Q1 2025 Precision Drilling Corp Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the Precision Drilling Corporation 2025 Q1 results Conference Call and Webcast. I would now like to hand the conference over to Lavonne Zdunich, Vice President of Investor Relations. Please go ahead.

Speaker Change: Good day and thank you for standing by welcome to the precision drilling Corporation 2025 first quarter results conference call and webcast I would now like to hand the conference.

Lavonne Zdunich: Welcome to the Precision Drilling Corporation 2025 First Quarter Results Conference call and webcast. I would now like to hand the conference over to Lavonne Zdunich, Vice President of Investor Relations. Please go Thank you, Operator, and welcome everyone to our first quarter conference call.

You don't think vice President of Investor Relations. Please go ahead.

Lavonne Zdunich: Thank you, operator. Welcome everyone to our Q1 Conference Call. Today, I'm joined by Kevin Neveu, Precision's President and CEO, and Carey Ford, our CFO. Yesterday, we reported our Q1 results. To begin the call, Carey will review these results. Then Kevin will provide an operational update and outlook commentary. Once we have finished our prepared comments, we will open the call for questions. Please note some of the comments today will refer to non-IFRS financial measures and include forward-looking statements, which are subject to a number of risks and uncertainties. For more information on financial measures, forward-looking statements, and risk factors, please refer to our news release and other regulatory filings on SEDAR and EDGAR. As a reminder, we express our financial results in Canadian dollars unless otherwise stated. With that, I'll turn it over to you, Carey.

Speaker Change: Thank you operator, and welcome everybody to our first quarter conference call today, I'm joined by Kevin nephew, precision, President and CEO and carry forward our CFO.

Lavonne Zdunich: Today, I'm joined by Kevin Neveu, Precision's President and CEO, and Carey Ford, our CFO.

Carey Ford: Yesterday we reported our first quarter results. To begin the call, Carey will review these results, and then Kevin will provide an operational update and outlook commentary.

Speaker Change: Yesterday, we reported our first quarter results to begin the call. Carrie will review. These results and then Kevin will provide an operational update and outlook commentary. Once we have finished our prepared comments, we will open the call for questions. Please note. Some of the comments today will refer to non ifr S financial measures and it.

Unknown Attendee: Once we have finished our prepared comments, we will open the call for questions.

Unknown Attendee: Please note some of the comments today will refer to non-IFRS financial measures and include forward-looking statements which are subject to a number of risks and uncertainties. For more information on financial measures, forward-looking statements, and risk factors, please refer to our news release and other regulatory filings on CDAR and EDGAR. As a reminder, we express our financial results in Canadian dollars unless otherwise stated.

Speaker Change: Forward looking statements, which are subject to a number of risks and uncertainties.

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

Speaker Change: As a reminder, we express our financial results in Canadian dollars, unless otherwise stated with that I'll turn it over to you Carey.

Carey Ford: With that, I'll turn it over to you, Carey. Thank you, Lavonne. Precision's Q1 financial results met our expectations for Adjusted EBITDA earnings and cash flow. Adjusted EBITDA of $137 million was driven by strong drilling activity in Canada and steady cash flow generation from our drilling operations in the US and Middle East, as well as our completion and production services business. Our Q1 adjusted EBITDA included a share-based compensation charge of $3 million and restructuring charges of $3 million. Without these charges, the adjusted EBITDA would have been $143 million. Revenue for the quarter was $496 million, a decrease of 6% from Q1 2024.

Carey Ford: Thank you, Lavonne. The Precision's Q1 financial results met our expectations for adjusted EBITDA earnings and cash flow. Adjusted EBITDA of CAD 137 million was driven by strong drilling activity in Canada and steady cash flow generation from our drilling operations in the US and Middle East, as well as our completion production services business. Our Q1 adjusted EBITDA included a share-based compensation charge of CAD 3 million and restructuring charges of CAD 3 million. Without these charges, adjusted EBITDA would have been CAD 143 million. Revenue for the quarter was CAD 496 million, a decrease of 6% from Q1 2024. Net earnings were CAD 35 million, or CAD 2.52 per share, representing Precision's 11th consecutive quarter of positive earnings. Funds and cash provided by operations were CAD 110 million and CAD 63 million respectively. In the US, Precision's drilling activity averaged 30 rigs in Q1, a decrease of 4 rigs from the previous quarter.

Carey: Thank you Juan.

Carey: <unk> Q1 financial results met our expectations for adjusted EBITDA earnings and cash flow adjusted EBITDA of $137 million was driven by strong drilling activity in Canada and steady cash flow generation from our drilling operations in the U S and middle East as well as our completion <unk> production services business.

Carey: Our Q1 adjusted EBITDA included share based compensation charge of $3 million and restructuring charges of $3 million without these charges adjusted EBITDA would have been 143 months.

Carey: Revenue for the quarter was 496 million a decrease of 6% from Q1 2024, net earnings were $35 million or $2.52 per share representing precision its 11th consecutive quarter of positive earnings.

Carey Ford: Net earnings were $35 million or $2.52 per share, representing Precision's 11th consecutive quarter of positive earnings. Funds and cash provided by operations were $110 million and $63 million respectively. And in the US, precision drilling activity averaged 30 rigs in Q1, a decrease of four rigs from the previous quarter. Daily operating margins in Q1, excluding the impacts of turnkey and IBC, were $8,360 USD, a decrease of $787 USD from Q4. For Q2, we expect normalized margins to be between $7,000 USD and $8,000 USD. Daily operating costs in the U.S. were unusually high this quarter due to rig activations, rig mobilizations, severance costs, and standby labor.

Carey: Okay.

Carey: Cash provided by operations were $110 million and $63 million respectively.

Carey: And in the U S precision as drilling activity averaged 30 rigs in Q1, a decrease of four rigs from the previous quarter.

Carey Ford: Daily operating margins in Q1, excluding the impacts of turnkey and IBC, were $8,360 USD, a decrease of $787 USD from Q4. For Q2, we expect normalized margins to be between $7,000 USD and $8,000 USD. Daily operating costs in the US were unusually high this quarter due to rig activations, rig mobilizations, severance costs, and standby labor. Without these items, daily operating costs would've been approximately CAD 22,000 per day, which is still above where I would like to see. As previously mentioned, we are carrying higher fixed costs in the US to support future activity increases. We maintain active rigs in the Rockies, West Texas, South Texas, Louisiana, and the Northeast. We intend to maintain a strong presence in all these regions, but that presence comes with cost. Our US team is demonstrating its ability to increase activity levels, ultimately driving down the per-rig fixed cost burden.

Carey: Daily operating margins in Q1, excluding the impact of turnkey and ITC were 8360 U S. D. A decrease of 787 USD from Q4 for Q2, we expect normalized margins to be between 7000 U S D and 8000 USD.

Carey: Daily operating costs in the U S were unusually high this quarter due to rig up rig activations rig mobilizations severance cost and standby labor.

Carey Ford: Without these items, daily operating costs would have been approximately $22,000 per day. which is still above where I would like to see. As previously mentioned, we are carrying higher fixed costs in the U.S. to support future activity increases. We maintain active rigs in the Rockies, West Texas, South Texas, Louisiana and the Northeast. We intend to maintain a strong presence in all these regions, but that presence comes with cost. Our U.S. team is demonstrating its ability to increase activity levels, ultimately driving down the per rig fixed cost burden. As the activity increase will not happen immediately and should evolve over several quarters, I will continue to push our team on every aspect of our cost structure to drive down operating costs as we work through the year.

Carey: Without these items daily operating costs would have been approximately $22000 per day.

Carey: Which is still above where I would like to see.

Carey: Okay.

Carey: As previously mentioned, we are carrying higher fixed cost in the U S to support future activity increases we maintain active rigs in the Rockies West, Texas, South, Texas, Louisiana in the northeast, we intend to maintain a strong presence in all these regions, but that presence comes with costs.

Carey: Our U S team is demonstrating its ability to increase activity levels levels, ultimately driving down the per rig fixed cost burden.

Carey Ford: As the activity increase will not happen immediately and should evolve over several quarters, I will continue to push our team on every aspect of our cost structure to drive down operating costs as we work through the year. With planned activity increases, I will be closely monitoring costs associated with rig reactivations and mobilizations later this year, as these costs may introduce some variability in reported daily costs in future periods. Our goal will be to continue to drive down normalized operating costs throughout 2025. Moving to Canada, Precision's drilling activity averaged 74 rigs, an increase of 1 rig from Q1 2024. Our daily operating margins for the quarter were CAD 14,779, a decrease of CAD 858 from Q1 2024. For Q2, our daily operating margins are expected to be between CAD 13,500 and CAD 14,500. Internationally, Precision's drilling activity in the quarter averaged 8 rigs.

Carey: As the activity increase will not happen immediately and should evolve over several quarters.

Carey: We continue to push our team on every aspect of our cost structure to drive down operating costs as we work through the year.

Carey Ford: Also, with planned activity increases, I will be closely monitoring costs associated with rig reactivations and mobilizations later this year, as these costs may introduce some variability in reported daily cost future periods. Our goal will be to continue to drive down normalized operating costs throughout 2025. Moving to Canada, precision drilling activity averaged 74 rigs, an increase of one rig from Q1 2024. Our daily operating margins for the quarter were $14,779, a decrease of $858 from Q1 2024. For Q2, our daily operating margins are expected to be between $13,500 and $14,500. Internationally, precision drilling activity in the quarter averaged eight rigs, international average day rates were $49,419 USD, a decrease of 6% from the prior year due to fewer rig nets.

Carey: Also with planned activity increases it would be.

Carey: Closely monitoring costs associated with rig reactivation and mobilization is later this year as these costs may introduce some very big variability in reported daily cost in future periods.

Carey: Our goal will be to continue to drive down normalized operating costs throughout 2025.

Carey: Moving to Canada.

Carey: It's really an activity averaged 74 rigs an increase of one rig from Q1 2024.

Carey: Operating margins for the quarter were $14779 a decrease of $858 for Q1 2024 for.

Carey: For Q2, our daily operating margins are expected to be between 13000 514500.

Carey: Internationally precision as drilling activity in the quarter averaged eight rigs international average day rates were 49419, USD a decrease of 6% from the prior year due to fewer rig moves.

Carey Ford: International average day rates were 49,419 USD, a decrease of 6% from the prior year due to fewer rig moves. In our CMP segment, adjusted EBITDA this quarter was CAD 18 million, down 8% compared to the prior year quarter. Adjusted EBITDA was negatively impacted by a 10% decrease in well service hours, slightly offset by higher margins. Well abandonment work represented approximately 27% of well service operating hours in the quarter. Capital expenditures for the quarter were CAD 60 million, including CAD 20 million for upgrade and expansion and CAD 40 million for maintenance and infrastructure. Our full year 2025 capital plan has been reduced from CAD 225 million to CAD 200 million. It is comprised of CAD 158 million for sustaining and infrastructure and CAD 42 million for upgrade and expansion.

Carey Ford: In our C&P segment, Adjusted EBITDA this quarter was $18 million, down 8% compared to the prior year quarter. Adjusted EBITDA was negatively impacted by a 10% decrease in well service hours, slightly offset by higher margins. Well abandonment work represented approximately 27% of well service operating hours in the quarter. Capital expenditures for the quarter were $60 million, including $20 million for upgrade and expansion and $40 million for maintenance and infrastructure. Our full year 2025 capital plan has been reduced from $225 million to $200 million and is comprised of $158 million for sustaining infrastructure and $42 million for upgrade and expansion.

Carey: In our <unk> segment adjusted EBITDA this quarter was $18 million down 8% compared to the prior year quarter. Adjusted EBITDA was negatively impacted by a 10% decrease in well service hours slightly offset by higher margins.

