Q3 2024 Precision Drilling Corp Earnings Call
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Speaker Change: Good day and thank you for standing by. Welcome to the precision drilling corporation 2024 third quarter results conference call. I would like to end the conference over Lavonne Zdunich vice president of investor relations, please go ahead.
Lavonne Zdunich: Welcome to Precision Drilling's third quarter earnings conference call in webcast. Today, I'm joined by Kevin Neveu, our president and CEO and Carey Ford, the CFO. Yesterday, Precision reported strong third quarter results, which Carey will review, followed by Outlook Commentary and an operational update from Kevin.
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.
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 will pass it over to Carey.
Carey Ford: Thank you, Lavonne. In the quarter, precision delivered year-over-year growth in revenue, adjusted EBITDA, and net earnings. The resilience of our high-performance, high-value business model, geographic diversification, and organizational focus on cash flow and return on capital drove our financial results.
Carey Ford: We continue to strengthen our balance sheet with $49 million of debt reduction during the quarter and $152 million year-to-date, reaching the low end of our target range of $150 million to $200 million in 2024.
Carey Ford: Share repurchases were $17 million during the quarter and $50 million year-to-date, tracking the target of 25% to 35% of free cash flow allocated to shareholders.
Carey Ford: We expect strong cash flow during the fourth quarter, and we'll continue to make progress with these targets.
Longer term, we plan to reduce debt by $600 million between 2022 and 2026 over the next nine quarters with approximately $190 million remaining.
Carey Ford: Achieve a leverage level below one times net debt dividend and increase our direct shareholder returns toward 50 percent.
Carey Ford: Precision's progress on balance sheet strength and shareholder returns has positioned us to be able to capture opportunistic high-value investments.
Carey Ford: We are increasing our 2024 capital spending plan from $195 million to $210 million to fund multiple contracted rig upgrades and take advantage of purchasing in-demand drill pipe for 2025 drilling programs ahead of potential import tariffs.
Carey Ford: In the past, we pursued similar opportunistic investments while meeting our annual capital allocation goals.
Carey Ford: These included the High Arctic and CWC acquisitions, as well as year-end pull-forward capital purchases at the end of 2023, and again this year.
Carey Ford: These investments have all produced excellent returns for our shareholders. In fact, as of the third quarter this year, we believe the assets purchased in the Hierarchic Transaction have paid for themselves in approximately two years.
Carey Ford: Moving on to Q3 performance.
Carey Ford: of 142 million dollars included a $200,000 share-based compensation recovery.
Carey Ford: Net earnings were $39 million or $2.77 per share, representing the ninth consecutive quarter of positive earnings for Precision.
Carey Ford: Margins for Canada were $12,877, lower than guidance due to rig mix, as we had increased demand for super single and double rigs. Margins for Q4 are expected to be approximately $15,000 a day, with increased winter seasonal ancillary revenue pull-through.
Carey Ford: In the U.S., drilling activity for precision averaged 35 rigs in Q3, a decrease of one rig from the previous quarter.
Carey Ford: Daily operating margins in Q3, excluding the impacts of turnkey and IBC, were $10,888, essentially flat from Q2. For Q4, we expect margins to decrease slightly to approximately $9,500 a day.
Carey Ford: Internationally, drilling activity for precision in the current quarter averaged 8 rigs. International average day rates were $47,223 USD.
a decrease of 8% from the prior year due to incurring 44 non-billable utilization days for a rig undergoing a certification. This decrease was offset by a positive year-over-year rig mix.
Carey Ford: In our C&P segment, Adjacente Vidal's quarter was $20 million, up 40% compared to the prior year quarter. Adjacente Vidal was positively impacted by a 34% increase in well-served hours, the integration of the CWC acquisition, and improved pricing.
Carey Ford: C&P results were further supported by Precision Rental Business which is realizing increased demand and utilization for centrifuge equipment on super triple rigs for customers in the Montney.
Carey Ford: Our contract rig fleet continues to support our outlook, with average annual rigs under contract in 2024 of 18 in the U.S., 23 in Canada, and 8 internationally.
