Q2 2026 Precision Drilling Corp Earnings Call

July 29, 2026

Operator: Good day, and thank you for standing by. Welcome to the Precision Drilling Corporation 2026 Q2 results conference call and webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lavonne Zdunich, Vice President of Investor Relations. Please go ahead.

Speaker #1: After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you need to press star 11 on your telephone.

Speaker #1: You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded.

Speaker #1: I will now attend the conference over to your speaker today. Lavonne Zdunich, Vice President of Investor Relations, please go ahead.

Speaker #2: Thank you, operator, and welcome everyone. Today, I’m joined by Carey Ford, President and CEO, and Dustin Honing, our CFO. Yesterday, we reported our second quarter results, highlighted by robust heavy oil drilling and well service activity in Canada, and improving rig utilization in the US.

Lavonne Zdunich: Thank you, operator, and welcome everyone. Today, I am joined by Carey Ford, President and CEO, and Dustin Honing, our CFO. Yesterday, we reported our Q2 results, highlighted by robust heavy oil drilling and well service activity in Canada and improving rig utilization in the US. Carey and Dustin will review these results, provide an operational update, and outlook commentary. Once we have finalized our prepared remarks, we will open the call for questions. Please note that some comments today will refer to non-IFRS financial measures and include forward-looking statements, which are subject to a number of risks and uncertainties. For more information on financial measures, forward-looking statements, and risk factors, please refer to our news release and other regulatory filings available on SEDAR+ and EDGAR. As a reminder, we express our financial results in Canadian dollars unless otherwise stated. Carey, over to you.

Speaker #2: Carey and Dustin will review these results, provide an operational update, and offer outlook commentary. Once we have finalized our prepared remarks, we will open the call for questions.

Speaker #2: Please note that some comments today will refer to non-IFRS financial measures and include forward-looking statements, which are subject to a number of risks and uncertainties.

Speaker #2: For more information on financial measures, forward-looking statements, and risk factors, please refer to our news release and other regulatory filings available on SEDAR+ and EDGAR.

Speaker #2: As a reminder, we express our financial results in Canadian dollars unless otherwise stated. Carey, over to you.

Speaker #3: Thank you, Lavonne, and good morning and good afternoon. Before I hand the call over to Dustin, I would like to make a few comments on the progress toward our 2026 strategic priorities.

Carey Ford: Thank you, Lavonne, and good morning and good afternoon. Before I hand the call over to Dustin, I would like to make a few comments on the progress toward our 2026 strategic priorities. This year, Precision Drilling aims to grow revenue through a differentiated service offering and deepening customer relationships while generating cash flow and returning it to shareholders through debt reduction and share repurchases. Halfway through the year, we are delivering on these priorities. We have grown year-to-date revenue by 8%, significantly expanded our contract book of business, executed contracted upgrades, and increased activity in both Canada and the US. We are on track to meet our return of capital commitments. In short, we are delivering on what we set out to accomplish in 2026. With that, I will turn the call over to Dustin to discuss the financial results released yesterday evening in detail.

Speaker #3: This year, Precision Drilling aims to grow revenue through a differentiated service offering and by deepening customer relationships, while generating cash flow and returning it to shareholders through debt reduction and share repurchases.

Speaker #3: Halfway through the year, we are delivering on these priorities. We have grown year-to-date revenue by 8%, significantly expanded our contracted book of business, executed contracted upgrades, and increased activity in both Canada and the US.

Speaker #3: We are on track to meet our return of capital commitments. In short, we are delivering on what we set out to accomplish in 2026.

Speaker #3: With that, I will turn the call over to Dustin to discuss the financial results released yesterday evening in detail.

Speaker #4: Thank you, Carey.

Dustin Honing: Thank you, Carey. For our Q2 2026, revenues increased by 11% from prior year, driven by growing momentum in our Canadian operations and rebounding activity levels in the US. Our operating expenses were disproportionately impacted by several US rig activations. That was as we moved from a low of 32 rigs operating in April to an exit of 42 rigs operating on 30 June 2026. Results this quarter also included CAD 3 million in costs related to restructuring our international operation. Q2 adjusted EBITDA was CAD 97 million, which equates to CAD 95 million before share-based compensation recovery, compared to prior year Q2 EBITDA of CAD 108 million or CAD 112 million before share-based compensation expense. Net earnings were a loss of CAD 1 million compared to net earnings of CAD 16 million in Q2 2025. Precision generated CAD 146 million of cash from operations, equivalent to Q2 2025.

Speaker #3: For our second quarter of 2026, revenues increased by 11% from the prior year, driven by growing momentum in our Canadian operations and rebounding activity levels in the US.

Speaker #3: Our operating expenses were disproportionately impacted by several US rig activations as we moved from a low of 32 rigs operating in April to an exit of 42 rigs operating on June 30th.

Speaker #3: Results this quarter also included $3 million in costs related to restructuring our international operation. Q2 adjusted EBITDA was $97 million, which equates to $95 million before share-based compensation recovery, compared to prior year Q2 EBITDA of $108 million, or $112 million before share-based compensation expense.

Speaker #3: Net earnings were a loss of $1 million, compared to net earnings of $16 million in the second quarter of 2025. Precision generated $146 million of cash from operations, equivalent to the second quarter of 2025.

Speaker #3: Capital expenditures were $76 million, comprised of $46 million for sustaining and infrastructure, and $30 million for rig upgrades. These investments were made in step with our shareholder returns program, reducing debt by $50 million and allocating $12 million toward share buybacks during the quarter.

Dustin Honing: Capital expenditures were CAD 76 million, comprised of CAD 46 million for sustaining and infrastructure and CAD 30 million for rig upgrades. These investments were made in step with our shareholder returns program, reducing debt by CAD 50 million and allocating CAD 12 million towards share buybacks during the quarter. Moving on to our operating segments. In Canada, Q2 drilling activity averaged an all-time record 61 active rigs, an increase of 11 rigs from Q2 2025 and one rig higher than prior guidance. Our reported Q2 daily operating margins were CAD 13,855, inclusive of CAD 3 million in customer upfront payments for upgrades. Compared to CAD 15,306 in Q2 2025, which was inclusive of CAD 7 million in upfront payments. Absent these upfront payments, normalized Q2 daily operating margins were CAD 13,331, compared with CAD 13,866 in Q2 2025, exceeding the upper limit of our prior guidance range.

Speaker #3: Moving on to our operating segments, in Canada, Q2 drilling activity averaged an all-time record 61 active rigs, an average increase of 11 rigs from Q2 2025, and one rig higher than prior guidance.

Speaker #3: Our reported Q2 daily operating margins were $13,855, inclusive of $3 million in customer upfront payments for upgrades, compared to $15,306 in the second quarter of 2025, which was inclusive of $7 million in upfront payments.

Speaker #3: Absent these upfront payments, normalized Q2 daily operating margins were 13,331, compared with 13,866 in the second quarter of 2025, exceeding the upper limit of our prior guidance range.

Speaker #3: Compared to the prior year, Precision's normalized operating margins were slightly impacted by rig mix, with a higher proportion of Super Singles and Doubles working through the spring.

Dustin Honing: Compared to prior year, Precision normalized operating margins were slightly impacted by rig mix, with a higher proportion of Super Single and doubles working through the spring. In the US, we averaged 35 active rigs, compared to an average of 37 sequentially from Q1, and an increase from the 33 rigs we had prior year Q2. Our daily operating margins for the quarter were US$6,212, compared to US$9,291 sequentially from Q1, falling below our prior guidance range. Although revenue per utilization day increased due to stronger pricing and increased technology adoption, margins were negatively impacted by reactivation costs this quarter as Precision exited Q2 with 42 active rigs, ahead of our prior guidance exit rig count. Internationally, Precision averaged seven active rigs, relatively in line with prior year Q2 activity levels. International day rates averaged US$50,524, a decrease of 5% from prior year.

