker Change: That's great color. Thank you great.

Kurt Hallead: Thank you.

Luke Lemoine: Our next question comes from Luke Lemoy with Piper Slander. Your line is open. Yeah. Hey. Good morning.

Speaker Change: Great. Thanks, Kurt Thank you Sir.

Operator: Great. Thanks, Kurt. Our next question comes from Luke Lemoine with Piper Slander. Your line is open.

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

Luke Lemoine: Yeah, Hey, good morning.

Luke Lemoine: Kevin, on the last call, you talked about U.S. land, the visibility and timing of the rebound just being a little bit unclear. And then you just talked about, you know, activity dropping now. So your views changed a little bit. It sounded like the customer conversations around rig ads were basically due to new capital formation along with Hainesville ads next year. I guess first, anything to point out there, any other factors? And then second, you talked about your rig counts in the U.S. maybe increasing from the high 30s to the low 40s from 3Q to 4Q. Do you think that's representative of the overall super spec rig count or maybe specific to Precision?

Luke Lemoine: Kevin, let's call you talked about US land and visibility and timing of the rebound just being a little bit unclear. And then you just talked about, you know, activity trapping now. So your views changed a little bit. It sounded like the customer conversations around break ads were basically new. Yeah. Due to new capital formation along with Haynesville as next year.

Speaker Change: Good morning, Kevin.

Luke Lemoine: Last call you talked about in U S land and visibility and timing of the rebound just being a little bit unclear.

Speaker Change: And then you just talked about activity trough analysis your views changed a little bit.

Speaker Change: Sounded like the customer conversations around rig adds were basically.

Speaker Change: Due to new capital formation, along with Haynesville as next year and I guess first anything you point out there any other factors and then second you talked about your rig counts in the U S. Maybe increasing the high <unk> to low <unk> from <unk> to <unk> you.

Luke Lemoine: You know, I guess first anything to point out there. Any other factors.

Luke Lemoine: And then second, you talked about your rig counts in the US, maybe increasing the high 30s to 40s from 3Q to 4Q. Do you think that's representative of the overall super spec record count, or maybe specific to precision?

Speaker Change: Do you think that's representative of the overall super spec rig count or maybe specific to precision.

Kevin Neveu: Luke, I think you know, so for us, a couple of ricks moves us from 38 to 40. So it's not a big market indicator. So I think keep that in mind.

Kevin Neveu: Luke, I think, you know, so for us, a couple of rigs moves us from 38 to 40. So it's not a big market indicator. So I think you should keep that in mind.

Speaker Change: Look I think.

Speaker Change: So for us.

Speaker Change: Couple of rigs moves us from 38 to 40, so it's not a big market indicator. So I think keep that in mind.

Kevin Neveu: You know, even if we had three rigs, we're now 41. So that doesn't really mean the whole industry is changing. I do think between now and the end of the year, it's likely that the larger drillers, and I think we're in that bucket, will gain rigs, and some of the smaller drillers may lose rigs as some of these consolidation transactions complete and they rationalize their fleets. So I think you could see any one of the larger drillers pick up a few rigs and 2, 3, 4 rigs, not 50 rigs, to be clear on that, just through the kind of conclusion of these consolidation transactions.

Kevin Neveu: You know, even if we had three years without 41, so that doesn't really mean the whole industry is changing. I do think that between now and the end of the year, it's likely that the larger drillers and I could win that bucket. Game ricks and some of those smaller drillers, drillers, they lose ricks as some of these consolidation transactions complete and they rationalize their fleets. So I think you could see any one of the larger drillers pick up a few ricks and, you know, two, three, four ricks, not not 50 ricks. You clear on that.

Speaker Change: Even if we had three rigs are now 41, so it doesn't really meet the whole industry is changing.

Speaker Change: Do think between now and the end of the year, it's likely that the larger drillers where that bucket.

Speaker Change: Gain rigs and some of the smaller dose drillers may lose rigs some of these consolidation transactions complete and they rationalize their fleets. So I think you could see one of the larger drillers pick up a few rigs and.

Speaker Change: Two three or four rigs or not.

Kevin Neveu: Just through the kind of conclusion of these consolidation transactions, if you layer in for us, one or two ricks in the Haynesville, which is in the big move, now you're at 42, 43 ricks. So the path to get 43 is not complicated. But I wouldn't; I don't see the market moving and adding 50 or 60 ricks to the end of the year. So I don't think that, you know, three or four ricks for precision means 10% of the market.

Speaker Change: About 50 rigs to be clear on that just through the conclusion of these consolidation transactions. If you layer in for us one or two rigs in the Haynesville.

Kevin Neveu: If you layer in for us 1 or 2 rigs in the Haynesville, which isn't a big move, now you're at 42, 43 rigs. So the path to get to 43 isn't that complicated. But I don't see the market moving and adding 50 or 60 rigs between now and the end of the year. So I don't think that 3 or 4 rigs for precision means 10% of the market

Speaker Change: Which is the big move now Youre at 42 43 weeks. So the path to get there are 43 isn't that complicated.

Speaker Change: But I wouldn't I don't see the market moving and adding a 50 or 60 rigs between now and the end of the year. So I don't think that.

Speaker Change: Three or four rigs for decision means.