Our net debt to trailing 12-month adjusted EBITDA ratio is approximately 1.4 times and our average cost of debt is approximately 7%.
Carey Ford: We expect our net debt to adjust to the EBITDA ratio to be approximately 1.3 times by year-end.
Carey Ford: Moving on to guidance for 2024.
Carey Ford: We expect depreciation of approximately $300 million, cash interest expense of approximately $70 million, cash taxes to remain low, and our effective tax rate to be approximately 25%.
Carey Ford: We expect SG&A of approximately 100 million dollars before share-based compensation expense.
Carey Ford: And we expect share-based compensation charges for the year to range between $40 million and $60 million at a share price range of $80 to $120.
Carey Ford: And the charge may increase or decrease by up to $20 million based on the share price performance relative to Precision's peer group. With that, I will turn the call over to Kevin.
Kevin Neveu: Thank you, Carey. I am pleased with the third quarter financial results and remain confident with the outlook for the balance of the year as we continue to make progress towards achieving our stated objectives.
My confidence stems from the focus and discipline across the precision organization, seeking to maximize free cash flow from every aspect of our business. This is ingrained in our culture and underpins everything we do.
Kevin Neveu: I'm also very pleased that Precision's increased international and Canadian rig activity has more than offset the constrained U.S. market. For the third quarter, Precision is one of the few service companies reporting a material increase in overall activity, billing 10% more drilling days compared to the same period last year.
And as I'll cover later in my prepared comments, we remain confident in the Canadian and international markets, while we expect a modest increase in the U.S. as reloaded budgets for 2025 kick in.
Looking forward to next year. Our multi-year journey to improve our balance sheet and reset our capital structure will turn an important corner as our debt leverage drops below one times EBITDA.
Kevin Neveu: Well, this may not be our final debt level objective, the company will enjoy substantial increased financial flexibility to further exploit opportunistic growth investments to increase shareholder capital returns and execute further capital structure improvements.
A good example of this opportunistic investment strategy is the multi-million dollar advanced purchase of drill pipe Carey mentioned.
We took advantage of excess vendor inventories and vendor discounts while front-running possible tariff increases, procuring drill pipe that we will utilize during the upcoming year.
Kevin Neveu: There should be no question that Precision shareholders will be the prime beneficiaries of this resetting of the capital structure through increased capital returns and opportunistic growth investments, which should all enhance the enterprise value.
Kevin Neveu: So now turning to our operations update, in LOR 48, it's steady as she goes is the theme. Customer demand remains constrained by volatile oil prices, soft natural gas prices, customer consolidation, and annual budget exhaustion.
Precisions U.S. rig activity continues to be relatively stable, albeit at levels below where I'd like. Rig activity remained in the mid-30s over the past quarter. We expect to sustain this level through the fourth quarter.
Kevin Neveu: With 2025 budget reloads on the horizon, we are seeing signs of a modest rebound in U.S. activity, as we have added seven term contracts since the end of the second quarter, with activation dates ranging from beginning late this year into the first few days of 2025.
The day rates on the ST-1500 contracts remain in the low $30,000 per day range, while our ST-1200s, also in the booking group, are in the upper 20s range.
I want to reiterate comments I made in the past that we're not looking to defend market share with aggressive pricing.
With drillers, subsidized rig moves, or any other high-value services combined or included in the day rate, we believe it remains fundamental to our high-performance, high-value strategy that we pursue the appropriate financial returns for the exceptional value our rigs provide our customers.
Kevin Neveu: Regarding these new contract additions, five of these contracts are with the consolidating majors and we believe this is a good indication that operator consolidation is transitioning to full integration and that precision is becoming a beneficiary of these majors high grading and rationalizing the drill contractor mix.
Also notable is that each of these contracts includes additional premiums for our alpha automation, alpha apps, and several of our evergreen diesel reduction solutions.
On that note, 2024 has been a very strong year for evergreen product rollout. Approximately 50% of our active rigs across our fleet have at least one evergreen solution installed and are earning incremental revenue.