Dustin Honing: Compared to prior year, Precision normalized operating margins were slightly impacted by rig mix, with a higher proportion of Super Single and doubles working through the spring. In the US, we averaged 35 active rigs, compared to an average of 37 sequentially from Q1, and an increase from the 33 rigs we had prior year Q2. Our daily operating margins for the quarter were $6,212, compared to US$9,291 sequentially from Q1, falling below our prior guidance range. Although revenue per utilization day increased due to stronger pricing and increased technology adoption, margins were negatively impacted by reactivation costs this quarter as Precision exited Q2 with 42 active rigs, ahead of our prior guidance exit rig count. Internationally, Precision averaged seven active rigs, relatively in line with prior year Q2 activity levels. International day rates averaged US$50,524, a decrease of 5% from prior year.

Speaker #3: In the US, we averaged 35 active rigs, compared to an average of 37 sequentially from Q1, and an increase from the 33 rigs we had in prior year Q2.

Speaker #3: Our daily operating margins for the quarter were $6,212, compared to $9,291 sequentially from Q1, falling below our prior guidance range.

Speaker #3: Although revenue per utilization day increased due to stronger pricing and increased technology adoption, margins were negatively impacted by reactivation costs this quarter, as Precision exited Q2 with 42 active rigs, ahead of our prior guidance exit rig count.

Speaker #3: Internationally, Precision averaged 7 active rigs, relatively in line with prior year Q2 activity levels. International day rates averaged US $50,524, a decrease of 5% from the prior year.

Speaker #3: During the quarter, rig margins were unfavorably impacted by rig mix, with one Kuwait rig idled, offset by one additional rig working in Saudi Arabia.

Dustin Honing: During the quarter, rig margins were unfavorably impacted by rig mix, with one Kuwait rig idled, offset by one additional rig working in Saudi Arabia. Operating expenses were again impacted by the conflict in the Middle East, and we also incurred CAD 3 million of one-time restructuring charges from closing our office in Dubai. This restructuring is expected to generate annualized savings of CAD 3 million per year. Our CMP segment adjusted EBITDA was CAD 14 million, CAD 4 million higher than prior year Q2. Strong fundamentals in the Canadian market drove increased well servicing demand, primarily in the heavy oil regions. Moving on to forward guidance, I will begin with our expectations for Q3 2026. Starting in Canada, our strong presence in Canada's heavy oil and unconventional natural gas and condensate markets is expected to generate continued activity growth from prior year levels.

Speaker #3: Operating expenses were again impacted by the conflict in the Middle East, and we also incurred $3 million of one-time restructuring charges from closing our office in Dubai.

Speaker #3: This restructuring is expected to generate annualized savings of $3 million per year. Our CMP segment adjusted EBITDA was $14 million, $4 million higher than prior year Q2.

Speaker #3: Strong fundamentals in the Canadian market drove increased well-servicing demand, primarily in the heavy oil regions. Moving on to forward guidance, I will begin with our expectations for the third quarter of 2026.

Speaker #3: Starting in Canada, our strong presence in Canada's heavy oil and unconventional natural gas and condensate markets is expected to generate continued activity growth from prior-year levels.

Speaker #3: For the third quarter, we expect average rig counts to be between the low to mid-70s, which compares to an average of 63 rigs working in prior year Q3.

Dustin Honing: For Q3, we expect average rig counts to average in between the low to mid-70s, which compares to an average of 63 rigs working prior year Q3. As a result of more Super Single working, our daily operating margins in Canada are expected to range between CAD 12,000 and CAD 13,000. Our expectation is that pricing will remain firm within our Super Single and Super Triple fleet throughout 2026. In the US, our Q3 average rig count is expected to be in the low 40s, our highest level since 2023. The coming quarter will again be impacted by reactivations, with daily operating margins expected to range between $7,000 and $8,000. Our business remains focused on demonstrating margin enhancement following these reactivations, with daily operating margins expected to approach $10,000 in Q4.

Speaker #3: As a result of more super singles working, our daily operating margins in Canada are expected to range between $12,000 and $13,000. Our expectation is that pricing will remain firm within our super single and super triple fleet throughout 2026.

Speaker #3: In the US, our third-quarter average rig count is expected to be in the low 40s, our highest level since 2023. The coming quarter will again be impacted by reactivations, with daily operating margins expected to range between $7,000 and $8,000.

Speaker #3: Our business remains focused on demonstrating margin enhancement following these reactivations, with daily operating margins expected to approach US$10,000 in Q4. Internationally, we expect to run 7 rigs, with operating margins lower than the prior year due to elevated operating costs in response to the ongoing tensions in the Middle East.

Dustin Honing: Internationally, we expect to run 7 rigs, with operating margins lower than prior year due to elevated operating costs in response to the ongoing tensions in the Middle East. Early in Q2, Precision secured a 5-year contract for our idled Kuwait rig, bringing our expected international rig count to 8 rigs working by mid-2027, following planned recertification and upgrade work. Our CMP business continues to generate strong free cash flow, driven by our well servicing and surface rental business lines. For Q3, we expect EBITDA to remain in line with prior year levels. Regarding cash flow, we anticipate Q3 to be a heavier working capital build quarter due to recent activity ramp up in the Canadian and US operations, in combination with our semi-annual interest payment. In Q4, we expect cash generation to rebound to normal levels.

Speaker #3: Early in Q2, Precision secured a five-year contract for our idled Kuwait rig, bringing our expected international rig count to eight rigs working by mid-2027, following planned recertification and upgrade work.

Speaker #3: Our CMP business continues to generate strong free cash flow, driven by our well-servicing and surface rental business lines. For Q3, we expect EBITDA to remain in line with prior year levels.

Speaker #3: Regarding cash flow, we anticipate Q3 to be a heavier working capital build quarter, due to recent activity ramp-up in the Canadian and U.S. operations.

Speaker #3: In combination with our semi-annual interest payment, in Q4 we expect cash generation to rebound to normal levels. Moving to guidance for the full year 2026, our capital expenditures budget remains at $265 million.

Dustin Honing: Moving to guidance for the full year 2026, our capital expenditures budget remains at CAD 265 million, which is comprised of CAD 172 million for sustaining and infrastructure and CAD 93 million for upgrades, which remains more weighted to Canada. Full year depreciation is expected to be CAD 320 million, and cash interest expense from debt is expected to be approximately CAD 45 million. Our effective tax rate is expected to be approximately 25% to 30%. PD expects business cash taxes to remain low in 2026, with cash taxes increasing in Canada in 2027. On the tax front, I will also address our 2018 Notice of Reassessment from the Canada Revenue Agency, just received late July. As disclosed in our press release, Precision will file a Notice of Objection that intends to vigorously contest this, as well as any additional reassessments that may be issued by the CRA.

Speaker #3: This is comprised of $172 million for sustaining and infrastructure, and $93 million for upgrades, which remains more weighted to Canada. Full-year depreciation is expected to be $320 million, and cash interest expense from debt is expected to be approximately $45 million.

Speaker #3: Our effective tax rate is expected to be approximately 25% to 30%. P/E expects business cash taxes to remain low in 2026, with cash taxes increasing in Canada in 2027.

Speaker #3: On the tax front, I'll also address our 2018 Notice of Reassessment from the Canada Revenue Agency, just received in late July. As disclosed in our press release, Precision will file a Notice of Objection and intends to vigorously contest this, as well as any additional reassessments that may be issued by the CRA.

Speaker #3: The company and its tax advisors believe that our tax filing position is appropriate, and we will provide updates as we work through and resolve this issue in the future.

Dustin Honing: The company and its tax advisors believe that our tax filing position is appropriate, and we will provide updates as we work through and resolve this issue in the future. For 2026, we expect SG&A to stay flat at approximately CAD 95 million before share-based compensation expense. As previously communicated, share-based compensation guidance for the year would range between CAD 25 million and CAD 45 million, assuming a share price range of CAD 100 to CAD 140 and a 1 times multiplier. Our long-term target to achieve net debt to adjusted EBITDA of less than 1 times remains firmly in place. In 2026, we plan to reduce debt by levels by CAD 100 million, while allocating up to 50% of free cash flow to share repurchases. At the mid-year mark, we have already reduced debt by CAD 75 million and repurchased CAD 16 million worth of shares.

Speaker #3: For 2026, we expect SG&A to stay flat at approximately $95 million, before share-based compensation expense. As previously communicated, share-based compensation guidance for the year would range between $25 million and $45 million, assuming a share price range of $100 to $140 and a one-time multiplier.