Carey Ford: Okay, and then carry and, personally, she talked about looking for opportunities to lower cost.

Speaker Change: 10% of the market.

Carey Ford: Okay. And then, Carey, in the press release, you talked about looking for opportunities to lower costs. Could you maybe elaborate on that, especially on the U.S. drilling side, and maybe what that could mean?

Speaker Change: Okay, and then Terry in the press release, you talked about looking for opportunities to lower costs could you maybe elaborate on that.

Carey Ford: Could you maybe elaborate on that, especially on the US drawing side, and maybe what that can mean. Yeah, I'll hit that from a couple different points. So we've talked a bit in the past about wearing a bit more fixed cost in our US business than we have in the past. Just we're operating six different operating regions and running 38 ricks. So we've got fixed cost is spread over a few days. So that's been a little bit of a headwind of margins on the items we can control. We've really had a focus on repair maintenance expense and working with our vendor list and optimizing centralized purchasing and optimizing a third party labor on a rig.

Terry: And especially on the U S drilling side and maybe what that can mean.

Carey Ford: Yeah, I'll hit that from a couple different points. So we've talked a bit in the past about wearing a bit more fixed costs in our US business than we have in the past. We're operating in six different operating regions and running 38 rigs. So we've got fixed costs to spread over a few days. So that's been a little bit of a headwind for margins. On the items we can control, we've really had a focus on repair and maintenance expenses and working with our vendor list and optimizing centralized purchasing and optimizing third-party labor on a rig.

Terry: Yes ill hit that from a couple of different points. So we've talked a bit in the past about we're in a bit more fixed costs in our U S business than we have in the past just we're operating six different operating regions and running 38 rigs that we've got.

Terry: Fixed costs are spread over fewer days, so that's been a little bit of a headwind to margins.

Terry: On the items, we can control, we've really had a focus on repair and maintenance expense and working with our vendor list and optimizing centralizing centralized purchasing and optimizing <unk>.

Carey Ford: So we're looking at all avenues to address reducing costs on our rigs. And we saw some of that performance really start to show up in the second quarter, and we expect to maintain that performance for the rest of the year.

Carey Ford: So we're looking at all avenues to. to address a reducing cost on a rig. We saw some of that performance really start to show up in the second quarter, and we expect to maintain that performance for us the year.

Terry: Third party labor on our rigs so we're.

Terry: We're looking at all avenues to.

Terry: <unk> addressed reducing costs on our rigs and we saw some of that performance really start to show up in the second quarter and we expect to maintain that performance the rest of the year.

Luke Lemoine: Okay, great. I'll turn it back on.

Luke Lemoine: Okay, great.

Luke Lemoine: I'll turn it back.

Speaker Change: Okay, Great I'll turn it back.

Luke Lemoine: Thanks, Luke.

Operator: Our next question comes from Aaron MacNeil with TD Cowell. Your line is open.

Aaron MacNeil: Our next question comes from Aaron McNeil with TD Cowan. Your line is open. Hi, everyone. Thanks for taking my questions. Carey, we've had two quarters now where margins have come in generally better than the guide. And I guess the question is, is your Q3 margin, margin guide similarly sort of conservative in your view? I think what we want to do is provide some guidance for the market that is realistic that we can meet and hopefully exceed. I think on the Canadian market, we have a dynamic that we haven't really had in the past several years where we're getting, as Kevin mentioned, a lot more super single work and some tele-double work.

Terry: Luke.

Speaker Change: Our next question comes from Aaron Macneil with TD Cowen Your line is open.

Aaron MacNeil: Hi everyone, thanks for taking my questions. Carey, we've had two quarters now where margins have come in generally better than the guide, and I guess the question is, is your Q3 margin guide similarly sort of conservative in your view?

Aaron MacNeil: Hi, everyone. Thanks for taking my questions.

Aaron MacNeil: Carey, we've had two quarters now where margins have come in.

Aaron MacNeil: Generally better than the guide and I guess the question is is your Q3 margin margin guide Similarly.

Conservative in your view.

Carey Ford: I think what we want to do is provide some guidance for the market that is realistic and that we can meet and, hopefully, exceed. I think in the Canadian market, we have a dynamic that we haven't really had in the past several years where we're getting, as Kevin mentioned, a lot more super single work and some tele-double work. And so when you get that rig mix blended into the fleet average, the pricing's a little bit lower, margins are a little bit lower, so it's a little bit less predictable. We think that we can beat the guidance that we've provided, but want to err a little bit on the conservative side just because of that new dynamic. And then in the US, same thing.

Speaker Change: I think what we want to do is provide some some guidance for the market that it's realistic that we can that we can meet and hopefully exceed I think on.

On the Canadian market, we have a dynamic that we haven't really had an.

Speaker Change: In the past several years, where we're getting as Kevin mentioned, a lot more super single work and some tele double work and so when you get that rig mix blend into the fleet average.

Carey Ford: And so when you get that rig mix blend into the fleet average, the price is a little bit lower; margins are a little bit lower. So it's a little bit less predictable. We think that we can beat the guidance that we've provided, but want to air a little bit on the conservative side just because of that new dynamic. And then in the US, same thing. I think that, you know, if we, if we, if a rig count remains flat or decreases a bit, we're wearing a bit more fixed cost per rig. And if it increases, you know, on kind of Kevin's potential, you know, getting to the low 40s, I think we're wearing a little bit less fixed cost, so the margin should be a little bit better.