Carey: Well abandonment work represented approximately 27% of well service operating hours in the quarter.

Carey: Capital expenditures for the quarter were $60 million, including $20 million for upgrade and expansion of $40 million for maintenance and infrastructure. Our full year 2025 capital plan has been reduced from $225 million to $200 million and is comprised of $158 million for sustaining and infrastructure and $42 million for upgrade and expansion.

Carey Ford: As of April 23rd, we had an average of 41 contracts in hand for the second quarter and an average of 38 contracts for the full year 2025. Moving to the balance sheet, our Q1 cash flow performance was better than expected, with neutral cash flow despite a quarter with working capital increases, semi-annual interest payments, and typical year-end payments. In fact, the $46 million decrease in cash from year-end was applied almost entirely to debt reduction of $17 million in share repurchases. share repurchases of $31 million in the quarter. As of March 31st, our long term debt position net of cash was approximately $778 million, and our total liquidity position was approximately $570 million, excluding letters of credit.

Carey: Okay.

Carey Ford: As of April 23rd, we had an average of 41 contracts in hand for Q2 and an average of 38 contracts for the full year 2025. Moving to the balance sheet, our Q1 cash flow performance was better than expected, with neutral cash flow despite a quarter with working capital increases, semiannual interest payments, and typical year-end payments. In fact, the CAD 46 million decrease in cash from year-end was applied almost entirely to debt reduction of CAD 17 million and share repurchases of CAD 31 million in the quarter. As of March 31st, our long-term debt position net of cash was approximately CAD 778 million, and our total liquidity position was approximately CAD 570 million, excluding letters of credit. Our net debt to trailing 12-month EBITDA ratio is approximately 1.5 times, and our average cost of debt is 6.9%.

Carey: As of April 23, we had an average of 41 contracts in hand for the second quarter at an average of 38 contracts for the full year 2025.

Carey: Moving to the balance sheet, our Q1 cash flow performance was better than expected with neutral cash flow, despite a quarter with working capital increases.

Carey: Annual interest payments and typical year end payments and.

Carey: In fact, the $46 million decrease in cash from year end was applied almost entirely to debt reduction of $70 million of share repurchase share repurchases a $31 million in the quarter.

Carey: As of March 31, our long term debt position net of cash was approximately $778 million and our total liquidity position was approximately $570 million excluding letters of credit.

Carey Ford: Our net debt to trailing 12 month EBITDA ratio is approximately 1.5 times and our average cost of debt is 6.9%. We expect our net debt to adjust EBITDA before share based compensation expense to continue to decline throughout the year. This quarter, on our balance sheet, we recognized the $230 million balance on our 2026 note as current debt. We plan to reduce this balance by at least $80 million in the last three quarters of the year with cash flow and cash on hand during the year and use our undrawn revolving credit facility to address the remaining balance.

Carey: Our net debt to trailing 12 month EBITDA ratio is approximately one five times and our average cost of debt is six 9%.

Carey Ford: We expect our net debt to adjust EBITDA before share-based compensation expense to continue to decline throughout the year. This quarter on our balance sheet, we recognized the CAD 230 million balance on our 2026 note as current debt. We plan to reduce this balance by at least CAD 80 million in the last three quarters of the year with cash flow and cash on hand during the year and use our undrawn revolving credit facility to address the remaining balance. Our plan to reduce our revolver balance continues significantly during 2026, where we expect to reduce the majority of the balance. Our revolving credit facility, as a reminder, matures in the middle of 2027. We are committed to reducing debt by CAD 700 million between 2022 and 2027 and achieving a normalized leverage level below 1x. Since 2022, we have reduced debt by CAD 452 million.

Carey: We expect our net debt to adjusted EBITDA before share based compensation expense.

Carey: <unk> to decline throughout the year.

Carey: This quarter on our balance sheet, we recognized a $230 million balance on our 2026 note is current that we.

Carey: We plan to reduce this balance by at least $80 million.

Carey: In the last three quarters of the year with cash flow and cash on hand during the year and use our undrawn revolving credit facility to address the remaining balance.

Carey Ford: Our plan to reduce our revolver balance continues significantly during 2026. where we expect to reduce the majority of the balance. A Revolving Cryo Facility, as a reminder, matures in the middle of 2027. We were committed to reducing debt by $700 million between 2022 and 2027, and achieving a normalized leverage level below one times. Since 2022, we have reduced debt by $452 million. Conveniently, the $248 million remaining on our target debt reduction nearly matches the remaining balance on a 2026 note. Our debt reduction target for 2025 is $100 million and we plan to allocate 35% to 45% of free cash flow before debt principal payments towards share repurchase.

Carey: Our plan to reduce our revolver balance continues significantly during 2026.

Carey: Where we expect to reduce the majority of the balance.

Carey: Our revolving credit facility as a reminder, matures in the middle of 2027.

Carey: We are committed to reducing debt by $700 million between 2022, and 2027 and achieving a normalized leverage level below one times since 2022, we have reduced debt by $452 million.

Carey Ford: Conveniently, the CAD 248 million remaining on our target debt reduction nearly matches the remaining balance on our 2026 notes. Our debt reduction target for 2025 is CAD 100 million, and we plan to allocate 35% to 45% of free cash flow before debt principal payments towards share repurchases. Moving on to guidance for 2025. Strong cash flow for the year, depreciation of approximately CAD 300 million, cash interest expense of approximately CAD 65 million. Cash taxes we expect to remain low, and our effective tax rate to be approximately 25% to 30%. We expect SG&A of approximately CAD 95 million before share-based compensation expense, and we expect share-based compensation charges for the year to range between CAD 15 million and 35 million at a share price range of CAD 60 to 100. The charge may increase or decrease based on share price performance and the performance of our shares relative to Precision's peer group.

Carey: Conveniently the $248 million remaining on our target debt reduction nearly matches the remaining balance of 2026 months.

Carey: Our debt reduction target for 2025, it's $100 million and we plan to allocate 35% to 45% of free cash flow before debt principal payments towards share repurchases.

Carey Ford: Moving on to guidance for 2025 strong cash flow for the year depreciation of approximately $300 million cash interest expense of approximately $65 million cash taxes, we expect to remain low and our effective tax rate to be approximately 25% to 30%. We expect SG&A of approximately $95 million before share based compensation expense. And we expect share based compensation charges for the year to range between $15 million and $35 million at a share price range of $60 to $100. And the charge may increase or decrease based on share price performance and the performance of our shares relative to Precision's peer group.

Carey: Moving on to guidance for 2025 strong cash flow for the year depreciation of approximately $300 million cash interest expense of approximately $65 million cash taxes, we expect to remain low and our effective tax rate to be approximately 25% to 30%.

Carey: We expect SG&A of approximately $95 million before share based compensation expense.

Carey: We expect share based compensation charges for the year to range between $15 million and $35 million at a share price range at $60 to $100 and the charge may increase or decrease based on share price performance and the performance.

Carey: Of our shares relative to precision peer group with.

Carey Ford: With that, I will turn the call over to Kevin. Thank you, Carey.

Carey Ford: With that, I will turn the call over to Kevin.

Kevin: With that I will turn the call over to Kevin.

Kevin Neveu: Thank you, Carey. Good morning, and thank you for joining our Q1 earnings call. I'll begin by saying that I'm feeling very good about our Q1 financial results and the momentum we're carrying into Q2. While macro events and economic uncertainty are somewhat obscuring forward visibility, I'm comforted that capital discipline across the upstream oil and gas industry has dampened the traditional knee-jerk reaction to commodity price volatility. Our customers in both the US and Canada are telling us that they are cautiously watching the macro events and the impact on oil prices while they remain optimistic about LNG and gas opportunities. While our customers are closely monitoring these trends, oil-targeted drilling plans remain largely unaffected by the current commodity price range, and our customer discussions regarding gas drilling opportunities continue to have a positive tone.

Kevin Neveu: Good morning, and thank you for joining our first quarter earnings call. So I'll begin by saying that I'm feeling very good about our first quarter financial results and the momentum we're carrying into the second quarter. While macro events in economic uncertainty are somewhat obscuring forward visibility, I'm comforted that capital discipline across the upstream oil and gas industry has dampened the traditional knee-jerk reaction to commodity price volatility. Our customers in both the United States and Canada are telling us that they are cautiously watching the macro events and the impact on oil prices, while they remain optimistic about LNG and gas opportunities.

Kevin: Thank you Gary Good morning, and thank you for joining our first quarter earnings call.

Kevin: So I'll begin by saying that I'm feeling very good about our first quarter financial results and the momentum we're carrying into the second quarter.

Kevin: While macro events as economic uncertainty are somewhat obscuring forward visibility I'm comforted that capital discipline across the upstream oil and gas industry has dampened the traditional knee jerk reaction to commodity price volatility.

Kevin: Our customers in both the United States, and Canada are telling us that they are cautiously watching the macro events and the impact of oil prices, while they remain optimistic about LNG gas opportunities.

Kevin Neveu: While our customers are closely monitoring these trends, oil-targeted drilling plans remain largely unaffected by the current commodity price range, and our customer discussions regarding gas drilling opportunities continue to have a positive tone. Now, as Carey mentioned, we've taken steps to tightly control aspects of our business and strictly manage our spending. And the organization is well focused on free cash flow while we remain poised and well positioned for any and all emerging opportunities. So beginning in Canada, after a strong winter, we're rolling into spring breakup period with our most active fleet in over a decade. Today we have 47 rigs operating that are essentially at the seasonal low in this mix.

Kevin: And while our customers are closely monitoring these trends oil targeted drilling plans remain largely unaffected by the current commodity price range.

Kevin: Customer discussions regarding gas drilling opportunities continue to have a positive tone.

Kevin Neveu: As Carey mentioned, we've taken steps to tightly control aspects of our business and strictly manage our spending, the organization is well focused on free cash flow while we remain poised and well-positioned for any and all emerging opportunities. Beginning in Canada, after a strong winter, we're rolling into spring breakup period with our most active fleet in over a decade. Today, we have 47 rigs operating that are essentially at the seasonal low. In this mix, we have 24 Super Triple and 23 Super Single running straight through breakup, about 10% above last year's level. We expect to begin adding rigs in the 1st week of May and should climb back up into the mid-60s by early July, in line or slightly ahead of last year's trend.

Kevin: As Terry mentioned, we've taken steps to tightly control.

Kevin: Aspects of our business and strictly manage our spending.

And the organizations are all focused on free cash flow, while we remain poised and well positioned for any and all emerging opportunities.

Kevin: So beginning in Canada. After a strong winter, we're rolling into spring breakup period with our most active fleet in over a decade.

Kevin: Today, we have 47 rigs operating that are essentially at the seasonal low in this mix.

Kevin Neveu: We have 24 super triples and 23 super singles running straight through breakup, about 10% above last year's level. We expect to begin adding rigs in the first week of May and should come climb back up into the mid 60s by early July in line or slightly ahead of last year's trend. The rig next will remain in the same proportions as this last winter, with approximately 40% of our rigs in the Monteney DuVernay Deep Basin drilling gas and condensate targets, and those should be relatively unaffected by any WTI volatility. I'll remind the listeners that for many of our customers, the condensate volumes these wells produce more than covers the drilling and completion costs, and the Canadian market remains short condensate.

Kevin: We have 24 Super triples, the 'twenty three super singles running straight through breakup about 10% above last year's level.

Kevin: We expect to begin adding rigs in the first week of May that should come climbed back up into the mid 60 by early July inline or slightly ahead of last year's trend.