Speaker #3: Our long-term target to achieve net debt to adjusted EBITDA of less than one times remains firmly in place. In 2026, we plan to reduce debt levels by $100 million, while allocating up to 50% of free cash flow to share repurchases.

Speaker #3: At the mid-year mark, we have already reduced debt by $75 million and repurchased $16 million worth of shares. Today, we have an average cost of debt of 6.7%, and over $502 million in total liquidity.

Dustin Honing: Today, we have an average cost of debt of 6.7% and over CAD 502 million in total liquidity. With that, I'll pass it back to Carey.

Speaker #3: With that, I'll pass it back to Carey.

Speaker #1: Thank you, Dustin. For my prepared remarks, I plan to cover three areas. First, progress on growing revenue aligned with our first 2026 strategic priority.

Carey Ford: Thank you, Dustin. For my prepared remarks, I plan to cover three areas. First, progress on growing revenue aligned with our first 2026 strategic priority. Second, an update on our international business. Finally, our North American activity outlook. For the company, Q2 revenue increased 11% year over year with a 14% increase in North American operations, offset by an 11% decrease internationally. The Precision team has delivered revenue growth by completing contracted drilling rig upgrades in North America, and by demonstrated differentiated technology-driven performance. The progress on contracted upgrades and deepening customer relationships in Q2 is reflected in the increase in our contract book, with Q4 contracts increasing by 12 rigs in Canada and nine rigs in the US, compared to our prior Q1 disclosure in April.

Speaker #1: Second, an update on our international business. And finally, our North American activity outlook. For the company, second-quarter revenue increased 11% year over year, with a 14% increase in North American operations, offset by an 11% decrease internationally.

Speaker #1: The Precision team has delivered revenue growth by completing contracted drilling rig upgrades in North America and by demonstrated differentiated technology-driven performance. The progress on contracted upgrades and deepening customer relationships in the second quarter is reflected in the increase in our contract book, with fourth quarter contracts increasing by 12 rigs in Canada and 9 rigs in the US, compared to our prior Q1 disclosure in April.

Speaker #1: On the topic of deepening customer relationships, in addition to rig upgrades and contracts, we view this to mean partnering with our customers, scaling digital technology and operational improvements across multiple rigs, and, in many cases, providing greater flexibility for our customers to execute their drilling plans with Precision.

Carey Ford: On the topic of deepening customer relationships, in addition to rig upgrades and contracts, we view this to mean partnering with our customers, scaling digital technology and operational improvements across multiple rigs, and in many cases, providing greater flexibility for our customers to execute their drilling plans with Precision. I mentioned at the beginning of this year that Precision had multiple drilling rigs with 25 different customers globally, that we wanted this number to grow. Today, that number is 30 customers, it is growing primarily in the US. Staying with the US, we have made significant progress not only in growing revenue, also in strengthening the business. We have increased our active rig count by 30% since our last conference call, expanded activity with existing customers, further concentrated operations in our core markets. We expect reactivation costs and rig churn to continue through Q3.

Speaker #1: At the beginning of this year, I mentioned that Precision had multiple drilling rigs with 25 different customers globally, and that we wanted this number to grow.

Speaker #1: Today, that number is 30 customers, and it is growing, primarily in the US. Staying with the US, we have made significant progress, not only in growing revenue, but also in strengthening the business.

Speaker #1: We have increased our active rig count by 30% since our last conference call, expanded activity with existing customers, and further concentrated operations in our core markets.

Speaker #1: We expect reactivation costs and rig churn to continue through the third quarter. However, the foundation we have built positions us for meaningful margin improvement beginning in the fourth quarter and continuing into 2027.

Carey Ford: However, the foundation we have built positions us for meaningful margin improvement beginning in Q4 and continuing into 2027. The US reactivation costs are certainly a temporary drag on margins, we view the expenditure as an investment. We are investing in crew training and development, equipment recertification, technology-driven startup plans to ensure flawless rig activations. This strategy is paying off. This past quarter, we had several startups in the Permian and multiple customers who, after working with Precision for a short period, began discussing with our team the addition of a second rig. On the technology front, I want to highlight three recent developments. First, progress on robotics continues with Precision's AlphaARMS robotics rig working for a major in the Montney, continuously outpacing pace setter wells and setting efficiency and speed records.

Speaker #1: The U.S. reactivation costs are certainly a temporary drag on margins, but we view the expenditure as an investment. We are investing in crew training and development, equipment recertification, and technology-driven startup plans to ensure flawless rig activations.

Speaker #1: And this strategy is paying off. This past quarter, we had several startups in the Permian, and multiple customers who, after working with Precision for a short period, began discussing with our team the addition of a second rig.

Speaker #1: On the technology front, I want to highlight three recent developments. First, progress on robotics continues, with Precision's AlphaArms Robotics rig working for a major in the Montney, continuously outpacing paces at our wells and setting efficiency and speed records.

Speaker #1: This technology has been continuously operated for the past two and a half years, with 54 wells drilled, over 3 million feet of tubulars handled hands-free, and 17,000 man-free hours on the rig floor.

Carey Ford: This technology has been continuously operated for the past two and a half years with 54 wells drilled, over 3 million feet of tubulars handled hands-free, and 17,000 man-free hours on the rig floor. Second, this summer, Precision Drilling was awarded a grant from Emissions Reduction Alberta to support the pursuit of a rig floor robotic solution for a Super Triple 1200 rig in the Canadian market. Engineering and planning are well underway, and we are in discussions with multiple Canadian customers about our next robotics rig in the country. In addition, we continue to have conversations about AlphaARMS with key existing and potential customers in the US. Finally, on the technology front, next month, we will open our Canadian Alpha Remote Operations Center on the seventh floor of our Calgary headquarters.

Speaker #1: Second, this summer, Precision Drilling was awarded a grant from Emissions Reduction Alberta to support the pursuit of a rig floor robotics solution for a Super Triple 1,200 rig in the Canadian market.

Speaker #1: Engineering and planning are well underway, and we are in discussions with multiple Canadian customers about our next robotics rig in the country. In addition, we continue to have conversations about Alpha Arms with key existing and potential customers in the US.

Speaker #1: Finally, on the technology front, next month we will open our Canadian Alpha Remote Operations Center on the seventh floor of our Calgary headquarters. The Calgary ARO complements our Houston ARO capabilities by bringing real-time collaboration and local drilling engineering expertise closer to Canadian customers, while remaining connected to Houston's broader operational expertise.

Carey Ford: The Calgary AlphaROC complements our Houston AlphaROC capabilities by bringing real-time collaboration and local drilling engineering expertise closer to the Canadian customers while remaining connected to Houston's broader operational expertise. As the scope of remote support expands, the two centers will operate as a single network, bringing together operations, sales, engineering, and other functions across our two headquarters to collaborate on a broader range of rig activities. If you're interested in learning more about how Precision utilizes real-time data-driven insights to drive performance and exceed customer expectations, and you plan to be in Calgary or Houston, please reach out to a member of the Precision team. We would love to give you a tour. For an update on our international operations, I want to once again recognize Precision's leadership and crews for their performance over the past few months amidst a dynamic regional environment.

Speaker #1: As the scope of remote support expands, the two centers will operate as a single network, bringing together operations, sales, engineering, and other functions across our two headquarters to collaborate on our broader range of rig activities.

Speaker #1: If you are interested in learning more about how Precision utilizes real-time, data-driven insights to drive performance and exceed customer expectations, and you plan to be in Calgary or Houston, please reach out to a member of the Precision team.

Speaker #1: We would love to give you a tour. For an update on our international operations, I want to once again recognize Precision’s leadership and crews for their performance over the past few months, amidst the dynamic regional environment.

Speaker #1: In the face of these challenges, our team continues to focus on personnel safety and, with all seven rigs, on delivering excellent results for our customers.

Carey Ford: In the face of these challenges, our team continues to focus on personnel safety and with all 7 rigs on delivering excellent results for our customers. As Dustin has covered, we are planning for our eighth rig activation next year. During the quarter, we streamlined our regional structure by closing our Dubai office and relocating leadership closer to our customers in Saudi Arabia and Kuwait. The move also helps reduce our cost structure in a region where we expect to have 8 rigs running for the foreseeable future. In Argentina, we, along with our partner, continue to have active conversations with all major operators about potential rig deployments in the region and will update the market as those discussions progress. Moving on to our North American outlook. We expect the Canadian market to continue to demonstrate strength for the foreseeable future.