Kevin Neveu: The pricing is a little bit lower margins are a little bit lower so it's a little bit less predictable.

Speaker Change: We think that we can beat the guidance that we provided but.

Speaker Change: Want to err, a little bit on the conservative side, just because of the new dynamic and then in the U S at St.

Speaker Change: The same thing I think that.

Carey Ford: I think that if the rig count remains flat or decreases a bit, we're wearing a bit more fixed cost per rig. And if it increases, you know, on kind of Kevin's potential, you know, getting to the low 40s, I think we're wearing a little bit less fixed costs, so the margin should be a little bit better. So I think, in short, there are some moving parts. So we want to make sure that we're providing realistic margin guidance for the market.

Speaker Change: If we if we our rig count remained flat or decreases a bit were wearing a bit more fixed cost per rig and if it increases.

Kevin Neveu: On kind of kevins.

Speaker Change: Potential.

Kevin Neveu: Getting to low <unk> I think we're right a little bit less fixed cost. So the margins should be able to better. So I think in short there's some moving parts.

Carey Ford: So I think in short, there's some moving parts. So we want to make sure that we're providing a realistic margin guidance for the market.

Kevin Neveu: So we want to make sure that we're providing a realistic margin guidance for the market.

Carey Ford: It makes total sense, and I think this one might be for you as well. But excuse the napkin math here, but at least on my estimates, you're sort of on pace to hit the lower end of the 25 to 35% share buyback target. I mean, is that sort of, maybe you can't guide to this if it's consistent with your view, but like, is that sort of the intention? Or do you think we'll maybe see you ramp up the share buyback pace in the second half of the year?

Aaron MacNeil: Makes total sense. And I think this one might be for you as well, but excuse the napkin math here. But at least on my estimates, you're sort of on pace to hit the lower end of the 25 to 35% share by back target. I mean, is that sort of maybe you can't guide to this if it's consistent with your view, but like, is that sort of the intention or giving will maybe see that you ramp up the share buyback pace in the second half of the year? Yes, so we are intentionally not prescriptive on how we're going to on what side of the range we're going to be on for the share buybacks.

Speaker Change: Total sense and I think this one might be for you as well bye.

Speaker Change: Excuse the napkin math here, but at least on my estimates you're sort of on pace to hit the lower end of that 25% to 35% share buyback target.

Does that sort of maybe you can guide to this and it's consistent with your view, but like is that sort of the intention or do you think maybe you ramp up the share buyback pace in the second half of the year.

Carey Ford: Yes, so we are intentionally not prescriptive on how we're going to, on what side of the range we're going to be on for the share buybacks. I think it depends on how much cash the business generates and also where the shares are trading in the market. In my comments, I mentioned that we've bought back about $40 million worth of shares year to date, and that includes some that we bought back in the month of July.

Speaker Change: Yes.

Speaker Change: We are intentionally not prescriptive on on how we're going to on what side of the range, we're going to be on for the share buybacks I think it depends on how much cash business generates in also.

Carey Ford: It depends on how much cash the business generates and also where the shares are trading in the market. You can, in my comments, I mentioned that we've bought back about 40 million dollars' worth of shares year to date; that includes some shares that we've bought back in the month of July. And if you kind of double that and look at the midpoint of our debt reduction range, I think we'd actually be at the high end of the 25 to 35% range. So I think we're definitely going to be within that range, and the where we are within that range will depend on both cash flow and where the shares trade between now and the end of the year.

Speaker Change: Where the shares are trading in the market.

Speaker Change: You can.

Speaker Change: In my comments I mentioned that.

Speaker Change: Buy back about $40 million worth of shares year to date that includes some shares that we bought back in the month of July.

Carey Ford: And if you kind of double that and look at the midpoint of our debt reduction range, I think we'd actually be at the high end of the 25% to 35% range. So I think we're definitely going to be within that range. And where we are within that range will depend on both the cash flow and then where the shares trade between now and

Speaker Change: And if you kind of double that in and look at the mid point of our debt reduction range I think we would actually be at the high end of the 20% to 35% range. So I think we're definitely gonna be within that range and where we are within that range will depend on both cash flow and then where the shares trade between now and the end of the year.

Aaron MacNeil: Makes sense.

Aaron MacNeil: I'll turn it back. Thanks, guys.

Speaker Change: Makes sense I'll turn it back thanks, guys. Okay. Thanks.

Waqar Syed: Thanks. Our next question comes from What Car side with ATV Capital Market. Your line is open. Thank you for taking the questions. Kevin, you know, you've seen a number of M&A transactions in the market with your peers. Some of the side to expand their pressure pump. And become more kind of providing for services in the US; others have increased exposure to at least. You know, a little bit of acquisitions have happened as well.

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

Speaker Change: Our next question comes from Waqar Syed with HEB capital markets. Your line is open.

Waqar Syed: Thank you for taking my questions. Kevin, you know, you've seen a number of M&A transactions in the market with your peers. Some have decided to expand their pressure pump business and become more kind of providing full services in the U.S. Others have increased their exposure to the Middle East. You know, drill bit acquisitions have happened as well.

Waqar Syed: Thank you for taking my questions.