Precision's evergreen strategy to deliver both economic value and diesel fuel reductions to our customers while earning a premium return on investment for Precision ensures that the full value produced by these solutions is shared equally between Precision and the operators.
I expect this fleet-wide rollout to continue for the next several years as we continue in our efforts to improve energy efficiency, reduce diesel consumption, and continue the transition to low-emission power solutions for our rigs.
Kevin Neveu: Now, turning to Canada, demand for our rigs targeting heavy oil, condensate, and LNG remains very high. Consequently, the demand for our super singles and super triples remains very high.
The importance of the Trans Mountain Pipe reducing the oil export bottlenecks has been a huge stimulus for heavy oil and condensate drilling activity.
So for those of you on the call who may be less familiar with the Canadian heavy oil drilling market, let me provide a brief overview.
Kevin Neveu: Heavy oil drilling and production in Alberta is very well understood by the operators and has been technically de-risked for a vast geographic extent ranging from northwestern Alberta across to the western edge of Saskatchewan.
These reserves are huge, with decades of drilling inventories, including conventional heavy oil, SAG-D, oil sands, and clear water.
The scale is immense, and while the technical and geological risk is low, the producing zones are relatively shallow, generally under 3,500 feet vertical depth, and usually involve horizontal wells and, in some cases, slant-style drilling.
The wall completion costs are relatively inexpensive, as no fracturing or stimulation is needed. The drilling operation is the key cost driver, and hence customers will pay a premium for safe, high-efficiency rigs, which can drill and move quickly and efficiently.
Specifically in the Clearwater, the operators utilize these complex multi-well designs where wellbore accuracy and placement is critical. These customers desire operational excellence and high efficiency will pay a premium for well-trained crews on high-performance rigs.
Speaker Change: Now, since this heavy oil is thick or viscous and difficult to pump, gas condensate liquid is blended with the heavy oil to improve or reduce the viscosity for easier pipeline transfer and oil shipping.
Kevin Neveu: The Canadian market is short about 275,000 barrels per day of condensate, which drives the condensate commodity price roughly in line with WTI prices and then stimulates drilling for this important resource.
We've been pleasantly surprised by the near instantaneous customer response to these market drivers with a wide swath of our client base increasing activity almost immediately following the Trans Mountain Pipeline entering service.
Utilization for our super single rigs, drilling heavy oil, and for our super triple rigs, drilling Monteney gas and gas condensate are both at historic high speed rig classes.
Today we have 75 rigs operating in Canada and expect this pace to continue other than a short few days around Christmas as some customers may give rig crews a break before getting fired up for what looks like a very busy 2025.
Kevin Neveu: We expect winter activity to ramp up fast and early this year, beginning as soon as December 27th, with our activity hitting high 70s or low 80s by the end of the first week of January. Peak activity this winter should exceed last year for precision.
Based on current customer plans, the seasonal spring breakup will be weather-driven, not budget-driven. And we expect a busy spring breakup period similar to last year, with many rigs on large multi-wheel pads operating through breakup.
Kevin Neveu: Now, I'll remind the listeners that in the spring of 2024, our seasonal activity declined only 33% from winter levels due to that high percentage of pad drilling rigs operating through breakup.
Kevin Neveu: And we expect this reduced seasonality trend to be a permanent shift in the Canadian activity profile for precision.
Kevin Neveu: Thanks for tuning in. We'll see you next time.
Now, over the last several weeks, we've received multiple customer inquiries for additional conversions of our super single rigs to full pad systems.
These upgrades include increasing the torque the rigs can deliver, increasing the handling capacity and capabilities for the rigs, and adding pad equipment to the rig.
Kevin Neveu: The payback on these upgrades is less than two years, meeting our capital return expectations.
Now, following the integration of the CWC transaction from late last year, Precision is also now a meaningful participant in the price-sensitive tele-double market.
We're not previously a focus for precision. Today, we are operating eight tele-doubles and as many 12 rigs of this class at times during the third quarter, which substantially
Kevin Neveu: more than substantially more than the combined pre-closed total of six rigs and well above the two Tele-Doubles precision operated separately last year.