Speaker #1: As Dustin has covered, we are planning for our eighth rig activation next year. During the quarter, we streamlined our regional structure by closing our Dubai office and relocating leadership closer to our customers in Saudi Arabia and Kuwait.

Speaker #1: The move also helps reduce our cost structure in a region where we expect to have eight rigs running for the foreseeable future. In Argentina, we, along with our partner, continue to have active conversations with all major operators about potential rig deployments in the region, and will update the market as those discussions progress.

Speaker #1: Moving on to our North American outlook. We expect the Canadian market to continue to demonstrate strength for the foreseeable future. Optimism around Western Canadian infrastructure projects, lower break-even costs for operators, and the return of foreign capital to the basin have provided a unique foundation for increased industry activity.

Carey Ford: Optimism around Western Canadian infrastructure projects, lower break-even cost for operators, and the return of foreign capital to the basin have provided a unique foundation for increased industry activity. Precision continues to deliver for customers in the most active Canadian regions, with 32 Super Triple rigs available to work in the Montney and related gas and condensate producing areas, and 48 Super Single rigs available to work in SAGD applications, the Clearwater, and other heavy oil regions. We are running 75 rigs today and expect to reach 80 rigs within the next 2 weeks. We expect to have full utilization of our Super Triple and Super Single fleets between now and the end of the year, and to maintain activity levels between 70 and 80 rigs during Q3 and Q4.

Speaker #1: And Precision continues to deliver for customers in the most active Canadian regions, with 32 Super Triple rigs available to work in the Montney and related gas and condensate-producing areas, and 48 Super Single rigs available to work in SAGD applications, the Clearwater, and other heavy oil regions.

Speaker #1: We are running 75 rigs today and expect to reach 80 rigs within the next two weeks. We expect to have full utilization of our Super Triple and Super Single fleets between now and the end of the year, and to maintain activity levels between 70 and 80 rigs during the third and fourth quarters.

Speaker #1: Our Canadian drilling fleet continues to advance. We will deliver our 20th Super Single pad rig in September, and major Super Triple upgrades in October and November, further expanding our ability to deliver for our customers.

Carey Ford: Our Canadian drilling fleet continues to advance, and we will deliver our 20th Super Single pad rig in September, and major Super Triple upgrades in October and November, further expanding our ability to deliver for our customers. The outlook for our CMP segment in Canada is also positive. Despite one of the wettest Q2s on record, our business delivered exceptional financial performance with year-over-year growth in activity, revenue, and EBITDA. Our industry leadership position, crew and rig quality, and support systems continue to meet increasing customer requirements in Canada. Q3 is off to a solid start, with over 80 rigs working in the field today. In the US, in an effort to reposition the business, Precision is meeting a growing set of opportunities with high-quality Super Series assets, a leading digital technology platform, exceptional crews, and robust operational support systems.

Speaker #1: The outlook for our CMP segment in Canada is also positive. Despite one of the wettest Q2s on record, our business delivered exceptional financial performance with year-over-year growth in activity, revenue, and EBITDA.

Speaker #1: Our industry leadership position, crew and rig quality, and support systems continue to meet increasing customer requirements in Canada. Q3 is off to a solid start, with over 80 rigs working in the field today.

Speaker #1: In the US, in an effort to reposition the business, Precision is meeting a growing set of opportunities with high-quality Super Series assets, a leading digital technology platform, exceptional crews, and robust operational support systems.

Speaker #1: Our strategy is working not only through increased activity and customer concentration, but also through onboarding new key customers. Based on our conversations with customers, we expect gas activity to be steady, with some temporary pauses in the Northeast drilling programs this fall, and supportive oil pricing presenting an opportunity for our customers to either add a rig or high-grade their existing service provider.

Carey Ford: Our strategy is working not only through increased activity and customer concentration, but also through onboarding new key customers. Based on our conversations with customers, we expect gas activity to be steady, with some temporary pauses in the Northeast drilling programs this fall, and supportive oil pricing presenting an opportunity for our customers to either add a rig or high-grade their existing service provider. We believe this market presents an excellent backdrop for Precision to increase activity and expand margins between now and the end of the year, setting the foundation for continued success in 2027. I would like to conclude by thanking the Precision crews, field leadership, and all Precision employees for their commitment to safety, customer service, and dedication to Precision. With that, I will hand the call back to the operator for questions.

Speaker #1: We believe this market presents an excellent backdrop for Precision to increase activity and expand margins between now and the end of the year, setting the foundation for continued success in 2027.

Speaker #1: I would like to conclude by thanking the Precision crews, field leadership, and all Precision employees for their commitment to safety, customer service, and dedication to Precision.

Speaker #1: With that, I will hand the call back to the operator for questions.

Speaker #2: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press *11 again.

Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star one one again. We'll 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.

Speaker #2: We'll pause for a moment while we compile our Q&A roster. Our first question comes from Aaron McNeil with TD Cowen. Your line is open.

Speaker #3: Hey everyone, thanks for taking my questions. We're fielding a lot of questions on the U.S. margin guide for the third quarter. I guess, what assumptions are you making around both the number of rigs being reactivated in Q3, as well as the quantum and total dollars?

Aaron MacNeil: Hey, everyone. Thanks for taking my questions. We're fielding a lot of questions on the US margin guide for Q3. I guess, what assumptions are you making around both the number of rigs being reactivated in Q3 as well as the quantum in total dollars? How would that have compared to Q2?

Speaker #3: And how would that have compared to the second quarter?

Carey Ford: Aaron MacNeil, I'll let Dustin Honing talk about the reactivations cost and the number of reactivations, and I'll give a little bit of commentary about the market backdrop.

Speaker #1: Aaron, I'll let Dustin talk about the reactivation costs and the number of reactivations, and I'll give a little bit of commentary about the market backdrop.

Speaker #3: Yeah. So, Aaron, on the reactivation front, in Q2, we moved, as you know, from 32 rigs up to 42. We had seven, what we’d call, major reactivations during that time frame.

Dustin Honing: Aaron MacNeil, on the reactivation front, in Q2, we moved, as you know, from 32 rigs up to 42. We had what we'd call seven major reactivations during that timeframe, and that climb certainly exceeded our expectations. We thought we would exit with the rig count in the high 30s, really good traction in Q2, but certainly had some impact on margin. When you look at Q3, it's a bit more of a rebalancing. We're seeing more increased opportunity in the Permian, and on a per-day basis, think of a reactivation cost ranging between CAD 1,500 to upward of CAD 2,000 a day. That's inclusive of the extra labor required to make sure that we can hit the ground running, we can crew these rigs adequately, and we are ready to go and execute for our customers.

Speaker #3: And that climb certainly exceeded our expectations. We thought we would exit with the rig count in the high 30s, so really good traction in Q2, but it certainly had some impact on margin.

Speaker #3: When you look at Q3, it's a bit more of a rebalancing. We're seeing increased opportunity in the Permian. And on a per-day basis, think of a reactivation cost ranging between $1,500 to upward of $2,000 a day.

Speaker #3: And that's inclusive of the extra labor required to make sure that we can hit the ground running, we can crew these rigs adequately, and we are ready to go and execute for our customers.

Speaker #1: Yeah, and I'll just add, you know, we're guiding to kind of low-40s rig count in Q3, and that's a result of activating rigs in oil basins.

Carey Ford: I'll just add, we're guiding to low 40s rig count in Q3, that's a result of activating rigs in oil basins. I mentioned in my comments that we expect a couple of our customers to have pauses in their programs in Q4, which kind of looks for a two or three-month pause before picking up rigs again in November and December. That's why we have reactivations with effectively a flat guide.

Speaker #1: And I mentioned in my comments that we expect a couple of our customers to have pauses in their programs in Q4, which looks like a two- or three-month pause before picking up rigs again in November and December.

Speaker #1: So that's why we have reactivations with, effectively, a flat guide.

Speaker #3: Gotcha. Sorry, maybe just another clarification. You guys had mentioned that there were seven reactivations, more in the second quarter. So, how many are being reactivated in the third quarter, or switching basins, as you described it?