Speaker Change: Kevin.

Waqar Syed: You've seen a number of M&A transactions.

Speaker Change: And the market peers.

Speaker Change: Some of them decided to expand their pressure pumping.

Speaker Change: It's become more kind of.

Speaker Change: Providing for services.

Speaker Change: In the U S.

Speaker Change: Increased exposure to middle East.

Speaker Change: It's been a big acquisitions that happiness.

Kevin Neveu: How do you see precision kind of evolving over the next like three to five years time to use the main focus on what you do now. Or you think that, you know, five years from now, Precision could be offering more business. Thank you. Waqar, that's a great question. In fact, something we talk about with our board, pretty much every board meeting, especially during a strategy sessions. So it is nice to have options, kind of going forward. You know, we've been so focused on that reduction for the past decade that has been kind of our top priority and really clear with our annual priorities.

Kevin Neveu: How do you see precision kind of evolving over the next like three to five years? Do you remain focused on what you do now? Or do you think that, you know, five years from now, precision could be offering, you know, more business?

Speaker Change: How do you see.

Speaker Change: Asian kind of.

Speaker Change: Evolving over the next like two to five Years' time do you remain focused on what you do now.

Speaker Change: Do you think that.

Speaker Change: Five years from now policy and could be offering.

Speaker Change: More businesses.

Kevin Neveu: Waqar, that's a great question. In fact, something we talked about with our board pretty much every board meeting, and especially during our strategy sessions. So it is nice to have options kind of going forward. You know, we've been so focused on debt reduction for the past decade that that's been kind of our top priority and really clear with our annual priorities.

Speaker Change: That's a great question and in fact, something we've talked about with our board pretty much every board meeting.

Speaker Change: Especially during our strategy sessions.

Speaker Change: So it is nice to have options.

Speaker Change: Going forward we.

Speaker Change: We've been so focused on debt reduction for the past decade that that's been kind of our top priority is to really clear with our annual priorities, but we did do a couple of tuck in acquisitions that worked out quite well we did the.

Kevin Neveu: But we did do a couple of tuck-in acquisitions that worked out quite well. We did the Hierarchic deal two years ago, and then CWC last year. Those worked out well.

Kevin Neveu: But we did do a couple of tuck-in acquisitions that worked out quite well. We did the high-artic deal two years ago in the CWC last year. And those worked out well. So I think that as we go forward, we'll keep our eyes open. We'll be opportunistic. If we can transact and do another tuck-in type, another or more tuck-in style acquisitions that supplement our current businesses, I think we'd be anxious to do that. A couple of comments.

Speaker Change: The high Arctic deal two.

Speaker Change: Two years ago, and then CWC last year those worked out well, so I think that as.

Kevin Neveu: So I think that as we go forward, we'll keep our eyes open, and we'll be opportunistic. If we can transact and do another tuck-in type, another or more tuck-in style acquisitions to supplement our current businesses. I think we'd be anxious to do that, a couple of comments. We have no strategic objectives right now around acquisitions; we don't need to. We don't need to make a big bet internationally. We don't need to go buy a block of business in any geography in North America, as we have those blocks.

Speaker Change: As we go forward.

Speaker Change: We will keep our eyes open we'll be opportunistic.

Speaker Change: If we can transact and do another tuck in type another or more tuck in style acquisitions to supplement our current businesses.

Speaker Change: I think we'd be anxious to do that.

Kevin Neveu: We have no strategic objectives right now around acquisitions. We don't need to, we don't need to bake a big bet internationally. We don't need to go buy a block of business in any geography in North America. We have those blocks. We're not looking to grow well-surfacing in the U.S. We're looking to grow well-surfacing in Canada to grow drilling in the U.S. So I think we'd stick with our knitting right now, which is drilling and well-surfacing in Canada, drilling in the U.S. And if we can find good tuck-in opportunities that we can do at least neutral on leverage or delivering and the creative, we'd be thrilled to do it.

Speaker Change: A couple of comments, we have no strategic objectives right now around acquisitions, we don't need to.

Speaker Change: We don't need to make a big bet internationally, we don't need to go buy a block of business in any geography in North America as we have those blocks.

Kevin Neveu: We're not looking to grow well servicing in the U.S. Instead, we're looking to grow well servicing in Canada to grow drilling in the U.S. So I think we'd stick with our knitting right now, which is drilling and well servicing in Canada and drilling in the U.S., and if we can find good tuck-in opportunities that we can do at least neutral on leverage or de-levering and accretive, we'd be thrilled to do them.

Speaker Change: We're not looking to grow well servicing in the U S. We're looking to grow whilst diversity in Canada to grow drilling in the U S.

Speaker Change: I think we'd stick with our knitting, right, now, which is drilling and well servicing and Canada drilling in the U S and if we can find good tuck in opportunities that.

Speaker Change: We can do it at least at least neutral or leverage or delevering.

Speaker Change: And.

Speaker Change: The accretive we'd be thrilled to do it.

Waqar Syed: It makes sense.

Unknown Attendee: Unknown Attendee, Precision Drilling Corp., Deepa Patel, Steven Krablin, Unknown Attendee, That 50% return of cash to free cash flow to shareholders, what would it look like? Would this be still buybacks or a combination of buybacks and dividends? Or how do you intend to proceed there?