Kevin Neveu: The rig mix will remain in the same proportions as this last winter, with approximately 40% of our rigs in the Montney, Duvernay, and Deep Basin drilling gas and condensate targets, and those should be relatively unaffected by any WTI volatility. I'll remind the listeners that for many of our customers, the condensate volumes these wells produce more than covers the drilling and completion costs, and the Canadian market remains short condensate. With LNG Canada's first shipments imminent and the potential for phase 2 approval later this year, we expect long-term stability in the Montney, with additional rigs likely required when the first phase is at full capacity early next year, and with further rig additions if phase 2 achieves FID. The balance of our Canadian activity will be almost all heavy oil-related, and that is Clearwater, Mannville, Martin Hills, SAGD, and conventional heavy oil.

Kevin: The rig mix will remain in the same proportions as this last winter with approximately 40% of our rigs in the Montney Duvernay deep basin drilling gas and condensate targets and those should be relatively unaffected by any WTO volatility.

Kevin: I'll remind the listeners that for many of our customers. The condensate volumes. These wells produce more than covers the drilling and completion costs.

Kevin: The Canadian market remains short condensate.

Kevin Neveu: With LNG Canada's first shipments imminent and the potential for Phase 2 approval later this year, we expect long-term stability in the Montagne, with additional rigs likely required when the first phase is at full capacity early next year, and with further rig additions if Phase 2 achieves FID. The balance of our Canadian activity will be almost all heavy oil related. And that is Clearwater, Manville, Martin Hills, SAG-D and conventional heavy oil. During the first quarter, we upgraded and reactivated an additional super single, increasing our fleet of 46 rigs available, with all of these committed for work through the summer and the fall.

Kevin: With LNG, Canada's first shipments dividend and the potential for phase II approval. Later this year, we expect long term stability in the montney with additional rigs lightly likely required when the first phase is up full capacity early next year and with further rig additions of phase III achieved F. I D.

Kevin: The balance of our Canadian activity will be almost all had the oil related and that is Clearwater Manville Marten Hills safety and conventional heavy oil.

Kevin Neveu: During the Q1, we upgraded and reactivated an additional Super Single, increasing our fleet of 46 rigs available, with all of these committed for work through the summer and the fall. We have two remaining Super Single cold stacked that are ready to reactivate. We believe there are several good opportunities which may lead to firing up these rigs before next winter. Despite the macro uncertainties, our Canadian customer base has learned to operate in a lean market with historically wider differentials, exercising capital discipline, and with operating efficiency as a prime strategy. They've been doing this for a decade. Our customers' balance sheets are in the best shape they've been in since the early 2000s. The Trans Mountain pipe has narrowed the oil differentials. Drilling and completion costs are tightly managed. Our customers are well-positioned to continue their programs through periods of market uncertainty.

Kevin: During the first quarter, we upgraded and reactivated and additional Super single, increasing our fleet of 46 rigs available with all of these committed for work through the summer in the fall.

Kevin Neveu: We have two remaining super singles cold stacked that are ready to reactivate. We believe there are several good opportunities which may lead to firing up these rigs before next winter. Despite the macro uncertainties, our Canadian customer base has learned to operate in a lean market with historically wider differentials. Exercising Capital Discipline with Operating Efficiency as a Prime Strategy. And they've been doing this for a decade. Our customers balance sheets are in the best shape they've been in since the early 2000s. The Trans Mountain pipe has narrowed the oil differentials. The drilling and completion costs are tightly managed and our customers are well positioned to continue their programs through periods of market uncertainty.

Kevin: We have two remaining Super singles Cold stacked that are ready to reactivate. We believe there are several good opportunities, which may lead to firing up these rigs before next winter.

Kevin: Despite the macro uncertainties, our Canadian customer base has learned to operate in a lean market with historically wider differentials.

Kevin: <unk> capital discipline with operating efficiency is a prime strategy.

Kevin: We're doing this for a decade.

Kevin: Our customers' balance sheets are in the best shape they have been in since the early two thousands.

Kevin: Trans Mountain pipe has narrowed the oil differentials of drilling and completion costs are tightly managed as our customers are well positioned to continue their programs through periods of market uncertainty.

Kevin Neveu: LNG Canada will be the first LNG export facility for Canada, and this new capacity will drive stable Monteney gas activity for a very long time. My enthusiasm for our Canadian segment is well-supported by these fundamentals, and I see a good runway for the next several years.

Kevin Neveu: LNG Canada will be the first LNG export facility for Canada. This new capacity will drive stable Montney gas activity for a very long time. My enthusiasm for our Canadian segment is well supported by these fundamentals, and I see a good runway for the next several years. Shifting gears for a moment, I'll discuss our Canadian well service segment, which is also experiencing strong, although slightly lower than expected customer demand. It seems that during Q1, our customers prioritized spending on drilling programs and perhaps held back a little on abandonments and delayed some prospective workovers. Despite the 10% reduction in activity this year versus last, RigMix was focused on higher margin projects and net cash flows were almost flat with last year.

Kevin: Now the G. Canada will be the first LNG export facility for Canada, and this new capacity will drive stable montney gas activity for a very long time.

Kevin: My enthusiasm for our Canadian segment is well supported by these fundamentals and I see a good runway for the next several years.

Kevin Neveu: So shifting gears for a moment, I'll discuss our Canadian Well Service segment, which is also experiencing strong, although slightly lower than expected customer demand. It seems that during the first quarter, our customers prioritized spending on drilling programs and perhaps held back a little on abandonments and delayed some prospective work over time. Despite the 10% reduction in activity this year versus last, RIGMIX was focused on higher margin projects and net cash flows were almost flat with last year. Our customers continue to give us indications that the activity this summer should be in line with last year, and we will have no problem responding with available rigs and crews.

Kevin: So shifting gears for a moment I will discuss our Canadian well service segment, which is also experiencing strong although slightly lower than expected customer demand.

Kevin: It seems that during the first quarter, our customers prioritize spending on drilling programs and perhaps held back a little on abandonments and delayed some perspective workovers. Despite.

Kevin: Despite the 10% reduction in activity this year versus last rig mix was focused on higher margin projects and net cash flows were almost flat with last year.

Kevin Neveu: Our customers continue to give us indications that the activity this summer should be in line with last year, and we will have no problem responding with available rigs and crews. Now, we mentioned in our press release that we've exited North Dakota, where we operated a fleet of 10 service rigs. We originally entered this market to provide services to Canadian customers operating in North America and North Dakota, and for several years, this business performed well. When our Canadian customers exited the market, we were left competing with local mom-and-pop service providers for highly price-sensitive customers. Although last year was a positive cash flow year for this segment, we did not achieve our targeted return on capital and we decided to exit the market. We are moving 6 of the rigs back to Canada and will sell the balance of the assets in the market.

Kevin: Our customers continue to give us indications this activity, but the activity. This summer should be in line with last year and we will have no problem responded with available rigs and crews.

Kevin Neveu: Now, we mentioned in our press release that we're exiting, that we've exited North Dakota, where we operated a fleet of 10 service rigs. We originally entered this market to provide services to Canadian customers operating in North America, in North Dakota. And for several years, this business performed well. When our Canadian customers exited the market, we were left competing with local mom and pop service providers for highly price sensitive customers. And although last year was a positive cash flow year for this segment, we did not achieve our targeted return on capital. We decided to exit the market.

Kevin: No we mentioned in our press release that we are exiting but that we've exited north Dakota, where we operated a fleet of 10 service rigs. We originally entered this market to provide services to Canadian customers operating in North America.

Kevin: North Dakota.

Kevin: For several years this business performed well.

Kevin: But our Canadian customers exited the market, we were less competing with local mom and pop service providers for highly price sensitive customers.

Kevin: Although last year was a positive cash flow year for this segment, we did not achieve our targeted return on capital we decided to exit the market.

Kevin Neveu: We are moving six of the rigs back to Canada and we'll sell the balance of the assets in the market.

Kevin: We are moving such of the rigs back to Canada will sell the balance of the assets in the market.

Kevin Neveu: In our U.S. drilling business, as Carey mentioned in his comments, we remain challenged by low utilization and subscale activity levels, with an average of 30 rigs operating in the first quarter. As mentioned in our press release and Carey's comments, we've restructured our U.S. sales and operations group to better focus on our customers' needs, their key performance metrics, and enhance our customer relationships. These changes included flattening the organization, eliminating several management positions, aligning sales, operations and technology with collaborative customer objectives, and streamlining decision making and internal communication chain. Early indications are that a restructured organization is working very well, as our current activity level is now 34 rigs, up from 30 in the first quarter.

Kevin Neveu: In our US drilling business, as Carey mentioned in his comments, we remain challenged by low utilization and subscale activity levels with an average of 30 rigs operating in Q1. As mentioned in our press release and in Carey's comments, we've restructured our US sales and operations group to better focus on our customers' needs, their key performance metrics, and enhance our customer relationships. These changes included flattening the organization, eliminating several management positions, aligning sales, operations, and technology with collaborative customer objectives, and streamlining decision-making and internal communication chain. Early indications are that our restructured organization is working very well as our current activity level is now 34 rigs, up from 30 in Q1. While contract churn will continue, we see a path to increase our US activity back to a level of appropriate scale.

Kevin: In our U S drilling business as Jerry mentioned in his comments, we remain challenged by low utilization and subscale activity levels with an average of 30 rigs operating in the first quarter.

Kevin: As mentioned in our press release and the Jerry's comments, we've restructured our U S sales and operations group to better focus on our customers' needs their key performance metrics and enhance our customer relationships.

Kevin: These changes included flattening the organization, eliminating several management positions aligning sales operations and technology with collaborative customer objectives, and streamlining decision, making and internal communication Jamie.

Kevin: Early indications are that are restructured our organization is working very well as our current activity level is now 34 rigs up from <unk> 30 in the first quarter.

Kevin Neveu: And while contract churn will continue, we see a path to increase our U.S. activity back to a level of appropriate scale. In my opening comments, I mentioned that our customers remain cautious regarding oil directed drilling, yet drilling plans remain in place. How we've seen this play out in one case is where a customer is indicating that our rigs will continue to operate through the year, but they will suspend completion activities for a period until they have more confidence in the oil price.

Kevin: And while contract churn will continue we see a path to increase our U S activity back to a level of appropriate scale.

Kevin Neveu: In my opening comments, I mentioned that our customers remain cautious regarding oil-directed drilling, yet drilling plans remain in place. How we've seen this play out in one case is where a customer is indicating that our rigs will continue to operate through the year, but they will suspend completion activities for a period until they have more confidence in the oil price. I remain cautiously optimistic that our Permian, our DJ, and South Texas activity will remain stable through the summer and into the fall. We continue to see a lot of interest in gas-directed drilling, both in the Haynesville and the Marcellus, and we currently expect to mobilize an additional ST-1500 rig to the Marcellus later this quarter. We continue to experience very active bidding activity in the Haynesville and expect rig activations later this quarter into the summer.

Kevin: In my opening comments I mentioned that our customers remain cautious regarding oil directed drilling <unk> drilling plans remain in place how.

Kevin: We've seen this play out in one case is where a customer is indicating that our rigs will continue to operate through the year, but they will suspend completion activities for a period until they have more confidence in the oil price.

Kevin Neveu: I remain cautiously optimistic that our Permian, our DJ, and South Texas activity will remain stable through the summer and into the fall. Now, we continue to see a lot of interest in gas directed drilling, both in the Haynesville and the Marcellus, and we currently expect to mobilize an additional ST1500 rig to the Marcellus later this quarter. Now we continue to experience very active bidding activity in the Hainesville and expect really activations later this quarter into the summer. With 10 precision super triple rigs stacked near Houghton, Louisiana, we believe we are very well positioned as our customers begin to pick up more rigs.

Kevin: I remain cautiously optimistic that our Permian DJ and South Texas activity will remain stable through the summer into the fall.