Aaron MacNeil: Gotcha. Sorry, maybe just another clarification. You guys had mentioned that there was the seven reactivations more in Q2. How many are being reactivated in Q3 or switching basins, as you described it?

Speaker #1: I think we're expecting to have about five rigs reactivated.

Carey Ford: I think we're expecting to have about five rigs reactivated.

Speaker #3: Gotcha. Okay.

Aaron MacNeil: Got you. Okay.

Speaker #1: In the first quarter.

Carey Ford: In the Q3.

Speaker #3: Okay, great.

Aaron MacNeil: Okay, great.

Speaker #1: Yeah, and one of the yeah, and just since everybody would have the question about when does the reactivation period pause, we've given guidance for Q4 margins of approaching $10,000 a day to kind of point to where when we have kind of normal activity levels without a high number of reactivations, where we expect margins to shake out.

Carey Ford: Yeah.

Aaron MacNeil: And then-

Carey Ford: Just since everybody would have the question about when does the reactivation period pause, we've given guidance for Q4 margins of approaching $10,000 a day to kind of point to where, when we have normal activity levels without a high number of reactivations, where we expect margins to shake out.

Speaker #3: Yeah, no, makes sense. And then, Dustin, maybe a follow-up on this CRA issue. In the event that you're ultimately on the hook for these penalties, how do the tax pools come into play?

Aaron MacNeil: Yep. No, makes sense. Dustin, maybe a follow-up on this CRA issue. In the event that you're ultimately on the hook for these penalties, how do the tax pools come into play? Maybe just a bigger picture, do you see it as impacting sort of your return of capital commitments?

Speaker #3: And maybe just a bigger-picture question: do you see this impacting your return-of-capital commitments at all?

Speaker #1: Okay, so I'm not going to go into specifics, but let me just go through the contingency announcement, and I'm sure others will have questions.

Dustin Honing: Okay. I'm not gonna go into specifics, but let me just go through the contingency announcement, I'm sure others would have questions. First and foremost, I'll start by saying that we have a very strong conviction in our position, and our external advisors believe that our filing position is appropriate. Although we think it's highly unlikely, Aaron, the max liability that we disclosed for any potential future reassessments on this issue would be CAD 155 million plus interest. To defend our position as a large business case, PD would be required to make an upfront payment of 50% of the assessed amount and the interest. I would say think of that as about CAD 80 million all in, paid out over 2 years. It's difficult to estimate as far as timing. This has been quite sudden, but our estimate today is about CAD 40 million.

Speaker #1: First and foremost, I'll start by saying that we have a very strong conviction in our position, and our external advisors believe that our filing position is appropriate.

Speaker #1: Although we think it's highly unlikely, Aaron, the maximum liability that we disclosed for any potential future reassessments on this issue would be $155 million, plus interest.

Speaker #1: So, to defend our position as a large-scale—or, sorry, large business case, PD would be required to make an upfront payment of 50% of the assessed amount and the interest.

Speaker #1: So, I would say think of that as about $80 million, all-in, paid out over two years. It's difficult to estimate, as far as timing.

Speaker #1: This has been quite sudden, but our estimate today is about $40 million. That would be due in late 2026 and into, or early, 2027.

Dustin Honing: That would be due late 2026 or into early 2027, the rest would be spread over the next 24 months. We could do either a letter of credit, cash, or a combination of both. That is yet to be determined. If we are successful defending our position, we would be reimbursed any cash that we put into this, plus interest. I also state that these processes, they do take a long time. This is likely several years, but we'll be sure to report on progress in a timely manner. As far as the cash outlay, whether it's a letter of credit or cash, that's to be determined. Our plans as far as capital allocation and how we manage the business hasn't changed at all. This is an issue that came up.

Speaker #1: And then the rest would be spread over the next 24 months. So, we could do either a letter of credit, cash, or a combination of both.

Speaker #1: That is yet to be determined. But if we are successful in defending our position, we would be reimbursed for any cash that we put into this, plus interest.

Speaker #1: And, you know, I would also state that these processes do take a long time. This is likely several years, but we'll be sure to report on progress in a timely manner.

Speaker #1: So as far as the cash outlay, whether it's a letter of credit or cash, that's to be determined. But our plans, as far as capital allocation and how we manage the business, haven't changed at all.

Speaker #1: And this is an issue that came up. We will work to get through this with the CRA, and we'll move forward.

Dustin Honing: We will work to get through this with the CRA, and we'll move forward.

Speaker #3: And sorry, on the tax pools—like, I’m not a tax expert at all—but, like, are you able to offset that cash outlay with existing tax pools, or is it a cash outlay?

Aaron MacNeil: Sorry, on the tax pools, I'm not a tax expert at all, but are you able to offset that cash outlay with existing tax pools, or is it a cash outlay?

Dustin Honing: The tax pools would cover the years that we flag to in reassessment, but it would accelerate us becoming cash taxable. That would be a cash outlay payment in a worst-case scenario.

Speaker #1: The tax pools would cover the years that we flagged to a reassessment, but it would accelerate us becoming cash taxable. So that would be a cash outlay payment in a worst-case scenario.

Speaker #3: Gotcha. Okay. Thanks, everyone. I'll turn it back.

Aaron MacNeil: Got you. Okay. Thanks, everyone. I'll turn it back.

Speaker #1: Yeah, for sure.

Dustin Honing: Yeah, for sure.

Speaker #2: Our next question comes from Keith Mackey with RBC Capital Markets. Your line is open.

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

Speaker #4: Hey, thanks, and good morning. Maybe just starting on the Middle East reactivation—can you maybe speak more broadly about what you're seeing in the Middle East now, as far as operations, continuity, incremental costs, disruptions, et cetera?

Keith MacKey: Hey, thanks, good morning. Maybe just starting on the Middle East reactivation. Can you just maybe, Carey, speak more broadly what you're seeing in the Middle East now as far as operations, continuity, incremental costs, disruptions, et cetera? Then for the reactivation of the Kuwait rig, what are you seeing as far as reactivation costs, and do you expect those to be incurred in 2026 or 2027?

Keith Mackey: Hey, thanks, good morning. Maybe just starting on the Middle East reactivation. Can you just maybe, Carey, speak more broadly what you're seeing in the Middle East now as far as operations, continuity, incremental costs, disruptions, et cetera? Then for the reactivation of the Kuwait rig, what are you seeing as far as reactivation costs, and do you expect those to be incurred in 2026 or 2027?

Speaker #4: And then, for the reactivation of the Kuwait rig, what are you seeing as far as reactivation costs? And, you know, do you expect those to be incurred in 2026 or 2027?

Speaker #1: Yeah, okay. So more broadly, in the region, we've had minor disruptions in activity, you know, measured in, you know, single digits numbers of days over the course of the quarter.

Carey Ford: Okay. More broadly in the region, we have had minor disruptions in activity measured in single-digit numbers of days over the course of the quarter. There has been disruptions on primarily getting people in and out of the countries, with flights getting canceled and airports being closed. That has been the main driver of increased cost. In terms of the opportunity set, we have six rigs in Kuwait, four working today. We have the fifth one going to work next year. We will have one idle rig that we will continue to market. In Saudi Arabia, we effectively have three rigs that are running. We expect those to run into the foreseeable future. That really explains the opportunity set for Precision. We have looked at a lot of growth opportunities that require new capital outside of our existing fleet.

Speaker #1: But there have been disruptions, primarily in getting people in and out of the countries, with flights getting canceled and airports being closed. And so that's been the main driver of increased cost.

Speaker #1: In terms of the opportunity set, we have six rigs in Kuwait, with four working today. We have the fifth one scheduled to begin working next year.

Speaker #1: So, we'll have one idle rig that we'll continue to market. In Saudi Arabia, we effectively have three rigs that are running, and we expect those to run into the foreseeable future.

Speaker #1: And that really explains the opportunity set for Precision. We've looked at a lot of growth opportunities that require new capital outside of our existing fleet.

Speaker #1: And what we've seen in recent years is just that the paybacks on that capital investment are way too long for us to be deploying new capital.