Speaker Change: That makes sense and then Carrie.

Carey Ford: And then Terry, you mentioned as a goal of being below one times net debt to a bidder ratio. And then maybe expanding cash return to share room is to about 50% of free cash flow.

Carrie: You mentioned that the goal.

Carrie: Below one times net debt to EBITDA ratio.

Shannon: And then maybe expanding cash Atlantis, Shannon just about 50% of free cash flow.

Carey Ford: In your view, from a timing perspective, when do you think you're going to get there? And then 50% return of cash to free cash flow to share room is what would it look like? Would this be still buybacks or combination of buybacks and dividends? How do you intend to proceed there?

Speaker Change: In your view from a timing perspective, when do you think you're going to get there and then.

Speaker Change: About 50% of cash free cash flow to shareholders.

Speaker Change: Like would this be.

Speaker Change: And buybacks are a combination of buybacks and dividends.

Speaker Change: Would you.

Carey Ford: Well, first of all, I think we're kind of taking one thing at a time. So we've got our guidance for this year and then our guidance through 2026. So we definitely are going to be looking to increase that allocation of our free cash flow directly to shareholders. This year, it's going to be share buybacks. We'll look at all options in the coming years as we get closer to that leverage level, but we have nothing to report on today.

Speaker Change: Tend to proceed there.

Carey Ford: Well, first of all, I think we're kind of taking one thing at a time. So we've got our guidance for this year and then our guidance through 2026. So we definitely are going to be looking to increase that allocation of our free cash flow directly to shareholders. This year, it's going to be a share of buybacks. We'll look at all options in the coming years as we get closer to that leverage level, but nothing to report on today. I think in terms of timing and when we can get to below one times, I think it's a lot sooner than we thought.

Speaker Change: First of all I think we're kind of taking one thing at a time. So we've got our guidance for this year and then our guidance through 2026. So we definitely are going to be looking to increase that allocation of our free cash flow directly to shareholders. This year it can be share buybacks.

Speaker Change: We'll look at all options in the coming years, as we get closer to that leverage level.

Speaker Change: But nothing to report on today.

Speaker Change: On in terms of timing on when we can get to below one times I think it's it's a lot sooner than we thought I mentioned in my comments that by the end of the year, we expect to be kind of around one five times and.

Carey Ford: I think in terms of timing on when we can get to below one times, I think it's a lot sooner than we thought. I mentioned in my comments that by the end of the year, we expect to be kind of around 1.25 times. And assuming we can continue the strong cash flow performance and EBITDA generation in 2025 that we've produced so far this year, we should be below one times EBITDA at some point next year.

Carey Ford: I mentioned in my comments that by the end of the year, we expect to be kind of around 1.25 times. And you know, assuming we can continue the strong cash flow performance and need the generation in 2025 that we produce so far this year, we should be below one times at some point next year.

Speaker Change: Assuming we can continue the strong cash flow performance and EBITDA generation.

In 2025.

Speaker Change: So far this year, we should be below one times at some point next year.

Waqar Syed: That's good. Well, thank you very much, and congrats on a great quarter. Thanks for the car.

Waqar Syed: Sounds good. Well, thank you very much and congrats on a great, great quarter.

Speaker Change: That's good thank you very much and congrats on a great great quarter.

Operator: Thanks, Waqar. Thank you. Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. Our next question comes from Jamie Kubik with CIBC. Your line is open.

Waqar Syed: Thank you.

Jamie Cubic: Again, ladies and gentlemen, if you have a question or a comment at this time, please first star one on your telephone. Our next question comes from Jamie Cubic with CIBC. Your line is open. Yeah, good morning, guys. Thanks for taking my question here. I just have a question on the Canadian market here a bit. Kevin and Carrie, you do reference LNG-directed drilling remaining very active in Canada. But the echo and station to gas markets on a four basis expected to be very weak for the next several months in Canada, respecting the precision's rig count is north of 70.

Speaker Change: Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone.

Speaker Change: Our next question comes from Jamie Kubik with CIBC. Your line is open.

Jamie Kubik: Yeah, good morning, guys. Thanks for taking my question here.

Speaker Change: Yes. Good morning, guys. Thanks for taking my question here.

Jamie Kubik: I just have a question on the Canadian market here a bit.

Speaker Change: Kevin and carry you do reference LNG directed drilling remaining very active in Canada.

Kevin Neveu: I just have a question on the Canadian market here a bit. You know, Kevin and Carey, you reference LNG-directed drilling remaining very active in Canada, but the ACO and Station 2 gas markets on a four basis are expected to be very weak for the next several months in Canada. Respecting that Precision's rig count is north of 70, can you talk a bit more about the dynamic in the Canadian market here and if operators have been discussing potentially deferring drilling activity given the pricing outlook is so weak, can you just expand a little bit on that market if you could? Thanks.

Speaker Change: But the <unk> and station to gas markets on a forward basis is expected to be very weak for the next several months in Canada.

Speaker Change: Respecting that precision rig count is north of 70 can you talk a bit more on the dynamic in the Canadian market here and if operators have been discussing potentially deferring drilling activity given the pricing and all that just so we can you just expand a little bit around that market. If you could thanks.