Kevin: Now we continue to see a lot of interest in gas directed drilling both in the Haynesville and the Marcellus and we currently expect to mobilize and additional ft 500 rig to the Marcellus later this quarter.

Kevin: Now we continue to experience <unk>.

Kevin: Active bidding activity in the Haynesville and expect rig Activations later this quarter into the summer.

Kevin Neveu: With 10 Precision Super Triple rigs stacked near Houma, Louisiana, we believe we are very well positioned as our customers begin to pick up more rigs. Regarding leading-edge pricing, with customer demand firm and rig supply tight in the gas basins, we are seeing stronger pricing in the Haynesville and Appalachia than in the Permian, where contract churn is prevalent and most of the price competition seems to be focused. I'll also add the customer interest in plans in these gas plays seems to be relatively unaffected by the macro uncertainties pressing on commodity prices. Now, turning to our international business. In Kuwait, we continue to operate 5 rigs. Precision Rig 906, which was due to expire during the Q3, has been extended and will continue to work through the end of this year. We believe that it'll either be extended further or recontracted after that.

Kevin: With 10 precision Super Triple rigs stacked in your heart and Louisiana. We believe we are very well positioned as our customers begin to pick up more rigs.

Kevin Neveu: Regarding leading-edge pricing, with customer demand firm and rig supply tight in the gas basins, we are seeing stronger pricing in the Haynesville and Appalachia than in the Permian, where contract sharing is prevalent, and most of the price competition seems to be focused. I'll also add the customer interest and plans in these gas plays seems to be relatively unaffected by the macro uncertainties pressing on commodity prices.

Kevin: Regarding leading edge pricing with customer demand firm and rig supply tight in the gas basins, we are seeing stronger pricing in the haynesville in Appalachia and in the Permian where contract churn is prevalent in most of the price competition seems to be focused.

Kevin: I'll also add the customer interest in plans in these gas place seems to be relatively unaffected by the macro uncertainties pressing on commodity prices.

Kevin Neveu: Now turning to international business. In Kuwait, we continue to operate five rigs. Precision Rig 906, which was due to expire during the third quarter, has been extended and will continue to work through the end of this year. We believe that will either be extended further or recontracted after that. The remaining four rigs in Kuwait are contracted well into 2028. We have one idle rig in Kuwait that we continue to bid for projects in Kuwait and other areas in the region. However, contract awards have slowed and we do not expect this rig to be contracted this year.

Kevin: Now turning to our international business.

Kevin: In Kuwait, we continue to operate five rigs.

Kevin: Precision rig 906, which was due to expire during the third quarter has been extended and we will continue to work through the end of this year.

Kevin: We believe that will either be extended further or re contracted after that the remaining four rigs in Kuwait are contracted well into 2028.

Kevin Neveu: The remaining 4 rigs in Kuwait are contracted well into 2028. We have 1 idle rig in Kuwait that we continue to bid for projects in Kuwait and other areas in the region. However, contract awards have slowed, and we do not expect this rig to be contracted this year. In Saudi Arabia, we are currently operating 3 rigs, but we have received a suspension notice for 1 rig, which will take effect in May and reduce our activity for 2 rigs, likely for the balance of this year. We have no indications from our customer that either of the 2 remaining rigs will be affected, and they should continue working for the balance of the year. Turning back to our planned reduction in capital spending, as Carey mentioned, we reduced our capital spending from CAD 225 million down to CAD 200 million.

Kevin: We have one idle rig in Kuwait that we continue to bid for projects in Kuwait and other areas in the region. However contract awards have slowed and we do not expect this rig to be contracted this year.

Kevin Neveu: In Saudi Arabia, we are currently operating three rigs. But we have received a suspension notice for one rig, which will take effect in May, and reduce our activity for two rigs, likely for the balance of this year. Now, we have no indications for our customer that either of the two remaining rigs will be affected, and they should continue working for the balance of the year.

Kevin: In Saudi Arabia, we are currently operating three rigs but.

Kevin: But we have received a suspension notice for one rig which will take effect in mid and producer activity for two rigs likely for the balance of this year.

Kevin: Now we have no indications from a customer that either of the two remaining rigs will be affected and they should continue working for the balance of the year.

Kevin Neveu: So turning back to our planned reduction in capital spending, as Terry mentioned, we reduced our capital spending from $225 million down to $200 million. Let me break this down to $8 million reduction in Upgrade capital in a $17 million reduction in our maintenance or sustaining capital. So first on the sustaining capital reduction, I'll point out that we usually take advantage of year-end vendor discounts and pre-buy drill pipe and other rig components for the coming year. We did that in 2023, we did that again in 2024, and in our 2025 budget, we anticipated a similar year-end investment.

Kevin: Yes.

Kevin: So turning back to our planned reduction in capital spending as Terry mentioned, we reduced our capital spending from $225 million down to $200 million.

Kevin Neveu: Let me break this down to a CAD 8 million reduction in upgrade capital and a CAD 17 million reduction in our maintenance or sustaining capital. First, on the sustaining capital reduction, I'll point out that we usually take advantage of year-end vendor discounts and pre-buy drill pipe and other rig components for the coming year. We did that in 2023, we did that again in 2024, and in our 2025 budget, we anticipated a similar year-end investment. At this point, we've removed that from our budget and comment that the remaining CAD 158 million is in line with our initial activity estimates for the year. Regarding the CAD 8 million reduction in upgrade capital, this was a budgeted placeholder for unidentified projects, primarily in the United States and international markets.

Kevin: Let me break this down to $8 million reduction in.

Kevin: Create capital and $17 million reduction in our maintenance or sustaining capital.

Kevin: So first on the sustaining capital reduction I'll point out that we usually take advantage of year end vendor discounts and pre buy drill pipe and other rig components for the coming year. We did that in 2022, three we did that again in 2024 and in our 2025 budget, we anticipated a similar year end investment.

Kevin Neveu: At this point, we will remove that from our budget and comment that the remaining $158 million is in line with our initial activity estimates for the year. Regarding the $8 million reduction in upgrade capital, this was a budgeted placeholder for unidentified projects primarily in the United States and international markets. Should either of these markets rebound in 2025, we'll consider additional upgrade spending, but only if the financial returns and contract terms meet our financial threshold.

Kevin: At this point.

Kevin: We removed that from our budget and comment that the remaining $158 million is in line with our initial activity estimates for the year.

Kevin: Regarding the $8 million reduction in upgrade capital. This was a budgeted placeholder for unidentified projects, primarily in United States and international markets.

Kevin Neveu: Should either of these markets rebound in 2025, we'll consider additional upgrade spending, but only if the financial returns and contract terms meet our financial thresholds. Now regarding the steps we are taking to reduce our fixed costs and restructure our US operations team. These are very difficult steps for the Precision organization and certainly we will miss the dedicated folks who are no longer on our team, and I thank them for their many contributions. That said, we believe it's essential to be sized and organized for the market that we see. It's also a key component of our core strategy to have tight control over every element of our business and our hand on every lever we control.

Kevin: Should either of these markets rebound in 2025, we will consider additional upgrade spending but only if the financial returns and contract terms meet our financial thresholds.

Kevin Neveu: Now regarding the steps we are taking to reduce our fixed costs and restructure our U.S. operations team. These are very difficult steps for the precision organization, and certainly we will miss the dedicated folks who are no longer on our team, and I thank them for their many contributions. That said, we believe it's essential to be sized and organized with a market that we see. It's also a key component of our core strategy to have tight control over every element of our business and our hand on every level we control. This gives me confidence that we'll continue to deliver on our three strategic objectives, despite whatever macro events impact our industry.

Kevin: Now regarding the steps, we are taking to reduce our fixed cost to restructure our U S operations team.

Kevin: These are very difficult steps for the precision organization and certainly we will miss the dedicated folks who are no longer on our team.

Kevin: <unk> them for their many contributions.

Kevin: That said, we believe it's essential to be sized and organized with a market that we see.

Kevin: It's also a key component of our core strategy to have tight control over every element of our business and our hand on every lever we control.

Kevin Neveu: This gives me confidence that we'll continue to deliver on our 3 strategic objectives despite whatever macro events impact our industry. We'll continue to provide high value, high performance services to our customers and remain well-positioned for any market opportunities we uncover. I'll conclude by thanking the employees of Precision for their dedication, their loyalty, and hard work, and the strong safety, operational, financial results our team continues to deliver. With that, I'll now turn the call back to the operator for questions.

Kevin: This gives me confidence that we'll continue to deliver on our three strategic objectives, despite whatever macro events impact our industry.

Kevin Neveu: We'll continue to provide high value, high performance services to our customers and remain well positioned for any market opportunities we uncover.

Kevin: We'll continue to provide high value high performance services to our customers.

Kevin: We remain well positioned for any market opportunities we uncover.

Kevin Neveu: So I'll conclude by thanking the employees of Precision for the dedication, their loyalty and the hard work and the strong safety operational financial results our team continues to deliver.

Kevin: So I'll conclude by thanking the employees of precision for their dedication their loyalty and hard work and a strong safety operational financial results. Our team continues to deliver.

Unknown Attendee: With that, I'll now turn the call back to the operator for questions. Thank you, ladies and gentlemen.

Kevin: With that I'll now turn the call back to the operator for questions.

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

Kevin: Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered you were seeing with yourself from the queue. Please press star one again.

Unknown Attendee: If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star 11 again.

Unknown Attendee: We'll pause for a moment while we compile our Q&A roster.

Kevin: We will pause for a moment, while we compile the Q&A roster.

Kevin: Okay.

Aaron MacNeil: Our first question comes from Aaron MacNeil with TD Cowen, your line is open. Hey, everyone, thanks for taking my questions. Kevin, you spoke to the restructuring of the U.S. sales and operations team, that operations are subscale. You know, some of your peers. I know you're comfortable with the We appreciate that you've got visibility.

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

Aaron MacNeil: Hey, everyone. Thanks for taking my questions. Kevin, you spoke to the restructuring of the US sales and operations team, that operations are subscale. Some of your peers have moved to a performance model. You've stuck with the day rate model. I know you're comfortable with the operational performance of your rigs, just given all the investments you've made in automation. I can also appreciate that you've got visibility to adding rigs. Maybe this is off the mark, but I guess I'm just curious to hear what your prevailing view is on the performance model versus the day rate model, and if you think the reluctance to move to a performance model is a headwind.

Aaron MacNeil: Everyone. Thanks for taking my questions.

Kevin: Kevin you spoke to the restructuring of the U S sales and operations team.

Aaron MacNeil: Operations are sub scale.

Speaker Change: Some of your peers have moved to a performance model you're stuck with the day rate model.

Speaker Change: No you are comfortable with the operational performance of your rigs just given all the investments you've made in automation I can also appreciate that you've got visibility to adding rigs. So maybe this is off the mark but I guess I'm just curious to hear what you are prevailing view is on that.

Kevin Neveu: Unknown Attendee, James Kubik, Keith MacKey, Aaron MacNeil, Lavonne Zdunich, Sean Mitchell, Aaron, great question. And I didn't give a lot of guidance to our contract structure in the US right now. I would tell you that I still I still like the a la carte style of base rate for the rig plus add on prices. It gives us lots of room to kind of enhance our margins. But I comment that we do have right now I think about a third of our US rigs are operating under some form of performance contract, where we receive an incentive to offer our customers better performance.

Speaker Change: Performance model versus the day rate model and if you think the real.

Speaker Change: Elected to move to a performance model as a headwind.