Dustin Honing: What we have seen in recent years is just that the paybacks on that capital investment are way too long for us to be deploying new capital. We have a business that is, I would not say it is optimal scale, but it is appropriate scale. It generates a lot of cash flow, and it is a good foundation for if market conditions change to where the returns become more attractive, we will be able to grow. I think I made the comment in my opening remarks that we kind of see this as an eight-rig business for the foreseeable future and that is how we are positioning it. That really drove into our decision on streamlining our operations and closing our Dubai office because the Dubai office was, I would say, put in place for us to grow the business beyond an eight-rig business.

Speaker #1: And so we have a business that’s — I wouldn’t say it’s optimal scale, but it’s appropriate scale, generates a lot of cash flow, and it’s a good foundation for if market conditions change to where the returns become more attractive, we'll be able to grow.

Speaker #1: But I think the comment in my opening remarks, that we kind of see this as an eight-rig business for the foreseeable future, and that's how we're positioning it.

Speaker #1: And that really drove our decision to streamline our operations and close our Dubai office, because the Dubai office, I would say, was put in place for us to grow the business beyond an eight-rig business.

Speaker #1: And I think, for the foreseeable future, we're going to be maximizing margins and cash off the eighth rig—the rig going back to work in Kuwait. There will be some capital spend this year, and a lot more next year.

Dustin Honing: I think for the foreseeable future, we are going to be maximizing margins and cash flow. In terms of the eighth rig, the rig going back to work in Kuwait, there will be some capital spend this year, a lot more next year. Think of it kind of in the mid double digits, kind of in the CAD 12 to 15 million capital range, that we would recoup that within the first couple of years of the five-year plus two one-year extensions contract that we are signing.

Speaker #1: Think of it kind of in the mid-double digits, so in the $12 to $15 million capital range. We would recoup that within the first couple of years of the five-year, plus two one-year extensions, contract that we're signing.

Speaker #4: Okay, very detailed. I appreciate the comments. I also appreciate that you’ve added a lot of rigs to your contract book in the US this quarter. Can you speak to your strategy there, as far as what you expect to contract?

Keith MacKey: Okay. Very detailed. Appreciate the comments. Appreciate that you have added a lot of rigs to your contract book in the US this quarter. Can you just speak to your strategy there as far as what you expect to contract? One of your competitors just talked about having 50% of their rigs on six-month-plus contracts and the customer is sort of the gating factor as far as how they do that. What is your approach to term versus spot in this market? Do you see a lot of opportunity to increase margins by getting better rates in the spot market, or are you looking to contract more on a longer-term basis with strategic customers?

Keith Mackey: Okay. Very detailed. Appreciate the comments. Appreciate that you have added a lot of rigs to your contract book in the US this quarter. Can you just speak to your strategy there as far as what you expect to contract? One of your competitors just talked about having 50% of their rigs on six-month-plus contracts and the customer is sort of the gating factor as far as how they do that. What is your approach to term versus spot in this market? Do you see a lot of opportunity to increase margins by getting better rates in the spot market, or are you looking to contract more on a longer-term basis with strategic customers?

Speaker #4: One of your competitors just talked about having 50% of their rigs on six-month-plus contracts, and, you know, the customer is sort of the gating factor as far as how they do that.

Speaker #4: But what's your approach to term versus spot in this market? Do you see a lot of opportunity to increase margins by getting better rates in the spot market, or are you looking to contract more on a longer-term basis with, you know, with strategic customers?

Speaker #1: Okay. Well, I think you've covered all the points on the marketing strategy. Let's see if I can hit those. We are seeing rate increases, and we have pushed through rate increases.

Dustin Honing: Okay. Well, I think you've covered all the points on the marketing strategy. Let's see if I can hit those. We are seeing rate increases. We have pushed through rate increases. Some of those

Speaker #1: Some of those showed up in our Q2 day rate numbers, but we expect the rates to continue to move up throughout the course of the year.

Carey Ford: showed up in our Q2 day rate numbers. We expect the rates to continue to move up throughout the course of the year. That's just a general comment on rates. As far as term, there's some customer-specific preferences on whether they want a short-term contract or a long-term contract. A lot of it's driven by where the market is. I would characterize the market today as being a, call it a six-month to one-year term market. We have a few customers that want two-year contracts. I would say that it's moved a little bit longer term in the past couple of months as customers are looking to lock up high-quality rigs. It's still in that kind of six months to a year type timeframe.

Speaker #1: So that's just a general comment on rates. And as far as term, there are some customer-specific preferences on whether they want a shorter-term contract or a longer-term contract.

Speaker #1: But a lot of it's driven by kind of where the market is, and I would characterize the market today as being a—call it a six-month to one-year term market.

Speaker #1: We have a few customers that want two-year contracts, but I would say that it's moved a little bit longer term in the past couple of months, as customers are looking to lock up high-quality rigs.

Speaker #1: But it's still in that kind of six to six-month to a year type time frame. In terms of strategy, we I covered this in my opening remarks, and I would just point back to what we started how we started the year, what we communicated at our investment day in March.

Carey Ford: In terms of strategy, I covered this in my opening remarks. I would just point back to how we started the year, what we communicated at our investment day in March. This is deliberate. We're not going after activity and scale for activity and scale's sake. We want to target our existing customers. We want to expand our existing business, our business with existing customers. We do have a handful of target customers within the US market. The ones that we think are really well-aligned with our philosophies on digital technology and safety and performance. We are making progress on onboarding some new customers. We're really excited about that.

Speaker #1: This is deliberate. We're not going after activity and scale for activity and scale's sake. We want to target our existing customers. We want to expand our business with existing customers.

Speaker #1: We do have a handful of target customers within the U.S. market, the ones that we think are really well aligned with our philosophies on digital technology, safety, and performance.

Speaker #1: And we are making progress on onboarding some new customers, so we're really excited about that. And then the last comment I would make is we're trying to create a more resilient business that will have more stable activity. That will help with business planning and will help with spreading our fixed costs over a larger number of rigs.

Carey Ford: The last comment I would make is we're trying to create a more resilient business that will have more stable activity, that will help with business planning, it will help with spreading our fixed cost over a larger number of rigs and align with the customer base that really value what we can offer. I would just say that we're executing exactly how we want to. We're not where we want to be yet. We're making good progress and some margin pressure in Q2 and Q3 as a result of successes, something we're willing to live with.

Speaker #1: And aligned with the customer base that really values what we can offer. So I would just say that we're executing exactly how we want to.

Speaker #1: We're not where we want to be yet, but we're making good progress. Some margin pressure in Q2 and Q3 as a result of success is something we're willing to live with.

Speaker #4: Got it. Thanks very much. That's it for me.

Keith MacKey: Got it. Thanks very much. That's it for me.

Keith Mackey: Got it. Thanks very much. That's it for me.

Speaker #1: Okay. Thanks, Keith.

Carey Ford: Okay. Thanks, Keith.

Speaker #2: Our next question comes from Derek Podheser with Piper Sandler. Your line is open.

Operator: Our next question comes from Derek Podhaizer with Piper Sandler. Your line is open.

Speaker #5: Hey everyone, I wanted to go back to US land and kind of talk through some of these rig moves. So, you exited the quarter at 42.

Derek Podhaizer: Hey, everyone. Wanted to go back to US land and kind of talk through some of these rig moves. You exited the quarter at 42. Sounds like you're expecting another five rigs to be reactivated. That brings you up to 47. Appreciate the guide of low 40s because you have some rig churn up in the Northeast, some pausing that you've already talked about. Just trying to think through Q4 and into 2027, is 47 rigs kind of the right starting point if all those rigs get contracted for 2027? You also talked about supply. I'm just trying to think through these reactivation expenses into 2027, maybe your supply stack of how many rigs could go back to work. Just trying to work through the upside here, if my numbers are right on that 42 + 5, kind of a starting level at 47.

Speaker #5: Sounds like you're expecting another five rigs to be reactivated. That brings you up to 47. I appreciate the guide of low 40s, because you have some rig churn up in the Northeast and some pauses that you've already talked about.

Speaker #5: But just trying to think through Q4 and then into 2027, is 47 rigs kind of the right starting point? If all those rigs get contracted for 2027—and then you also talked about supply.

Speaker #5: I'm just trying to think through these, like, reactivation expenses into 2027. You know, maybe your supply stack of how many rigs could go back to work.

Speaker #5: Just trying to work through the upside here. And if my numbers are right on that, 42 plus 5 for kind of a starting level at 47.

Speaker #5: So, just to help out around here, that would be great.