Kevin Neveu: Can you talk a bit more on the dynamic in the Canadian market here and if operators have been discussing potentially deferring drilling activity given the pricing. So we can you just expand a little bit around that market if you could. Thanks.

Kevin Neveu: Yeah, I can. I don't want to speak to specific customer comments because they'll know who they are, and they'll know what they said. So we hear a lot, no question about that. I think our rig count today is actually one rig higher than a year ago drilling in the Montagne, I think it is. I also know that we've got a couple of operators that are slowing down their drilling programs this year but asking us to have that rig for them on January 1st.

Kevin Neveu: Yeah, I can. I don't want to speak to a specific customer comments because they'll know who they are and they'll know what they said. So we hear a lot. No question about that. I think our recount today is actually run rig higher than a year ago drilling in the mountain. I think it is. I also know that we've got a couple of operators are slowing down drilling programs this year. But asking us to have that rig for them for January 1st. So I think you're getting to the point now where there's enough gas to meet the demand when they start operating.

Speaker Change: I can.

Speaker Change: Don't want to speak to a specific customer comments, because they'll know who they are and they'll know what they said.

Speaker Change: So we hear a lot no question about that.

Speaker Change: I think our rig count today is actually run rate higher than a year ago drilling in the Montney I think it is.

Speaker Change: I also know that we've got a couple of operators are slowing down drilling programs. This year, but <unk> is to have that rig for them for January one.

Kevin Neveu: So, you know, I think you're getting to the point now where there's enough gas to meet the demand when they start operating. But I think as I plan for kind of full-scale operations next year, they probably need those rigs back. So I did mention that we've got a few windows of rig availability right now in Q3. I expect to fill those up with other customers.

Speaker Change: So I think youre getting to the point now where there's enough gas to meet the demand.

Speaker Change: <unk>.

Kevin Neveu: But I think, as a plan for kind of full scale run operations next year, they probably need those rigs back. So I didn't mention that we've got a few windows of a rig availability right now in Q3. Expect to fill us up with other customers. And I'd also comment that I don't think we're drilling a single dry gas well. I think all of these wells produce. There's condensate that still fires the economics of the well shouldn't use that term fires still drives the economics of the well.

Speaker Change: They start operating but I think as a plan for kind of full scale run operations next year, they probably need those rigs back. So I did mention that we've got a few windows of rig availability right now in Q3, we expect to fill it up with other customers.

Jamie Kubik: And I'd also comment that I don't think we're drilling a single dry gas well. I think all of these wells produce, condensate, it still drives the economics of the wealth. Shouldn't use that term, drives. It still drives the economics of the world.

Speaker Change: And I'd also Colombia, I don't think we're drilling a single dry gas well I think all of these wells produce.

Speaker Change: Condensate still fires the economics of the well.

Speaker Change: Couldnt use that term buyers still drives the economics of the world.

Jamie Cubic: Okay, that's good. That's all for me. Thank you.

Operator: Okay, that's good. That's all for me. Thank you.

Speaker Change: Okay. That's good that's all for me. Thank you.

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

John Gibson: Our next question comes from John Gibson with BMO Capital Marcus. Your line is open. Good morning all. Maybe touching on your international rigs and just sort of presence, obviously going to be up to 50% year over year, which is outstanding. Can you provide details on the daily margins on those rigs and maybe some further details on potential rig activations that you reference in the pressure. So they moved closer, further from prior quarters.

Speaker Change: Thank you.

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

Kevin Neveu: Morning all, maybe touching on your international rigs and just sort of presence, obviously, going to be up 50% year over year, which is outstanding. Can you provide details on the daily margins on those rigs and maybe some further details on potential rig activations that you referenced in the press release? Have they moved closer or further from prior quarters?

Speaker Change: Yeah.

John Gibson: Good morning, all.

John Gibson: Maybe touching on your international rigs and just sort of presence, obviously going to be up 30% year over year, which is outstanding can you provide details on the.

John Gibson: Daily margins on those rigs and maybe.

Speaker Change: Some further details on potential rig activation that you referenced in the press release have been moved closer further from prior quarters.

Kevin Neveu: Yeah, so hey, John, I think on the international margin, we don't disclose the margins just because we have two customers in the international market. So, like to keep that confidential, but I would say that they are a little bit better than mid-cycle margins, what we would experience in North America. And when you think about kind of the dynamics, we're getting five-year contracts on on those rigs. And so the payback period and the IRR on the rigs is going to be just a little bit lower than what we would require in North America because there's more certainty and a longer term horizon.

Carey Ford: Yeah, so hey, John. I think about the international margins; we don't disclose the margins just because we have two customers in the international market. So I would like to keep that confidential. But I would say that they are a little bit better than mid cycle margins we would experience in North America. And when you think about kind of the dynamics, we're getting five-year contracts on those rigs. And so the payback period and the IRR on the rigs are going to be just a little bit lower than what we would require in North America because there's more certainty and a longer-term horizon.

John Gibson: Okay.

John Gibson: Yes, So hey, John.

Speaker Change: I think on the international margins, we don't disclose the margins just because we have two customers in the international market.

Speaker Change: So I'd like to keep that confidential, but I would say that they are a little bit better than mid cycle margins. What we would experience in North America and when you think about kind of the dynamics, we're getting five year contracts on on those rigs and so the payback period and the IRR on the rigs is going to be just a little bit lower than what we would require north.