Kevin Neveu: Aaron, great question, and I didn't give a lot of guidance to our contract structure in the US right now. I would tell you that I still like the à la carte style of base rate for the rig, plus add-on prices. It gives us lots of room to enhance our margins. I comment that we do have right now, I think, about a third of our US rigs are operating under some form of performance contract where we receive an incentive to offer our customers better performance. The performance could be related to move times, could be related to drilling performance, or even fuel consumption. I feel good about how we're being rewarded for any enhancements we can provide our customers for better performance right now.

Speaker Change: Erin.

Speaker Change: Great question, and I didn't give a lot of guidance to our contract structure in the U S. Right now I would tell you that I still I still like the.

Speaker Change: Ala Carte style of base rate for the rig plus add on prices. It gives us lots of room.

Speaker Change: To kind of enhance our margins, but I comment that we do have right now I think about a third of our U S rigs are operating under some form of performance contract, where we receive an incentive to offer our customers better performance the performance could be could.

Kevin Neveu: The performance could be could be related to move times could be related to drilling performance or even fuel consumption. So I feel good about how we're being rewarded for any enhancements we can provide our customers for better performance right now. I don't think it's going to permeate across our entire fleet, but we're certainly open to the idea of, you know, having rewards linked to things we can control and deliver better performance. And I know I was oversimplifying there, but thanks for that.

Speaker Change: Could be related to move times could be related to drilling performance or even fuel consumption. So I feel good about.

Speaker Change: How we are being rewarded for any enhancements, we can provide our customers for better performance right now.

Kevin Neveu: I don't think it's going to permeate across our entire fleet, but we're certainly open to the idea of having rewards linked to things we can control and deliver better performance.

Speaker Change: I don't think its going to permeate across our entire fleet, but we're certainly open to the idea of.

Speaker Change: Having rewards linked to things, we can control and deliver better performance.

Aaron MacNeil: Okay. I know I was oversimplifying there, but thanks for that. I'm not sure if the next one's for Kevin or Carey, but both of you have done an admirable job of fixing the balance sheet over many, many years and have much better insights into the business from the inside than we do from the outside. I guess with all that in mind, what's the rationale to continue to pay down debt here instead of maybe focusing more free cash flow on meaningfully buying back the stock?

Speaker Change: Okay, and I know it was im oversimplifying there thanks for that.

Unknown Attendee: I'm not sure. has done an admirable job. better insights into the business from the inside.

Speaker Change: I'm not sure if the next one is for Kevin or carry but.

Speaker Change: Some of you have done an admirable job of fixing the balance sheet over many many years.

Speaker Change: Much better insights into the business from the inside than we do from the outside so I guess with all that in mind.

Kevin Neveu: I guess with all that in mind, you know, what's the rationale? Yeah, Aaron, I mean, I think part of the success we've had is just a commitment to, to de-lever, we set out targets every year, and we stick to them. And so, you know, we have investors all the time, asking us to adjust one way or the other. And we think that planning this capital structure for the long term, with annual commitments is going to generate the most success for shareholders. So I think for this year, we're sticking with our guidance of $100 million of debt reduction, and allocating maybe a little bit less than that to to share repurchases.

Speaker Change: The rationale to continue to pay down debt here instead of maybe focusing more free cash flow on meaningfully buying back the stock.

Carey Ford: Yeah, Aaron, I think part of the success we've had is just a commitment to de-lever. We set out targets every year, and we stick to them. We have investors all the time asking us to adjust one way or the other. We think that planning this capital structure for the long term with annual commitments is going to generate the most success for our shareholders. I think for this year, we're sticking with our guidance of CAD 100 million of debt reduction and allocating maybe a little bit less than that to share repurchases. We want to get to the 1 times level. We've got a really good capital structure in place with a lot of liquidity and termed out debt that's at good coupons. We've made a commitment to get to below 1 times, and we're going to stick with it.

Speaker Change: Yes, Erin I mean, I think part of the success. We've had is just a commitment to delever, we set out targets every year and we stick to them and so we have <unk>.

Speaker Change: Investors all the time.

Speaker Change: As to adjust one way or the other and we think that planning this capital structure for the long term with annual commitments is going to generate the most success for our shareholders. So I think for this year, we're sticking with our guidance of a $100 million of debt reduction and you're allocating it maybe a little bit less than that two to share repurchases.

Kevin Neveu: And we want to get to the one times level. I mean, we've got a we've got a really good capital structure in place with a lot of liquidity and termed out debt that's at good coupons. But we've made a commitment to get to below one times and we're going to stick with it.

Speaker Change: And we want to get to the one times level I mean, we've got a we've got a really good capital structure in place with a lot of liquidity and turned out that that's it good coupons.

Speaker Change: But we've been made a commitment to get to below one times and we're going to stick with it.

Carey Ford: Aaron, I'll add to that. I don't think one's a magic number, but I do think that between a combination of being low leverage and having kind of long-term maturities, it gives us more confidence to weather through periods of uncertainty and also focus on maximizing liquidity so that we can fund the business when it rebounds after these periods of uncertainty. So I feel good about our direction right now. You might notice that during the first quarter, we actually applied a little more cash to share repurchases than debt reduction. You know, I think we'll try to be intelligent with how we apply capital, but we'll stay in line with the guidelines we put forward.

Aaron MacNeil: Fair enough. Head down.

Kevin Neveu: Fair enough. I'll add to that. I don't think one's a magic number, but I do think that between a combination of being low leverage and having long-term maturities, it gives us more confidence to weather through periods of uncertainty and also focus on maximizing liquidity so that we can fund the business when it rebounds after these periods of uncertainty. I feel good about our direction right now. You might notice that during the Q1, we actually applied a little more cash to share repurchases than debt reduction. I think we'll try to be intelligent with how we apply capital, but we'll stay inside the guidelines we put forward.

Speaker Change: Fair enough fair enough.

Speaker Change: I'll add to that I don't think I don't think one's a magic number, but I do think that between a combination of being low leverage and having a long term maturity as it gives us more confidence to weather through periods of uncertainty.

Speaker Change: And also focus on.

Speaker Change: Maximize liquidity, so that we can fund the business when it rebounds after.

Speaker Change: These periods of uncertainty so I feel good about our direction right now.

Speaker Change: You might notice that during the first quarter, we actually apply it a little more cash to share repurchases and debt reduction.

Speaker Change: I think we will we will try to be intelligent with how we apply capital, but we'll stay on lifestyles. The guidelines we put forward.

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

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

Speaker Change: Understood. Thanks, guys I'll turn it back.

Kevin Neveu: Thank you.

Thank you.

Keith Mackey: Our next question comes from Keith MacKey with RBC Capital Markets. Point of clarification to start out. Technically, does that mean you end up with more excess free cash flow or are you anticipating that? Yeah, Keith, I would just say that we are fully confident that we're going to meet our meet our capital allocation guidance, whether the capital expenditures were 225 or 200 million, but that that meaning that guidance was not a driver for reducing capital. I think it's just running all of our cash outflows as tightly as we can, whether that's operating costs or capital expenditures.

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

Speaker Change: Next question comes from Keith <unk> with RBC capital markets. Your line is open.

Keith MacKey: Hey, good morning. Just a point of clarification to start out. The CAD 25 million capital reduction, I understand what that's all for. Technically, does that mean you end up with more excess free cash flow, or are you anticipating that you're going to see a decrease in cash from operations, and this is a way to even it out? Are you ultimately expecting to have more free cash flow from spending less capital?

Speaker Change: Hey, good morning.

Speaker Change: Just a point of clarification to start out so the $25 million capital reduction I understand what that is all for.

Speaker Change: But technically does that mean, you end up with more excess free cash flow or are you anticipating that you're going to see a decrease in cash from operations and this is a.

Speaker Change: To even it out or are you ultimately expect to have more free cash flow for spending less capital.

Carey Ford: Yeah. Keith, I would just say that we are fully confident that we're going to meet our capital allocation guidance, whether the capital expenditures were CAD 225 million or CAD 200 million. Meeting that guidance was not a driver for reducing capital. I think it's just running all of our cash outflows as tightly as we can, whether that's operating cost or capital expenditures. That's what we're doing.

Speaker Change: Yes, Keith I would just say that we are fully confident that we're going to meet our.

Speaker Change: Meet our capital allocation guidance, whether the capital expenditures were 125 or $200 million fat that mean.

Speaker Change: Meaning that guidance.

Speaker Change: It was not a driver for reducing capital I think it's just.

Speaker Change: Running all of our cash outflows as tightly as we can whether that's operating cost or capital expenditures.

Carey Ford: That's what that's what we're doing.

Speaker Change: That's what we're doing.

Keith MacKey: Yeah, understood. Just on the changes you've made in the US, Carey, the normalized day margin for Q2 is a little bit lower than what we had in our model. Not saying our model is the one that's correct, but nevertheless, you've made some changes in the US, and yet we see margins below where we would have had them before these changes. Can you just walk us through a little bit more about the impact of the changes you've made and how you see that flowing through margins in Q2 and beyond?

Speaker Change: Yeah understood and just on the changes you've made in the U S. Kerry.

Carey Ford: Based on the changes you've made in the U.S., Carey? A normalized day margin for Q2 is a little bit lower than what we had in our model, not saying our model is one that's correct. Nevertheless, you've made some changes in the U.S. for these changes. So can you just walk us through a little bit more about the impact? made and how you see that flowing. Yeah, so the margins on balance will reduce our fixed cost, our overall fixed cost, and then our fixed cost per day will be a function of the total fixed cost and activity.

Speaker Change: The the day normalized daily margin for Q2 is a little bit lower than what we had in our model not not saying her model is one that's correct, but nevertheless, you have made some changes in the U S and yet we see margins below where we would have had them before these changes. So can you just walk us through a little bit more about the impact of that.

Speaker Change: Changes, you've made and how you see that flowing through margins in Q2 and beyond.

Carey Ford: Yeah. The margins on balance will reduce our fixed cost, our overall fixed cost, and then our fixed cost per day will be a function of the total fixed cost and activity. As we add more rigs, that fixed cost per day will go down and margins should go up based on the lower fixed cost per day. There are going to be, as I mentioned in my comments, there's going to be a little bit of noise in those margins as we increase the number of rigs running with rig mobilizations or rig reactivations that come up when you don't have a steadier rig count. I think as we are adding rigs throughout the year, we're going to see some bumps on the operating costs.

Speaker Change: Yeah. So the the margins on balance will reduce our fixed cost our overall fixed cost and then our fixed cost per day per day will be a function of the total fixed costs and activities. So as as we add more rigs that fixed cost per day will go down and margins should go up based on the lower fixed cost.

Carey Ford: So as we add more rigs, that fixed cost per day will go down and margins should go up based on the lower fixed cost per day. But there are going to be, as I mentioned in my comments, there's going to be a little bit of noise in those margins as we as we increase the number of rigs running with rig mobilizations and rig reactivations that, you know, kind of come up when you don't have a steadier rig count. And so I think as we are adding rigs throughout the year, we're going to see kind of some bumps on the operating cost.

Speaker Change: Per day, but there are going to be as I mentioned in.

Speaker Change: In my comments theres going to be a little bit of noise in those margins as we as we increase the number of rigs running with rig mobilizations in rig reactivation.

Speaker Change: Ed.

<unk> kind of come up when you don't have a steadier rig count and so I think as we are adding rigs throughout the year, we're going to see kind of some bumps on the operating cost, but when we get to as Kevin said in a kind of an appropriate scale level yield efficiency those margins continue to go up.

Carey Ford: But when we get to, as Kevin said, kind of an appropriate scale level, you should see those margins continue to go up.

Carey Ford: When we get to, as Kevin said, in a kind of an appropriate scale level, you should see those margins continue to go up.

Keith MacKey: Okay. Got it.

Carey Ford: Keith, I'll add to that. My comments included the mention of a likely rig mobilization from Texas to the Marcellus. That's obviously covered by the contract value, but it's lumpy. We pay for that move up front and recover it through the contract.