Derek Podhaizer: Just a helper on that would be great.

Speaker #1: Okay, Derek, I think you're doing some pretty good math there. You know, we don't want to guide to an average rig count for Q4, but I would say that today, with our rig reactivations and some rigs, you know, pausing their programs for just a little bit, we have around 50 rigs that are warm and, you know, upgraded, warm—have recently worked—that won't require any reactivation costs to go back to work.

Carey Ford: Okay, Derek, I think you're doing some pretty good math there. We don't want to guide to an average rig count for Q4, but I would say that today, with our rig reactivations and some rigs pausing their programs for just a little bit, we have around 50 rigs that are warm and upgraded, warm, have recently worked, that won't require any reactivation costs to go back to work. I think in an environment with the oil price where we see it today and gas prices being constructive around CAD 3, we should hit a rig count of high 40s before the end of the year. I'm not guiding to an average rig count in a particular quarter that high, and I'm not guiding to an average rig count in Q4 that high.

Speaker #1: And I think in an environment with the oil price where we see it today, and, you know, gas prices being constructive around $3, we should hit a rig count of the high 40s before the end of the year.

Speaker #1: Now, I'm not guiding to an average rig count in a particular quarter that high, and I'm not guiding to an average rig count in Q4 that high.

Speaker #1: But I do think that with the customer conversations we have going right now, and with warm rigs available, we should be able to increase our rig count beyond where it is today.

Carey Ford: I do think that with customer conversations we have going right now and warm rigs available, we should be able to increase our rig count beyond where it is today.

Speaker #5: Okay. That's super helpful. And then just thinking about that, the approaching the 10,000 margin, I think it sounded like fourth quarter, and if you don't have any other big major reactivations in 2027, does that will that continue to trend higher, or if the demand's there, do you have the available capacity to continue doing these reactivations?

Derek Podhaizer: Okay, that's super helpful. Then just thinking about that'll be approaching the 10,000 margin, I think it's at like Q4. If you don't have any other big major reactivations in 2027, will that continue to trend higher? If the demand's there, do you have the available capacity to continue doing these reactivations? I'm basically just trying to work out how long we've got to deal with the reactivation expenses before we see that margin inflection, which it sounds like you're getting closer to, but just wanted to extend that out to 2027 a little bit.

Speaker #5: I'm basically just trying to work out, like, how long we've got to deal with the reactivation expenses before we see that margin inflection—which it sounds like you're getting closer to—but I just wanted to extend that out to 2027 a little bit.

Speaker #1: Yeah. I think you've got a couple of things. In that equation, you've got a numerator and a denominator. The rig reactivation costs on a per-day basis were highly impactful when we were running 35 rigs in a quarter.

Carey Ford: Yeah, I think you've got a couple things. In that equation, you've got a numerator, denominator, and the rig reactivation costs on a per-day basis were highly impactful when we are running 35 rigs in a quarter. Reactivating a large number of rigs in a quarter when our activity levels are pretty low, it is high on a per-day basis. As our rig activity increases and the number of reactivations slows down, we should be able to have more resilient margins if, all else equal, the pricing in the market is stable.

Speaker #1: So, reactivating a large number of rigs in a quarter when our activity levels are pretty low is high on a per-day basis. As our rig activity increases and the number of reactivations slows down, we should be able to have more resilient margins if, you know, all else equal, the pricing in the market is stable.

Speaker #5: Got it. Okay, great, Carey. Super helpful. I'll turn it back. Thanks.

Derek Podhaizer: Got it. Okay. Great, Carey. Super helpful. I will turn it back. Thanks.

Speaker #2: Again, ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. Our next question comes from Tim Monticello with ATV Cormorant Capital Markets.

Operator: Again, ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. Our next question comes from Tim Morrison with ATB Cormark Capital Markets. Your line is open.

Speaker #2: Your line is open.

Speaker #6: Thanks for taking my question. Most have been answered, but maybe just a quick follow-up on those assumptions around that $10,000 margin in Q4. Can you talk a little bit about, I guess, the pace of pricing increases that you're seeing in the market?

Tim Morrison: Thanks for taking my question. Most of them have been answered, maybe just a quick follow-up on those assumptions around that CAD 10,000 margin in Q4. Can you talk a little bit, I guess, the pace of pricing increases that you are seeing in the market? Are you implying any rig reactivation costs in Q4?

Tim Monachello: Thanks for taking my question. Most of them have been answered, maybe just a quick follow-up on those assumptions around that CAD 10,000 margin in Q4. Can you talk a little bit, I guess, the pace of pricing increases that you are seeing in the market? Are you implying any rig reactivation costs in Q4?

Speaker #6: And then, like, are you implying any rig reactivation costs in Q4?

Speaker #1: So, first of all, on rig reactivations, I think they would be relatively minor. I think if there are a few reactivations or less, I think that margin guidance holds.

Carey Ford: First of all, on the rig reactivations, I think they would be relatively minor. I think if there are a few reactivations or less, I think that margin guidance holds. In terms of pricing increases, I would say that the range of pricing increases in the US market for some customers where maybe they have got a recent upgraded rig and the contract is rolling off, but it was already at a high day rate, maybe the increase is low single digit thousands of CAD a day. For some customers where the rig was, for whatever reason, a little bit below market, we are seeing rate increases of up to CAD 5,000 a day. I would say spread across our fleet, it would be in the maybe CAD 500 to CAD 1,000 a day per quarter type increase.

Speaker #1: In terms of pricing increases, I would say that the range of pricing increases in the US market for some customers, where maybe they've got a recent upgraded rig and the contract is rolling off and it was already at a high day rate, maybe the increase is low single-digit thousands of dollars a day.

Speaker #1: For some customers where the rig was, for whatever reason, a little bit below market, we're seeing rate increases of up to $5,000 a day.

Speaker #1: So I would say, spread across our fleet, it would be in the, you know, maybe $500 to $1,000 a day per quarter type increase.

Speaker #6: Yeah, and Tim, I'd also add that if you look back over the last several quarters in the US, even with lower activity levels, we were consistently running an operating margin around that $9,000-a-day mark.

Dustin Honing: Yeah. Tim, I would also add that if you look back over the last several quarters in the US, even with lower activity levels, we were consistently running an operating margin around that CAD 9,000 a day mark. Fixed cost absorption, I think we can better incur any unforeseen reactivation opportunities. The pricing opportunities that Carey mentioned that we are pushing through right now, I think that it is an attainable target.

Speaker #6: So, fixed cost absorption—I think we can better incur any unforeseen reactivation opportunities. And then the pricing opportunities that Carey mentioned, that we're pushing through right now, I think that's an attainable target.

Speaker #1: Yeah, for Q4. But I would also say that we'd expect to exceed that next year, all else equal. So this is just—we're trying to put a mark out there for Q4 to help people kind of understand when the dust settles.

Carey Ford: Yeah. For Q4, I would also say that we would expect to exceed that next year, all equal. This is just we are trying to put a mark out there for Q4 to help people kind of understand when the dust settles, where do we think margins will be in Q4. That is not our goal to have it ending point with our margins at that level.

Speaker #1: Where do we think margins will be in the fourth quarter? But that's not our goal, to have an ending point with our margins at that level.

Speaker #6: Got it. On CapEx, the number in the quarter is centered around the high end of the previous CapEx range for the year. Can you talk about, I guess, what solidified in the outlook to drive to the higher end?

Tim Morrison: Got it. On CapEx, the number in the quarter centered around the high end of the previous CapEx range for the year. Can you talk about, I guess, what solidified in the outlook to drive to the higher end? Do you see any further opportunities to deploy more capital in terms of CapEx this year? Do you think that is sort of baked in dry at this point?

Tim Monachello: Got it. On CapEx, the number in the quarter centered around the high end of the previous CapEx range for the year. Can you talk about, I guess, what solidified in the outlook to drive to the higher end? Do you see any further opportunities to deploy more capital in terms of CapEx this year? Do you think that is sort of baked in dry at this point?

Speaker #6: And do you see any further opportunities to deploy more capital in terms of CapEx this year? Do you think that's sort of what they can drive at this point?

Speaker #1: Well, we messaged Q2 as disproportionately higher in our capital spending. There were some deliveries that did trickle into Q3, but I would say our program is a little bit more front-weighted.