Now, for those of you less familiar with the Canadian rig market, the rig I'm referring to is a telescoping double, or commonly called a teledouble.
Kevin Neveu: These are shallow-to-medium-depth double-stand rigs, and while they lack the overall high efficiency of a super-triple rig, they can compete on single-well pads with some of the lower-grade triples.
Now, the industry overbuilt this rig class between 2005 and 2015, as these were primarily targeting shallow gas and the cardium and Viking oil plays.
During that time, Precision largely focused on building out then our newly introduced Super Triples for the Monteney and expanding our fleet of well-known Super Singles for heavy oil.
Kevin Neveu: Now, the Canadian market remains oversupplied with these tele-doubles, and the market rates for these rigs are still substantially lower than both our super triples and our pad-equipped super singles.
This is a market for precision scale-based cost advantage.
Our operational leverage, superior safety and crew capabilities enables Precision to operate Teledevils and still earn an accretive margin and deliver meaningful free cash flow. And this rig class will not require any meaningful allocation of capital outside of normal maintenance spending.
So, turning to our Canadian Well Service business, the integration of the CWC assets is complete. We've achieved our planned synergies, as Carey mentioned earlier. More importantly, we have Canadian basin-wide coverage with meaningful exposure in every operating area in Alberta, British Columbia and Saskatchewan.
Kevin Neveu: The winter season looks very busy, likely with industry-wide crew shortages keeping tension on the supply side of well-servicing availability. We believe our scale and focus on crew safety and retention will give us a leg up on the competition as customers scramble to get the service rigs they need.
Kevin Neveu: Now turning to our international business, it's also as dead as she goes.
Speaker Change: As Carey mentioned, we experienced a low in revenue during the third quarter due to an extended recertification of one rig. That rig was back up and operating a few days ago. We expect Q4 revenue for an international group will trend closer to normal levels.
Kevin Neveu: We're also expecting a tender package later this year or early next year in Kuwait, which may give us an opportunity to activate our one remaining idle rig during 2025. We'll keep you informed as this progresses.
Essentially, Precision's international activity in Saudi Arabia and Kuwait will significantly up from 2023 as a strong, stable generator of free cash flow approved for Precision.
So to conclude my comments, I want to thank our customers and our investors for their strong support for Precision, and I want to thank the people of Precision once again for a strong operational quarter with excellent financial results.
So, I'll now turn the call back to the operator for questions.
Speaker Change: 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 received yourself from the queue, please press star 1 1 again. We'll pause for a moment while we compile our Q&A roster.
Thank you very much.
Speaker Change: Our first question comes from Kurt Halid with Benchmark. Your line is open.
Kurt Halid: Hey, good afternoon everybody or good morning wherever you may be. Thanks for all that detail on the call and I think, Kevin, you know, you referenced a much more
Speaker Change: caused a shortage and super triples. Can you expand upon that a little bit? To what magnitude do you think there, if there is to be a shortage, what that magnitude would be?
Speaker Change: That's a great question and you'll notice my comments were a little brief on LNG and our prepared comments.
So we're watching anxiously to see how LNG Canada fires up. We know the gas is going to the pipe now to get the facility commissioned.
We're still hearing the first shipments are going to be happening at the end of the second quarter in 2025 for LNG Canada.
Speaker Change: I think that we'll see rig demand increase and you know it might be two or three rigs or it could be a little more maybe four or five rigs but it feels like demand is in that kind of two to five rig range to balance out the needs for LNG Canada.
Speaker Change: Okay, great. Appreciate that, Keller. And then maybe for Carey, I've kind of referenced the dynamics around some of the...
potential upgrade that you got coming, you know, for some of these super single rigs and so on. How should we think about free cash flow conversion in 2025?