Kevin Neveu: Keith MacKey, I'll add to that. My comments included the mention of a likely rig mobilization from Texas to the Marcellus. That's obviously covered by the contract value, but it's lumpy. We pay for that move upfront and then recover it through the contract.

Speaker Change: Okay got it Keith I'll add to that and I did my comments included the mention of a likely rig mobilization from from Texas to the Marcellus.

Speaker Change: That's obviously covered by contract value, but it's lumpy with pizza that move upfront and to recover to the contract.

Keith MacKey: Got it. Maybe just to follow up on that a little bit. You're doing some rig reactivations based on natural gas basin demand. Sounds like there could be a couple there. There's also a lot of uncertainty on the oil front. Just what really gives you the confidence to be able to activate new rigs for gas basins instead of just looking to see if you have some spare rigs, spare hot rigs from oil basins that you could just move over? Is it really just not realistic to work it that way?

Speaker Change: Got it got it.

Unknown Attendee: Maybe just to follow up on that a little bit.

Speaker Change: Maybe just to follow up on that a little bit.

Speaker Change: So youre doing some rig reactivation is based on natural gas based on demand it sounds like there could be a couple there.

Unknown Attendee: doing some rig reactivations based on natural gas.

Unknown Attendee: There's also a lot of uncertainty on the What really gives you the confidence to be able to act? So we will always make the decision that has the minimum cash impact and utilize the closest best available range.

Speaker Change: But theres also a lot of uncertainty on the oil front. So just.

What really gives you the confidence to be able to activate new rigs for gas basins. Instead of just kind of looking to see if you have some spare rigs spare hot rigs from oil basins that you could just move over or is it really just not realistic to work it that way.

Kevin Neveu: Well, no, actually, it's exactly what we're doing. If the rig is moving to the Marcellus, likely we have a rig move tied to that we'll be recovering in the contract, but we still have to pay for that rig move upfront. In the Haynesville, if you noticed my comments, I think we have 9 idle rigs in the Haynesville, are not active right now. It is less expensive to activate those rigs than mobilize rigs from their idle in, or they may even be hot in the Permian back to the Haynesville.

Speaker Change: No no actually it's <unk>.

Actually what we're doing but if the rig is moving to the Marcellus likely we have a rig move tied to that that will be recovering in the contract, but we still have to pay for that rig move upfront in the haynesville. If you've noticed my comments I think we have nine idle rigs in the Haynesville are not active right now it is less expensive to activate those rigs.

Speaker Change: Otherwise rigs from.

Speaker Change: They are idle.

Speaker Change: There may even be hot in the Permian back to the Haynesville.

Keith MacKey: Okay. Got it. Thanks for that. I'll turn it back.

Speaker Change: Okay got it thanks for that I'll turn it but we will always make the decision that has the minimum cash impact and utilize the closest best available rig.

Kevin Neveu: We'll always make the decision that has the minimum cash impact and utilize the closest, best available rig.

Keith MacKey: Thank you.

Speaker Change: Thank you.

Operator: Our next question comes from.

Kevin Neveu: Thanks, Keith.

Speaker Change: Our next question. Thank you sorry about that our next question comes from Waqar Syed with ATV capital markets. Your line is open.

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

Waqar Syed: Our next question comes from Waqar Syed with ATV Capital Markets. Thank you for taking my question.

Waqar Syed: Thank you for taking my question. Kevin, Carey, is there a rule of thumb that we can use for rig mobilization or rig reactivation costs for rig pickup in the Haynesville and Appalachian?

Waqar Syed: Thank you for taking my question.

Waqar Syed: Kevin, Carey, is there a rule of thumb that we can use for rig mobilization or rig reactivation costs for rig pickup in the Haynesville and Appalachia? It depends on which we're picking up and when it's happening. But it's typically between $500,000 and a million dollars to either reactivate or remobilize a rig, something in that range.

Speaker Change: Kevin Kerry.

Kevin Kerry: Is there a rule of thumb that we can use for a rig mobilization of rig reactivation costs.

Speaker Change: Four of our rig.

Speaker Change: The pickup in the Haynesville in Appalachia.

Kevin Neveu: It depends on which rig you're picking up and when it's happening, but it's typically between CAD 500,000 and CAD 1 million to either reactivate or remobilize a rig, something in that range.

Speaker Change: It depends on which rig are picking up or when it's happening, but it's typically between 500000 net $1 million to either reactivated re mobilizing rigs something in that range.

Waqar Syed: Yeah. Are you seeing that?

Carey Ford: Unknown Speaker And are you seeing that... Unknown Speaker It's just a pure reactivation. To give you a little more clarity, you know, those rigs in the Haines have been down now for approaching two years. So if we reactivate a rig, we have to change the fluids, change some of the rubber products. That's probably something in the $500,000 range. If we're moving an active rig, the mobilization cost will be more than that, but the rig doesn't require that startup cost. It doesn't, it feels that, you know, if a rig is done for two years, a half a million or a million dollar reactivation cost may be at the lower end.

Speaker Change: Yeah and.

Kevin Neveu: To give you a little more clarity, those rigs in the Haynesville have been down now for approaching two years. If we reactivate a rig, we have to change the fluids, change some of the rubber products. That's probably something in the CAD 500,000 range. If we're moving an active rig, the mobilization cost will be more than that, but the rig doesn't require that startup cost.

Speaker Change: Are you seeing just adhere reactivation.

Speaker Change: To give you a little more clarity on those rigs in the Haynesville been down now for approaching two years. So if we reactivated rig we have to change the fluids changed some of the rubber products, that's probably something in the $500000 range, if removing inactive rig mobilization cost.

Speaker Change: We'll be more than that but the rig doesn't require that startup cost.

Waqar Syed: It feels that, if a rig is down for 2 years, a half a million or a million-dollar reactivation cost may be at the lower end. Are you comfortable with those numbers?

Speaker Change: It doesn't it seems that we have today.

Greg has done for two years or half a million a million dollars of reactivation cost may be at the lower end.

Carey Ford: Are you comfortable with those numbers? Yeah, we are. It really is just rubber products. I mean, what the industry often does, when it's been down for a long time is not, not us specifically, the industry will sometimes take drill pipe off a rig and borrow some spare parts off the rig. So reactivation costs can be higher. If you're backfilling borrowed drill pipe or backfilling spare parts on the rig. I don't expect we'll have much of that.

Speaker Change: Are you comfortable with those numbers.

Kevin Neveu: Yeah, we are. It really is just rubber products. What the industry often does when it's been down for a long time is, not us specifically, the industry will sometimes take drill pipe off a rig and borrow some spare parts off the rig. Reactivation costs can be higher if you're backfilling borrowed drill pipe or backfilling spare parts on the rig. I don't expect we'll have much of that.

Speaker Change: Yes, we are.

Speaker Change: It really is just driver products.

Speaker Change: But the industry often does when it's been down for a long time this is not.

Speaker Change: Specifically the industry will sometimes take drill pipe off of rig and borrow some spare parts off the rigs so reactivation costs could be higher if youre back filling borrow drill pipe or backfill a spare parts on the rig.

Speaker Change: I don't expect we'll have much of that.

Waqar Syed: Okay. What's the impact on your CapEx and maybe also on OpEx of these tariffs, both in the US and Canada?

Speaker Change: Okay and.

Waqar Syed: And what's the impact on your CAPEX and maybe also on OPEX of these tariffs? both in the U.S. and Canada.

Speaker Change: And what's the impact on your Capex and maybe also on Opex us these tariffs.

Speaker Change: Both in the U S and Canada.

Carey Ford: Waqar, could you repeat that question? So the impact on your capital budget as well as on your operating costs of these tariffs and counter tariffs. Oh, tariffs. Okay, sorry, I'm just missing that one word there. You know, the big part for the big impact for drilling contractors is on drill pipe. That's the kind of the highest dollar consumable item. So there's going to be a little bit of impact on on new drill pipe that we purchased. I mean, if you've been following our story for the past couple of years, we've gotten well ahead of drill pipe needs in bulk purchases.

Carey Ford: Waqar, could you repeat that question?

Waqar Syed: Waqar could you repeat that question.

Waqar Syed: The impact on your capital budget as well as on your operating costs of these tariffs and counter-tariffs.

Speaker Change: So the impact on the capital budget as well as on your operating cost of these tariffs and counter tariffs.

Carey Ford: Oh, tariffs. Okay, sorry, I was just missing that one word there. The big impact for drilling contractors is on drill pipe. That's the highest dollar consumable item. There's going to be a little bit of impact on new drill pipe that we purchase. If you've been following our story for the past couple of years.

Waqar Syed: Oh tariffs, okay, sorry, I was just missing that one where they are.

Waqar Syed: The big part for the big impact for drilling contractors is on drill pipe.

Waqar Syed: The kind of the highest dollar consumable item, so theres going to be a little bit of impact on new drill pipe that we purchase I mean, if you've been following our story for the past couple of years, we've gotten well ahead of drill.

Waqar Syed: Yeah

Carey Ford: drill pipe needs in bulk purchases. I think there will be a little bit of increased cost on drill pipe. Drill pipe prices, regardless of tariffs, move around quite a bit. I think even with tariffs, drill pipe wouldn't be as expensive as it was a couple of years ago. I think it's a cost that we're going to be able to manage. Aside from drill pipe, we have some tariff exposure on consumable parts, but we have alternate supply sources and alternate domestic supply sources. We don't anticipate a big problem on either equipment deliveries or cost. I think we're a bit fortunate as drilling contractors in that we're running machines that are already in place, and the cost is really just repair and maintaining them and then paying the people to run them.

Waqar Syed: Drill pipe.

Waqar Syed: And bulk purchases.

Carey Ford: But I think, you know, there will be a little bit of increased cost on drill pipe, drill pipe prices, Regardless of tariffs move around quite a bit. And I think even with tariffs, drill pipe wouldn't be as expensive as it was a couple of years ago. So I think it's a cost we're gonna be able to manage. Absent or aside from drill pipe, we have some tariff exposure on consumable parts, but we have alternate supply sources. in alternate domestic supply sources. We don't anticipate a big problem on either equipment deliveries or cost. And I think we're a bit fortunate as drilling contractors in that we're running machines that are already in place and the cost is really just repairing and maintaining them and then paying the people to run them.

Waqar Syed: Thank you.

Waqar Syed: There will be a little bit of increased costs on drill pipe.

Waqar Syed: Drill pipe prices.

Waqar Syed: Regardless of tariffs move around quite a bit.

Waqar Syed: And I think even with tariffs drill pipe wouldn't be as expensive as it was a couple of years ago. So I think it's a cost of it and be able to manage absent.

Waqar Syed: Aside from drill pipe, we have some tariff exposure on.

Waqar Syed: Consumable parts, but we have alternate supply sources.

Waqar Syed: And alternate domestic supply sources. So we don't we don't anticipate a big problem either.

Waqar Syed: Deliveries or cost and I think where.

Waqar Syed: We're fortunate.

Waqar Syed: As drilling contractors and that we're running machines that are already in place and the cost is really just repair and maintaining them and then paying the people to run them. So it's not.

Carey Ford: So it's not nearly as big of an impact for our business as it would be for some other companies.

Carey Ford: It's not nearly as big of an impact for our business as it would be for some other companies.

Waqar Syed: Not nearly as big of an impact for our business as it would be for some other companies.

Carey Ford: Gary, maybe it's worth mentioning some of the work you've done with the IEDC on trying to communicate to policymakers around tariffs. Yeah, I'll just mention a few weeks ago, the IADC hosted a group of drilling contractor representatives to have meetings with US Congress people about the impact of these tariffs are on drilling contractors and our customers. And, you know, really just the benefit of the oil and gas industry for the United States. And I think it was, it was positive to see the support from Congress people for the industry, and their openness to hearing maybe the impact some of these tariffs would have on the industry in general.