Speaker Change: America, because theres more certainty and longer term.

Speaker Change:

Kevin Neveu: And last, just any update on the potential reactivations of the, yeah, outstanding rigs in your international region. Yeah, John, no, we have no news right now, nothing, nothing to report other than we were unsuccessful on a tender in Saudi Arabia. The rates were well below the levels we ever upgraded rig and deployed to, but we understand some people making strategic decisions. It's just, that's their call. I do think that we have opportunities to continue pursuing in Kuwait, in Saudi Arabia, and in the region right now. And I think we'll be successful. I think, but I don't see anything happening likely during the third quarter, maybe during the fourth quarter.

Speaker Change: Okay.

Speaker Change: And last one.

John Gibson: [inaudible] Just any update on the potential reactivations of the outstanding rigs in your international regions. Yeah.

Speaker Change: Just any on any update on the potential reactivation of the.

Speaker Change: Outstanding.

Kevin Neveu: Yeah, John, no, we have no news right now. Nothing, nothing to report other than we were unsuccessful in a tender in Saudi Arabia. The rates were well below the levels we Unknown Attendee, Precision Drilling Corp

Speaker Change: Your international regions, Yes.

Speaker Change: Yes.

Speaker Change: No we have no news right now nothing nothing to report other than.

Speaker Change: We were unsuccessful in a tender in Saudi Arabia.

Speaker Change: The rates were well below the levels we.

Speaker Change #100: Never upgrade we can deploy to but we understand some people, making strategic decisions. It's just that's their call.

Speaker Change #100: I do think that we have opportunities to continue pursuing in Kuwait, and Saudi Arabia and in the region right now and I think it will be successful I think but I don't see anything happening likely during the third quarter, maybe during the fourth quarter.

John Gibson: Okay, great.

Unknown Attendee: Okay, great. Last one for me. Sorry if I missed this. Could you touch on day rates and margins on the super single cluster rigs in Canada? I mean, it looks like you've gained some market share here, and I was just wondering what drove this and if you've been able to push prices higher on this class of rig.

Kevin Neveu: Lossin for me, sorry if I missed this. Could you touch on the rates and margins on the super single class of rigs in Canada? I mean, it looks like you've made some market share here. Market share here and just wondering if what year old this and if you've been able to push pricing higher on this class of rigs. Yeah, I'm not sure we've actually gained any market share because our market, it's really hard to tell exactly, but our market share is still soon to be in the same range. And, you know, we're mainly competing with rigs that probably aren't quite as efficient, so we can get a little higher day rate.

Speaker Change #100: Okay great.

Speaker Change #101: Last one from me sorry, if I missed this could you touch on day rates and margins on our Super single class of rigs in Canada, I mean, it looks like you've gained some market share market share here and just wondering if.

Speaker Change #102: What drove this and if you've been able to push pricing higher on this class of rig.

Kevin Neveu: Yeah, I'm not sure we've actually gained any market share. It's really hard to tell exactly, but our market shares still seem to be in the same range. And we're mainly competing with rigs that probably aren't quite as efficient, so we get a little higher day rate. I gave guidance on the margins in the range of $7,000 to $14,000 a day. You can assume that the pad rigs are going to be in the top half of that range, and the non-pad rigs will be in the bottom half of that range.

Speaker Change #103: Yes, I'm not sure we've actually gained the market share because our market is just really hard to tell exactly but our market share is still seem to be in the same range.

Speaker Change #103: The remainder.

Speaker Change #103: The remainder competing with rigs that probably aren't quite as efficient. So we can get a little higher day rate.

Kevin Neveu: I gave guidance on the margins of the range of seven to fourteen thousand dollars a day. You can assume that the pad rigs are going to be the top half of that range and the non pad rigs will be the bottom half of the range. I suggested that the third of the rigs are pad style rigs. The upgrade cost to convert a rig to pad style is quite low compared to the triples, and I expect we'll have. of several more of those super singles that are non-pad, converted pad rigs, probably the second half of this year.

Speaker Change #103: I gave guidance on the margins are in the range of seven to $14000. A day you can assume that the pad rigs are going to be the top half of that range.

Kevin Neveu: I suggested that a third of the rigs are pad-style rigs. The upgrade cost to convert a rig to pad-style is quite low compared to the triples, and I expect we'll have several more of those super-singles that are non-pad-converted pad rigs, probably in the second half of this year.

Speaker Change #104: <unk> pad rigs will be the bottom half of the range I suggested that a third of the rigs are pad style rigs.

Speaker Change #104: The upgrade cost to convert a rig to patch style is quite low compared to the triples, and I expect we will have.

Speaker Change #104: Several more of those Super singles that are non pad converted pad rigs probably the second half of this year.

John Gibson: Okay, great. An awesome quarter. I'll turn it back. Thanks.

John Gibson: Okay, great, awesome quarter. I'll turn it back, thanks. Thanks. Thank you, watch on.

Speaker Change #105: Okay great.

Operator: Thanks. All the best, John.

Awesome quarter I'll turn it back thanks.

John Gibson: Thanks, John.

John Daniel: Our next question comes from John Daniel with Daniel Energy Partners; your line is open. Hey guys, thanks for having me on. Just one question. One of the free complaints I get from like a private well-service guys in the US is the cost of insurance and the ability to get it. I'm just curious if that's the same dynamic as it plays in Canada and is that going to create some opportunities for more tuck-ins.