Yeah, so if you remember, Kurt, all of the rigs, whether it's a super single or super triple, they're modular. And the upgrades that we're doing are really bolt-on upgrades. So typically, they're going to kind of be in the $1 to $3 million range. So an individual upgrade won't upset a prescribed capital allocation plan, whether it's 2024 or 2025. So I would, you know, before we announce our formal plan,
beginning of next year, I would say that it will likely look pretty similar to this year with allocations towards debt reduction and share repurchases.
and I'll just I'll leave it there. Yeah I think we'll give more clear guidance on our plans in 2025 early in the year like we typically do.
Speaker Change: Okay, great. And one more thing, just for clarity, Kevin, again, in your press release, your reference, you got seven contracts starting up at the end of the year for projects in 2025. Is that going to be sufficient to kind of keep your
Your run rate in the mid-30s, or is that going to be, you know, are those seven rigs going to wind up being additive to that 35 rig count that you had in third quarter?
Kevin Neveu: Kurt, that's a really great detailed question and I'll do the best I can to answer it.
There's still a fair amount of churn in the uncontracted rigs. You've got a block of rigs that are uncontracted, they're well-to-well, and there has been churn. And that churn is going to continue between now and the end of the year.
Speaker Change: I'd say that the range is kind of low to mid 30s to maybe as high as low 40s early in the next year, but there's a range.
And I think, you know, increasing commodity volatility probably keeps it towards the low end of the range, and more commodity price stability probably moves us to the higher end of the range.
Speaker Change: I hate to give you such a wide range. I don't think it's going to impact our capital or our free cash flow plans dramatically because I think we're covering a lot of that with our international and our Canadian businesses.
Speaker Change: Got it. Thank you. Appreciate it.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Waqar Syed with ATV Capital Markets. Your line is open.
Waqar Syed: Thank you.
Carey, Kevin, when do you expect U.S.
Waqar Syed: So that's
Speaker Change: They may have already bought them, but if there's more weakness in the industry rig count, maybe they haven't. I think the resiliency this year has been really impressive for us and for the industry.
One dynamic of our margins that...
I think you probably would see, comparing to some of our peers that have already reported,
Waqar Syed: They're, you know, several thousand dollars a day lower, and there's a couple reasons for that. We had about 60% of our rigs that were working in the third quarter were Super Triple 1500s. The rest were 1200s or a few of the CWC rigs that we acquired at the end of last year.
Waqar Syed: When we strip out the non super triple 1500 rigs
Our day rates were right in line with where our peers that have already reported reported day rates.
And our margins would have been a couple thousand dollars a day lower, which is a result of the lower fixed cost absorption that I've mentioned a couple times on previous calls. So I think the margins for precision are quite a bit better for our Super Triple 1500s than what we're reporting on average.
and we would expect certainly to have some stability in those margins in the coming quarters.
Waqar Syed: Okay.
You now have some seasonality in your activity in Q4 and Q1, primarily for some of the COWC rigs acquired in the Rockies area. Do you expect that seasonality this winter as well? And if so, what would be the impact like?
Well, Carl, that seasonality is in the range of two to four rigs, which normally wouldn't trouble me too much, but with, uh,
with 35 rigs running, two to four rigs starts to sound like a bigger number. I think there's a fair amount of churn and there's a pretty good chance we can mitigate that, but it'll be a day-to-day review with our operations team and sales team.
Speaker Change: And how many rigs are, and I can look up as well, but how many rigs are working in the Rockies right now for you?
Yeah, it's in the range of two to four rigs depending on what's happening on a day-to-day basis. And that would just be Wyoming. Yeah. We have another six rigs or so working in Colorado.
Do you know if this is incremental demand or if you are, you said that there was some high grading going on, are they high grading from some of these small grading contractors or it's also happening with some of your, you know, large four peers as well?
It doesn't appear that we're
Speaker Change: Taking market share away from a large peer, it probably looks like we're replacing lower grade rigs. Sometimes it's hard to tell exactly.
Thank you.
Okay, that's all for me. Thank you very much.
Speaker Change: Great, thanks, Ricardo.
Speaker Change: Our next question comes from Sean Mitchell with Daniel Energy Partners. Your line is open.
Hey guys, thanks for taking the question.