Kevin Neveu: Carey, maybe it's worth mentioning some of the work you've done with the IADC on trying to communicate to policymakers around tariffs.

Waqar Syed: Maybe it's worth mentioning so for work you've done.

Waqar Syed: The D C.

Waqar Syed: <unk> tried to communicate.

Waqar Syed: Sure.

Waqar Syed: Policymakers around tariffs.

Carey Ford: Yeah. I'll just mention a few weeks ago, the IADC hosted a group of drilling contractor representatives to have meetings with US congresspeople about the impact of these tariffs on drilling contractors and our customers. Really just the benefit of the oil and gas industry for the United States. I think it was positive to see the support from congresspeople for the industry and their openness to hearing maybe the impact some of these tariffs would have on the industry in general.

Waqar Syed: I'll just mention a few weeks ago the IDC.

Waqar Syed: A group of drilling contracted representatives to have meetings with you.

Waqar Syed: U S Congress people about.

Waqar Syed: The impact of these tariffs are on drilling contractors and our customers and it really just the benefit.

Waqar Syed: The oil and gas industry for the United States and I think it was.

It was positive to see the support from Congress people for the industry and their openness openness to hearing maybe the impact some of these tariffs would have on the industry in general.

Carey Ford: And would you explain to us what those impacts could be beyond the drill pipe cost that you mentioned? Yeah, I mean, I think it's just probably the same, same squaring that everybody else is trying to do where the administration's trying to get oil prices lower. But if you have tariffs on products that are used by the oil and gas industry, it could make operating costs a bit higher for our customers.

Waqar Syed: Would you explain to us what those impacts could be beyond the drill pipe cost that you mentioned?

Waqar Syed: And what would you explain to us what those impacts could be beyond the drill pipe cost that you mentioned.

Carey Ford: Yeah, I think it's just probably the same squaring that everybody else is trying to do, where the administration's trying to get oil prices lower. If you have tariffs on products that are used by the oil and gas industry, it could make operating costs a bit higher for our customers. Just making sure that everybody understood the implications that tariffs may have on the industry at large.

Waqar Syed: Yes, I mean, I think it's probably the same.

Waqar Syed: Same squaring that everybody else is trying to do where.

Waqar Syed: The administrations.

Waqar Syed: To get oil prices lower.

Waqar Syed: But if you have tariffs on products that are used by the oil and gas industry. It could make operating cost a bit higher for our customers. So just making sure that everybody understood. The implications that tariffs may have on on the industry at large.

Waqar Syed: So just making sure that everybody understood the implications that tariffs may have on on the industry at And Kevin, one of your E&P customers in Canada talked about cost deflation in Canada, up to about 10%.

Waqar Syed: Okay. Kevin, one of your E&P customers in Canada talked about cost deflation in Canada up to about 10%. Are you seeing any pressure on price for services in Canada?

Waqar Syed: Okay.

Waqar Syed: Kevin.

Speaker Change: <unk> Costa E&P customers in Canada, I talked about cost deflation in Canada up to about 10%.

Kevin Neveu: Are you seeing any pressure on price for services in Canada? Thank you for the question. I was waiting for that one. So I would tell you that we always have that pressure on pricing in our face. It only eases back when the industry is in a real growth mode. And we haven't seen that real growth mode for a long time. So there's always cost pressures or price pressures back from our customers. Even in Canada, where we're almost fully utilized, and there might not be many other rigs in the market. Our customers continually try to push back on And certainly those negotiations are ongoing.

Speaker Change: Are you seeing any pressure on price for services in Canada.

Kevin Neveu: Thank you for the question. I was waiting for that one. I would tell you that we always have that pressure on pricing in our face. It only eases back when the industry's in a real growth mode, and we haven't seen that real growth mode for a long time. There's always cost pressures or price pressures back from our customers, even in Canada, where we're almost fully utilized and there might not be many other rigs in the market. Our customers continually try to push back on price. Certainly those negotiations are ongoing. No question, when you're in a period of broader uncertainty, they ramp up that work to try to cut their costs.

Speaker Change: Thank you for the question I was waiting for that one.

Speaker Change: So.

Speaker Change: I would tell you that we always have that pressure on pricing.

Speaker Change: Face it only eases back when.

Speaker Change: Industries that have real growth mode, and we haven't seen that real growth mode for a long time. So there is always cost pressures or price pressures back from our customers even in Canada, where we're almost fully utilized and there might not be many other rigs in the market our customers continually try to push back on price.

Speaker Change: And certainly those negotiations are ongoing no question. When you are in a period of kind of broader uncertainty.

Kevin Neveu: No question when you're in a period of kind of broader uncertainty, they ramp up that work to try to try to cut their costs. What I'd tell you is that I think we're focused on managing our margins very effectively or likely trying to raise our margins, working with our customers to find ways to be more efficient, but being paid for that efficiency. So we're certainly not projecting a 10% reduction in margins or pricing in this market.

Speaker Change: They ramp up that work to try to try to cut their costs.

Speaker Change: Okay.

Kevin Neveu: What I'd tell you is that I think we're focused on managing our margins very effectively here, likely trying to raise our margins, working with our customers to find ways to be more efficient, but being paid for that efficiency. We're certainly not projecting a 10% reduction in margins or pricing in this market.

Speaker Change: I would tell you is I think we're focused on managing our margins very effectively are likely trying to raise our margins.

Speaker Change: We're through other customers to find ways to be more efficient, but being paid for that efficiency.

Speaker Change: So we're certainly not projecting a 10% reduction in margins or more pricing in this market.

Kevin Neveu: And is the pressure more on the super singles versus super triples or is it the same class? Yeah, so first of all, I'd guide you that don't expect margins and other product line to be reduced. In fact, expect to see margins rise. We probably have less third party competition or, you know, peer group competition on super singles than we do on super triples. that we have really strong mark positions in both and great performance in both. So it's, you know, it's not not one of the high risks right now that we're weighing as we think about our business, the balance of this year.

Waqar Syed: Okay. Is the pressure more on the Super Single versus Super Triple, or is it the same in both asset classes?

Speaker Change: Okay and is the pressure more on the Super singles versus Super triples.

Speaker Change: Thank you.

Speaker Change: Is it the same.

Speaker Change: Asset classes.

Kevin Neveu: Yeah. First of all, I'd guide you that don't expect margins in either product line to be reduced. In fact, expect to see margins rise. We probably have less third-party competition or peer group competition on Super Single than we do on Super Triple. We have really strong market positions in both and great performance in both. It's not one of the high risks right now that we're weighing as we think about our business for the balance of this year.

Speaker Change: Yes, So first of all I'd guide you that don't expect margins in other product line to be reduced in fact.

Speaker Change: To see margins rise.

Speaker Change: We probably have less <unk>.

Speaker Change: Third party competition, nor peer group competition on Super singles that we do on Super triples.

Speaker Change: So we have really strong market positions in both and great performance in both so it's.

Speaker Change: No it's not.

Speaker Change: Not one of the high risks right now that we're waiting because we think about our business for the balance of this year.

Waqar Syed: Great. Thanks again.

Speaker Change: Great. Thanks again.

Carey Ford: Waqar, just to add that, if you heard my guidance for Q2 margins, they're effectively the same as last year, potentially higher than last year.

Carey Ford: Waqar, just to add to that, if you heard my guidance for Q2 margins, they're effectively the same as last year, potentially higher than last year. With more super singles in the mix.

Speaker Change: What cards I'd, just add that if you heard my guidance for Q2 margins. They are effectively the same as last year potentially higher than last year with with more Super singles in the mix. Okay. Okay. Yeah yeah.

Kevin Neveu: With more Super Single in the mix.

Carey Ford: Correct.

Waqar Syed: Yeah.

Kevin Neveu: Yeah.

Waqar Syed: And then just one final question, Carey. Shortfall revenues, should we be expecting some in Q2 or for the second half of 2025? We may have some, we typically don't guide for that. That's all for me. Thank you so much. Thanks, Waqar.

Waqar Syed: Just one final question, Carey. Shortfall revenues, should we be expecting some in Q2 or for H2 of 2025?

Speaker Change: And then just one final question Kerry shortfall revenues should we be.

Kerry: Expecting some in Q2 for the second half of 'twenty.

Speaker Change: 25.

Carey Ford: We may have some. We typically don't guide for that.

We may have some we typically don't guide for that.

Waqar Syed: Yeah. That's all for me. Thank you so much.

Speaker Change: Okay.

Speaker Change: It's all for me. Thank you so much.

Kevin Neveu: Thanks, Waqar.

Speaker Change: Thanks Waqar.

Operator: 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 VMO Capital Markets, your line Morning or afternoon, depending on the time zone you're in here, but you said one generally. What are your conversations like with producers in this environment? you know, in both Canada and the US.

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

John Gibson: Morning or afternoon, depending on the time zone you're in here. Just have 1 generally sort of a broader question. What are your conversations like with producers in this environment, in both Canada and the US? Is there a specific commodity price be it oil or gas, where we could see a significant change in capital spending plans for the year? I'm just wondering.

John Gibson: Good morning, or afternoon, depending on the time zone you in here, but just had one.

Speaker Change: Generally sort of a broader question what are your conversations like with producers in this environment.

Speaker Change: In both Canada, and the U S is there a specific commodity price be it oil or gas, where we could see a significant change in capital spending plans for the year.

Kevin Neveu: Is there a specific commodity price be it oil or gas where we could see a significant change in capital spending plans for the year? Just wondering, you know, what your expectations are, obviously in a lower commodity environment? Yeah, so often the information you get from our customers is designed to create pricing tension with us. So we don't get the cleanest information about what their thresholds are. Generally, we don't get that great information. But it does feel like it does feel like in the US and the oil or the basins. Low 60s, high 50s is probably stable, get below kind of high 50s, and the uncertainty level increases.

Kevin Neveu: Yeah

Speaker Change: I'm just wondering.

John Gibson: what your expectations are, obviously in a lower commodity environment here.

Speaker Change: What your expectations are obviously in a lower commodity environment here.

Kevin Neveu: Often the information we get from our customers is designed to create pricing tension with us. We don't get the cleanest information about what their thresholds are, generally. We don't get that great information. It does feel like in the US and the oily basins, low 60s, high 50s is probably stable. Get below high 50s and the uncertainty level increases. In Canada, because we have an exchange rate advantage and the WCS discounts narrowed with the Trans Mountain pipeline, that number might be a little lower. It might be more like low 50s or 50-ish before our customers get too nervous about activity. Now that's a sense from us. No customers give us a hard line or a hard threshold. They're continually trying to press us for lower rates. I'd say it's not necessarily hard-line numbers that we can stand on.

Speaker Change: Yeah. So often the information you get from our customers is designed to create pricing tension with us. So we don't get the cleanest information about what their thresholds are generally we don't get that great information, but it does feel like.

Speaker Change: It does feel like in the U S and the oil or the basins.

Speaker Change: Low <unk> high <unk> is probably stable get below kind of high <unk>.

Speaker Change: <unk> level of increases.

Kevin Neveu: In Canada, you know, because we have an exchange rate advantage, and the WCS discounts narrowed with the Trans Mountain Pipeline, that number might be a little lower, it might be more like low 50s or 50-ish before our customers get too nervous about activity. Now, that's a sense for us. No customers give us a hard line or a hard threshold. They're continually trying to press us for lower rates. And so I'd say it's not necessarily hard line numbers that we can count on. Okay, that's fair, but appreciate their response.

Speaker Change: In Canada.