John Daniel: Our next question comes from John Daniel with Daniel Energy Partners. Your line is open.

John Gibson: Our next question comes from John Daniel with Daniel Industry Partners. Your line is open.

Kevin Neveu: Hey guys, thanks for having me on. Just one question. One of the frequent complaints I get from private well service guys in the U.S. is the cost of insurance and the ability to get it. I'm just curious if that same dynamic is at play in Canada, and is that going to create some opportunities for more

John Daniel: Hey, guys. Thanks for having me on just one question.

Speaker Change #107: One of the complaints.

Speaker Change #108: Complaints I get from my prior.

Speaker Change #109: Private wealth service guys in the U S as the cost of insurance and the ability to get it I'm just curious if that same dynamic is at play.

Speaker Change #109: Canada and is that going to create some opportunities for more tuck ins.

Kevin Neveu: John, that's a really prickly question. I just came back from our insurance renewals in the spring. We go to London; we do a comprehensive insurance renewal with our insuring group. I would tell you that I think that larger service companies with scale right now have very good access to insurance, but the rates have gone up. I would say that smaller, and the smaller you get, the access to insurance gets trickier and more expensive. The insurance industry is dealing with a lot of their investors, and they're being pushed not to insure this industry. We see that.

Kevin Neveu: John, that's a really prickly question. I just came back from our insurance renewals in the spring. We go to London, and we do a comprehensive insurance renewal with our insuring group. I would tell you that I think that larger service companies with scale right now have very good access to insurance, but the rates have gone up. I would say that the smaller you get, access to insurance gets trickier and more expensive. The insurance industry is dealing with a lot of its investors, and they're being pushed not to insure this industry. We see that.

Speaker Change #109: John That's a really quickly question I just came back from our insurance renewals in the spring.

John: We go to London, we do a comprehensive insurance renewal with our insurance group I would tell you that I think that.

John: Larger service companies with scale right now.

Speaker Change #111: Very good access to insurance, but the rates have gone up.

Speaker Change #111: I would say that smaller and smaller you get access to insurance gets trickier and more expensive.

Speaker Change #111: The insurance industry is dealing with.

Speaker Change #111: A lot of there.

Speaker Change #111: A lot of there.

Speaker Change #112: Investors in.

Speaker Change #113: They're being pushed not to ensure this industry, we see that we start with several insurers use to cover precision who won't cover oil and gas yet so the market size is decreasing.

Kevin Neveu: We start with several insurers who used to cover precision, who won't cover oil and gas again. So the market size is decreasing, and those that are in the space want to focus on the lower risk, larger, more capable companies. So I think that's a real risk for a small company. I would tell you that I think any large service provider that's kind of multi-basin, tens or hundreds of assets will have access to insurance, and maybe tougher for smaller companies.

Kevin Neveu: We sat with several insurers who used to cover precision whose business won't cover oil and gas again. So the market size is decreasing, and those that are in the space want to focus on the lower risk, you know, larger, more capable companies. So I think that's a real risk for a small company. But I would tell you that I think any large service provider that's got a multi-basin, you know, you know, tens or hundreds of assets will have access to insurance. It may be tougher for smaller companies.

Speaker Change #113: Those are in the space what to focus on the lower risk.

Speaker Change #114: Larger more capable companies. So I think that's a real risk for a small company I would tell you that I think a large service provider Thats got a multi basin.

Speaker Change #113: No.

Speaker Change #113: Tens or hundreds of assets.

Speaker Change #113: We will have access to insurance it may be tougher for smaller companies.

John Daniel: Okay, is it your sense that the customers are being smart and auditing this?

Kevin Neveu: Okay, do you see your sense that the customer are being smart and audited in this? For every contract we have, we have to have proof of insurance. Okay, you know, typically go through that liability assessment with our clients.

Speaker Change #115: Is it your sense that the customers are being Smarten auditing us.

Kevin Neveu: For every contract we have, we have to have proof of insurance. Okay. We typically go through that liability assessment with our clients.

Speaker Change #115: For every contract we have we have to have proof of insurance okay.

Speaker Change #116: We typically go through that liability assessment with our clients.

John Daniel: That's all I have got. Thanks guys.

John Daniel: Sure, that's all I got. Thank you. Great, thanks, John.

Speaker Change #119: Fair enough that's all I got thanks, guys.

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

Unknown Attendee: And I'm not showing any further questions.

John: Thanks, John.

Lavonne Zdunich: This time I'd like to turn the call back over to Levan for any closing remarks. On behalf of the precision team, I would like to thank everyone for joining in on our call today and wish you a great day. Thank you.

Speaker Change #117: And I'm not showing any further question at this time I'd like to turn the call back over to <unk> for any closing remarks.

Operator: On behalf of the Precision team, I would like to thank everyone for joining in on our call today and wish you a great day. Thank you.

<unk>: On behalf of the position I would like to thank everyone for joining in on our call today and wish you Great day. Thank you.

Lavonne Zdunich: Well, ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.

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

Speaker Change #120: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

<unk>: Yes.

<unk>: Okay.

<unk>: [music].

<unk>: Okay.

<unk>: Okay.