A couple of thoughts. We've heard some rumblings about obviously a seasonal slowdown in Q4 in North America over the course of the last week or two, but with gas prices in the strip showing some signs of life, are you guys hearing anything from your customers on increasing activity on the gas side?
in the next 12 months. I think there is a little more focus on gas and I think that you'll see the gas rate can't move up at least modestly.
got it and then maybe one follow-up. Let me qualify that every time I've made a rig count prediction of rig counts going up a week after the conference call something changes that.
No, that's fair. It's tricky. Maybe a follow-up here. Can you share your thoughts about kind of growth in your current service lines and any additional service lines you guys might pursue in the world of M&A?
You know, Sean, we've really worked hard to look at consolidating in the areas where we currently have business, so, you know, last couple of transactions and
in Canada have been consolidating transactions. Before that, we exited coiled tubing and swapped into more well service rigs.
sideways to other product lines and more focused on the things we do well.
Speaker Change: Okay, that's helpful.
All right guys, thanks for the color
Speaker Change: Thanks, Ron.
Our next question comes from John Gibson with BMO Capital Markets. Your line is open.
Morning and thanks for taking my question. I just wanted some clarification on the margin guidance for Q4. Did you say $15,000 for Canada?
Yeah, approximately 15,000, John.
Just wondering, what is the the delta from Q3? Is it mostly rig mix? Are you seeing some some pricing improvements?
So, I think the pricing is stable to slightly up across rig classes. The rig mix will be pretty similar. We have a couple of super triples that will be firing up in Q4, which will help. And then there's...
ancillary winter revenue that will be supporting margins like it typically does in Q4.
You got it. On your capital return program, you talked about a shift to 50% of free cash flow being allocated to shareholder returns. Is that still a 2025?
story and are buybacks the focus or could you look at maybe mixing a dividend in as early as next year?
Yeah, I think we've never said that 2025 would be a 50% allocation, we said we'd be continually moving towards that number. So I think that it's fair to assume we will be increasing our allocation towards shareholders. And I think when we get to below one times net debt, it'll be
Much more likely that we'll be at that 50% level. Right now, share buybacks have worked really well for us. I think that's going to be the mechanism to return capital directly to shareholders.
next year, and we will be talking about a dividend more frequently. We talk about capital allocation with our board every quarter, but I'm sure it'll become more prominent in the discussion.
Okay, that's fair. Last for me, on the international bids, apologies if I missed this, but have you seen much improvement, or movement, sorry, either positively or negatively?
as we look out to potential signings moving forward.
John, what you might not have heard or seen is that in Saudi Arabia, Aramco suspended some offshore rigs, offshore jackups, and some land rigs.
some of the other contractors saw their land rigs at least suspended for a period of time up to a year maybe longer we weren't under any of that our rigs are still running we have no suspensions but I think that tells you a bit about what's going on in the Middle East right now that as long as OPEC has production constraints in place
The need for additional rigs is is quite low or muted.
Speaker Change: I think as they start planning to release constraints over time, those rig needs will go up. But of course, we're coming to another OPEC meeting here in a few days' time in December, where they'll talk about whether they delay or not.
I'd say support investable prices as they call it. So I think there's gonna be strong support to keep a narrow band in oil prices, which likely means that production constraints stay in place a little longer, which probably means they don't need more rigs for a little longer.
Speaker Change: Long answer to a pretty simple question. I'm sorry.
No, I appreciate that. It's all very good colors. So thanks again, and congrats on the strong quarter. Glad to see the reaction in the markets today.
Speaker Change: Thank you.
Our next question comes from Keith Mackey with RBC Capital Markets. Your line is open.
Hi, good morning. I just wanted to start out on the rig market in Canada. So, Kevin, you have some helpful color on the three sort of different classes of rigs.
Keith, those rigs do compete with us in the super single category. They do compete with us in the super triple category. The math of the day rates.
works so that if a drilling pad is bigger than three wells per pad, then there's almost nothing a Tully Double can do to compete with a Super Triple, even at a very low price.