Speaker Change: Because we have an exchange rate advantage.

Speaker Change: Advantage and the WCS discounts narrowed with the Trans mountain pipeline that number might be a little lower it might be more like.

Speaker Change: Low $50 or $50 before our customers get too nervous about activity now.

Speaker Change: Our sense from US no customers give us a hard line or a hard threshold there.

Speaker Change: We're continually trying to process for lower rates.

Speaker Change: So I would say is it's.

Speaker Change: Not necessarily.

Speaker Change: Hard line numbers that we can stand up.

John Gibson: Okay. That's fair. Appreciate the response. I'll turn it back. Thanks.

Speaker Change: Okay, that's fair, but I appreciate the response I'll turn it back thanks.

Unknown Attendee: I'll turn it back.

Unknown Attendee: Thank you.

Kevin Neveu: Great. Thank you.

Great. Thank you.

John Daniel: Next question comes from John Daniel with Daniel Energy Partners. Your line is open. Hey guys, thanks for having me. Kevin, I know this question is not the well sourced business, it wasn't material to you guys in the US, but I'm just curious if the decision to to move out. Was that a customer consolidation because of that lack of scale, bad behavior from your local well service peers? Just what kind of drove that? And then What is there a read through to maybe some of the similar sub 10 rig businesses in Canada that might do the same thing if you will?

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

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

John Daniel: Hey, guys. Thanks for having me. Kevin, I know this question is not the well service business, wasn't material to you guys in the US, but I'm just curious if the decision to move out, was that a customer consolidation because of that lack of scale, bad behavior from your local well service peers? Just what kind of drove that, then is there a read-through to maybe some other similar sub-10 rig businesses in Canada that might do the same thing, if you will? Just your thoughts.

John Daniel: Hey, guys. Thanks for having me.

Kevin Kerry: Kevin I know this question.

Speaker Change: <unk> business not much wasn't material to you guys in the U S. But I'm just curious if the decision to.

Speaker Change: Move out was that a customer consolidation because of that lack of scale bad behavior from your local Wal service peers, just what kind of drove that and then.

Speaker Change: Is there a read through to maybe some other similar sub 10 rig businesses in Canada.

Speaker Change: So the same thing zero.

Kevin Neveu: Just your thoughts.

Kevin Neveu: Well, John, first thing I'll say is you've been around the well service business darn near as long as I have been, you understand the dynamics really well, and your question demonstrates that. The number 1 reason is that our Canadian customers that were pressing into North Dakota sold their assets.

Speaker Change: Costs well.

Kevin Neveu: Well, John, first thing I'll say is you've been around the well service business darn near as long as I have been. So you understand the dynamics really well. And your question demonstrates that. The number one reason is that our Canadian customers that were pressing into North Dakota sold their assets. and then we were faced with, you know, I'd say that more price sensitive customers were happy with the service quality and safety offered by local mom-and-pops. and we have a hard time competing in that kind of an environment. So it was price sensitivity. If safety quality and crew capability was at a higher value, we might still be there.

Speaker Change: John first thing I'll say is <unk> been around the well service business darn near as long as I have been so you understand the dynamics really well your question demonstrates that.

Speaker Change: Number one reason is that our Canadian customers that were oppressing into North Dakota sold their assets.

John Daniel: Okay.

Kevin Neveu: We were faced with, I'd say that more price-sensitive customers. We're happy with the service quality and safety offered by local mom-and-pops. We have a hard time competing in that kind of an environment. It was price sensitivity. If safety, quality, and crew capability had a higher value, we might still be there.

Speaker Change: Okay.

Speaker Change: And then then we were faced with.

Speaker Change: I'd say that more price sensitive customers. So we're happy with.

Speaker Change: The service quality and safety offered by a local mom and Pops.

Speaker Change: And we have a hard time competing in that kind of environment. So he was he was price sensitivity.

Speaker Change: If.

Speaker Change: If <unk>.

Speaker Change: Safety quality and crew capability was at a higher value we might still be there.

Unknown Attendee: Fair enough.

John Daniel: Fair enough. That's all I had. Thanks for including me, guys.

Unknown Attendee: That's all I had. Thanks for including me, guys. Thanks, John. Thank you, John.

Speaker Change: Fair enough, that's all I had thanks for including me guys.

Kevin Neveu: Thanks, John.

Lavonne Zdunich: Thank you, John.

Speaker Change: Thanks, John John.

Unknown Attendee: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. One moment for our next question.

Operator: Again, ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone. One moment for our next question. Our next question comes from Aaron Rosenthal with JPMorgan. Your line is open.

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

Speaker Change: One moment for our next question.

Aaron Rosenthal: Our next question comes from Aaron Rosenthal with J.P. Morgan, your line is open. Hey, thanks for taking my question. Just wanted to touch on a quick clarifying point. On the international front, the rig drop that was called out in the release, and then you had mentioned that there was moving pieces on the international front. In the prepared remarks, just want to confirm that there was only one international rig drop and the suspension was referenced in the release was the rig in Kingdom.

Speaker Change: Our next question comes from Erin Rosenthal with Jpmorgan. Your line is open.

Aaron Rosenthal: Hey, thanks for taking my question. Just wanted to touch on a quick clarifying point. On the international front, the rig drop that was called out in the release, and then you had mentioned that there was some moving pieces on the international front in the prepared remarks. Just wanted to confirm that there was only one international rig drop, and the suspension that was referenced in the release was the rig in Kingdom. Is that correct?

Hey, Thanks for taking my question.

Speaker Change: Just wanted to touch on a quick clarifying point on the international front the rig drop that was called out in the release and then you had mentioned that there were some moving pieces on the international front.

Speaker Change: In the prepared remarks, just wanted to confirm that there was only one international rig drop and the suspension.

Speaker Change: In the release.

Speaker Change: The rig in Kingdom is that correct.

Aaron Rosenthal: Is that correct? That's correct. Thank you. And then you also mentioned that, you know, no expectations for impact for the other two rigs.

Kevin Neveu: That's correct.

Speaker Change: That's correct.

Aaron Rosenthal: Okay. Thank you. I think you also mentioned that no expectations for impact for the other two rigs in the region. Any kind of broader comments you could provide on activity levels or anything you're hearing from broader macro landscape in that region that you're able to provide?

Speaker Change: Okay. Thank you.

Speaker Change: And then you also mentioned that no expectation for impact for the other two rigs.

Kevin Neveu: In the region, any kind of broader comments you can provide on activity levels or anything you're hearing, you know, broader macro landscape in that region that you're able to provide? Yeah, well, certainly in Saudi Arabia, you know, it's a it's a single customer market. And, you know, they don't broadly communicate their drilling strategy across their fleet of rigs. But we do hear that our rig that's been suspended, will be among a large group of rigs that are being suspended. And how large that group is, we don't know. But we understand there will be a number of suspensions occurring or that already have occurred that maybe haven't made it to the market yet.

Speaker Change: Yes.

Speaker Change: In the region any kind of broader comments, you can provide on activity levels or anything you're hearing.

Speaker Change: Yes.

Speaker Change: Our macro landscape in that region that you are able to provide.

Kevin Neveu: Yeah. Well, certainly in Saudi Arabia, it's a single customer market and they don't broadly communicate their drilling strategy across their fleet of rigs. We do hear that our rig that's been suspended will be among a large group of rigs that are being suspended. How large that group is, we don't know. We understand there'll be a number of suspensions occurring or that already have occurred that maybe haven't made it to the market yet.

Speaker Change: Yes, well certainly in Saudi Arabia.

Speaker Change: It's a single customer market.

Speaker Change: <unk>.

Speaker Change: They don't broadly communicate their drilling strategy across their fleet of rigs, but we do hear that.

Speaker Change: Our rig that's been.

Speaker Change: Suspended will be among a large group of rigs that are being suspended and how large that group is we don't know.

Speaker Change: So we understand there there'll be a number of suspensions occurring or that already have occurred that maybe haven't made it to the market yet.

Aaron Rosenthal: Thank you very much.

Aaron Rosenthal: Thank you very much. Then, on the Haynesville piece, and sorry if I missed this, the work that you alluded to coming up in Q2 or in the summer. I guess relative to the nine to 10 rigs that you have ready, I guess, idle in the region, are you able to quantify the level of rig demand in that timeframe?

Speaker Change: Thank you very much and then.

Aaron Rosenthal: And then on the Hainesville piece, and sorry if I miss this, the work that you alluded to coming up in 2Q in the summer, you know, I guess relative to the nine to 10 rigs that you have rated, you know, I guess, I know in the region, are you able to quantify, quantify the level of rig demand, you know, in that timeframe? Yeah, I'll stop short of doing that because I'd say the bid intensity right now is quite high. So lots of bids, but it's still hard for us to determine how many of those bids will turn into rigs rotating to the right.

Speaker Change: On the Haynesville piece.

Speaker Change: Sorry, if I missed this.

Speaker Change: Work that you alluded to coming up in <unk> in the summer I.

Speaker Change: I guess relative to the nine to 10 rigs that you have.

Speaker Change: Sir I know in the region are you able to quantify or quantify the level of rig demand.

Speaker Change: In that timeframe.

Kevin Neveu: Yeah. I'll stop short of doing that because I'd say the bid intensity right now is quite high. Lots of bids, but it's still hard for us to determine how many of those bids will turn into rigs rotating to the right. Bidding activity is up. Our customers are converting more of those to contracts now, which is clear. I think both us and some of our in-basin peers are seeing increasing activity. It's still hard to handicap how many of those bids will actually turn into rigs and how soon that'll happen. I think for us, we're talking about 1, 2, 3, 4 rigs in the next couple of months, not 10 rigs in the next couple of months.

Yes.

Speaker Change: I'll stop short of doing that because.

Speaker Change: I'd say the bid intensity right now is quite high so lots of bids, but its still hard for us to determine how many of those bids will turn into rigs rotate into the right.

Aaron Rosenthal: Bidding activity is up, our customers are converting more of those to contracts now, which is clear. I think both us and some of our in-basin peers are seeing increasing activity, but it's still hard to handicap how many of those bids will actually turn into rigs and how soon that'll happen. So I think for us, we're talking about, you know, one, two, three, four rigs in the next couple of months, not 10 rigs in the next couple of months. Perfect. Thank you very much. Great, thank you.

Speaker Change: Bidding activity is up our customers who are converting more of those contracts now which is clear I think both us and some of our in basin peers are seeing increasing activity, but it's still hard to handicap, how many of those bids will actually turn into rigs and how soon that will happen.

Speaker Change: So I think for US we're talking about 1% to three four rigs in the next couple of months.

Speaker Change: Not 10 rigs next couple of months.

Aaron Rosenthal: Perfect. Thank you very much.

Speaker Change: Perfect. Thank you very much.

Kevin Neveu: Great. Thank you.

Speaker Change: Great. Thank you.

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

Operator: 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.

Speaker Change: And I'm not showing any further questions at this time I would like to turn the call back over to Levonne for any closing remarks.

Lavonne Zdunich: I'd like to turn the call back over to Lavonne for any closing. Thank you everyone for taking the time to listen to our first quarter earnings call and wishing you a good day. If you have any follow up questions, please feel free to send an email to myself or give me a call. Thank you.

Lavonne Zdunich: Thank you everyone for taking the time to listen to our Q1 earnings call, and wishing you a good day. If you have any follow-up questions, please feel free to send an email to myself or give me a call. Thank you.

Speaker Change: Thank you everyone for taking the time to listen to our first quarter earnings call and wishing you a good day. If you have any follow up questions. Please feel free to send an E mail to myself or give me a call. Thank you.

Unknown Attendee: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a...

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

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

Unknown Attendee: Thanks for watching!

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].