So, I mean, the value a super triple produces on medium to large pads, you can't overcome that with a low rate on a tele-double. So on one-walled pads, two-walled pads, yes, there is head-to-head competition. Virtually all of our work is on multi-walled pads right now. I think 100% of our super triples are on multi-walled pads.
On the super single side, yeah, no question that a Tele-Double can compete. There's a meaningful difference in the cost to mobilize that Tele-Double compared to a super single.
So we can move a super single in about a third fewer truckloads. So in short duration wells, trucking costs become material.
So, again, it means that tele-doubles can compete, but the rate has to be substantially lower to balance out with that trucking cost. So as a result, we can achieve higher day rates for the super single. And then when we make a super single, a pad super single, well, then that tele-double can't compete.
Yeah, further to that point, Keith, you know, if you look at our utilization on super singles this quarter and going into Q4,
We're kind of in the 90% range on super singles, when our...
Speaker Change: Our teledoubles were right around 50%. We think that 50% is representative of where the teledoubles in the industry are working right now. And the super single is just really in a class of its own, in terms of what it can do in the heavy oil markets and best reflected in the utilization.
Yeah, understood. And how would roughly that $15,000 per day margin break out between your different rig classes, if you had to describe it that way?
Yeah, I think the way I would describe it is the Super Triples are on average higher than $15,000, the Super Singles are a bit lower than $15,000, and the Tele Doubles are a bit lower than that.
Got it.
Speaker Change: Okay, I'll leave it there. Thanks very much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Ali Hemraj with TD Cowen. Your line is open.
Ali Hemraj: Oh, is that, does that be, am I live? Yes.
It's Aaron McNeil here, sorry about that. Kevin, maybe I'll ask Kurt's question a bit differently.
Speaker Change: You know as it relates to the seven new contracts. Are you reactivating?
Speaker Change: Already working.
or rigs that have contracts.
Speaker Change: is winding down.
Of the seven, two would be contract renewals or extensions, five would be new customer, new contract awards. Some of those rigs will have worked in the past four or five months, some of those rigs have not worked this year.
Gotcha, that's super helpful. And then any other color on what types of upgrades that are occurring and, you know, I'm particularly interested on the CWC related rig side, if that's applicable, and also curious to know if you're moving rigs to new basins.
Speaker Change: We're not moving any rigs in this current round, so nothing we've got scheduled to move in the near term.
Speaker Change: Perhaps one rig, I'm wrong, there might be one rig moving up to the DJ Basin, actually. 1500 horsepower rig moving to the DJ Basin, I think that's in the mix.
and that move is paid for by the client not paid for by us be clear on that. The upgrades are going to be things like racking capacity and pressure capacity on the rigs. We're going from 5,000 to 7,500 psi adding a third mud pump on one or two rigs.
Yeah, and Kevin said in his comments on the Tele-Double Fleet, we don't foresee a whole lot of upgrade capital going forward if we make this capital in the Tele-Double Fleet. All of the upgrade capital that we will be spending in Q4 and going into the first part of next year will be on super triples in the U.S.
at Super Singles in Canada, and maybe a little bit on Super Triple in the Canadian market.
I was referring to the triples in the U.S.
Speaker Change: and the CWC triples.
Yeah, Aaron, none of those triples are currently scheduled for an upgrade at this point.
Gotcha. Okay. No, that's helpful. And then maybe one more for Carey, expanding on John's question.
Speaker Change: You know year-to-date the pace of the buyback would suggest you're shooting for the sort of the bottom end of the range You know the debt targets already been achieved if we're just thinking exclusively about q4
Speaker Change: You know
two months of the year.
Yeah, so we really just, we put forward an annual guidance for how we're going to allocate capital and we're going to continue to follow that annual guidance, but it's going to be a mix between debt reduction, share buybacks, and cash bill.
Fair enough. I'll leave it there. Thanks, guys.
And I'm not showing any further questions at this time. I'd like to turn the call back over to LaVonne for any closing remarks.
I'd like to thank everyone for joining us today and if you have any follow-up questions you can give me a call later today. Thanks and have a great afternoon.
Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.