Dustin Honing: Well, we messaged Q2 as disproportionately higher in our capital spending. There were some deliveries that did trickle into Q3. I would say our program is a little bit more front-weighted, especially it will be more in the third quarter. We talked about the major Super Triple upgrades going on in Canada. There are two of those. That spend has been underway, it will continue into Q3 and at the beginning of Q4, where those rigs are mobilized and deployed. I think overall comment I would make, Tim, is we feel really comfortable with that CAD 265 budget, that allows us to further recognize some activity increases in the US. We mentioned the warm rigs that we have available. If you look at the majority of our reactivation expense has been in expense, not capitalized. We are pretty comfortable with that CAD 265 number.

Speaker #1: Especially, there'll be more in the third quarter. We talked about the major super triple upgrades going on in Canada—there are two of those. That spend has been underway, and it will continue into Q3 and at the beginning of Q4, when those rigs are mobilized and deployed.

Speaker #1: I think, overall, the comment I'd make, Tim, is we feel really comfortable about the $265 million budget. And that allows us to further recognize some activity increases in the US.

Speaker #1: We mentioned the warm rigs that we have available. If you look at the majority of our reactivation expense, it has been in expense, not capitalized.

Speaker #1: So we're pretty comfortable about the 265 number.

Speaker #6: Okay. I haven't heard much about pricing increases in Canada, but it does sound like activity levels through the back half of the year should be pretty strong.

Tim Morrison: Okay. I have not heard much about pricing increases in Canada, it does sound like activity levels through the back half of the year should be pretty strong. You talk about near full utilization, your Super Single and Super Triples. Are you seeing any signs of momentum in Canadian pricing at all?

Tim Monachello: Okay. I have not heard much about pricing increases in Canada, it does sound like activity levels through the back half of the year should be pretty strong. You talk about near full utilization, your Super Single and Super Triples. Are you seeing any signs of momentum in Canadian pricing at all?

Speaker #6: You talk about, in your full utilization, your super singles and super triples. Are you seeing any signs of momentum in Canadian pricing at all?

Speaker #1: Yeah. I think for our Super Singles, you know, particularly with all the pad Super Singles, and then the Super Triples who are working in the Montney, the opportunities to raise rates there are muted.

Carey Ford: Yeah, I think for our Super Single, particularly with all the pad Super Single and the Super Triples we have working in the Montney, the opportunities to raise rates there are muted. We have raised some rates for that rig class. We do, as I mentioned, have some rigs that are getting deployed in the Q3 and Q4 upgrades, which would have a positive impact to the fleet pricing because they are top of the market rigs. I think there is a little bit of opportunity to move rates, I would say broadly, we are not quite seeing it yet.

Speaker #1: We have raised some rates for that rig class. And then we do, as I mentioned, have some rigs that are getting deployed in the third and fourth quarter upgrades, which would have a positive impact to the fleet pricing because they're top of the market rigs.

Speaker #1: So, I think there's a little bit of opportunity to move rates, but I would say, broadly, we're not quite seeing it yet.

Speaker #6: Okay, I appreciate it. And then I guess just one quick one on the pause that you're seeing in the Northeast. Is that related to a specific customer or a couple of customers' activity programs, or are they moving from one customer to another?

Tim Morrison: Okay. I appreciate it. I guess just one quick one on the pause that you are seeing in the Northeast. Is that related to a specific customer or a couple customers' activity programs? Are they moving from one customer to another?

Tim Monachello: Okay. I appreciate it. I guess just one quick one on the pause that you are seeing in the Northeast. Is that related to a specific customer or a couple customers' activity programs? Are they moving from one customer to another?

Speaker #1: No, it does relate to two or three different customers in the region, and it's really about how they execute their drilling programs.

Carey Ford: No, it does relate to two or three different customers in the region. It's really how they execute their drilling programs. A lot of times they will drill wells in the first two or three quarters of the year, pause, and then frack the wells, and then start drilling again. This is not a new seasonal impact that we've seen, but just it's highlighted where we're reactivating rigs and have a flat overall rig count. We're kind of making note of it for the market.

Speaker #1: A lot of times, they will drill wells in the first two or three quarters of the year, pause, and then frack the wells, and then start drilling again.

Speaker #1: And so, this is not a new seasonal impact that we've seen, but it is highlighted where we're reactivating rigs and have a flat overall rig count.

Speaker #1: So, we're kind of making note of it for the market.

Speaker #6: Okay. Understood. I appreciate all the detail.

Tim Morrison: Okay, understood. I appreciate all the detail on that.

Tim Monachello: Okay, understood. I appreciate all the detail on that.

Speaker #5: Our next question comes from John Daniel with Daniel Energy Partners. Your line is open.

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

Speaker #6: Hey, guys. Thanks for including me. The incremental rigs which you expect to go to work in Q4 and the U.S.—would those largely be for public or private operators?

John Daniel: Hey, guys. Thanks for including me. The incremental rigs which you expect to go to work in Q4 in the US, would those largely be for public or private operators? Do you see any of those additions being used to displace your competition?

Speaker #6: And do you see any of those additions being used to displace your competition?

Speaker #1: So, it's a mix of public and private. Maybe the rig additions that we see in the near term would be more weighted toward public, for precision.

Carey Ford: It's a mix of public and privates. Maybe the rig additions that we see in the near term would be more weighted towards publics for Precision. I think the H1 of the year it was mostly privates, now it's more publics. We at least have two opportunities where we're displacing with two rig adds where we know we're displacing a competitor.

Speaker #1: I think the first half of the year is mostly private. Now it's more public. And then we at least have two opportunities where we're displacing with two rig adds, where we know we're displacing a competitor.

Speaker #6: Okay, got it. And then going back to the Marcellus for a second, I know that's a number—those operators have first-half weighted budgets.

John Daniel: Okay. Got it. Going back to the Marcellus for a second. I know that a number of those operators have H1 weighted budgets, this isn't new. In prior cycles, if you will, have there been periods where you guys get paid a standby rate during when the rigs are released? Is the market strong enough where you might contemplate moving that rig to another basin? What would it take for you to come to that decision to do so?

Speaker #6: So, this isn't new, but in prior cycles, if you will, have there been periods where you guys get paid a standby rate during when the rigs are released? Or is the market strong enough where you might contemplate moving that rig to another basin, and what would it take for you to come to that decision to do so?

Speaker #1: Okay. I would first say that we really like the Northeast. We like our rig fleet there, our operation, our reputation, and our customers. So we're not eager to move a rig out of the Northeast just to keep our rig count in the U.S. higher.

Carey Ford: Okay. I would first say that we really like the Northeast. We like our rig fleet there, our operation, our reputation, and our customers. We're not eager to move a rig out of the Northeast just to keep our rig count in the US higher. I think it would take a lot to move a rig out of there. Second of all, if a rig is on contract and a customer pauses, we would get a standby rate. We have had instances where customers will not have a rig on contract, but they want to either keep the crew warm or give us some economic incentive to keep the rig kind of marked as theirs. We do sometimes have those types of arrangements.

Speaker #1: So, I think it would take a lot to move a rig out of there. Second of all, if a rig is on contract and a customer pauses, we would get a standby rate.

Speaker #1: And we have had instances where customers will not have a rig on contract, but they want to either keep the crew warm or give us some economic incentive to keep the rig kind of marked as theirs.

Speaker #1: And so we do sometimes have those types of arrangements, so it's a bit of a mixed bag.

John Daniel: Okay.

Carey Ford: It's a bit of a mixed bag.

Speaker #6: Mixed bag, fair enough. Well, do those crews—when the rigs go down—do you recycle them to other basins to keep them working? How do you handle the labor situation?

John Daniel: Mixed bag. Fair enough. Well, do those crews, when the rigs go down, do you recycle them to other basins to keep them working? How do you handle the labor situation?

Carey Ford: We would typically do that. The Northeast is a bit different, where a lot of the crews are local and so we would try to work them on other rigs in the region if we can.

Speaker #1: We would typically do that. The Northeast is a bit different, where a lot of the crews are local. And so we would try to work them on other rigs in the region if we can.

Speaker #6: Okay, got it. Thank you very much.

John Daniel: Got it. Okay. Thank you very much.

Speaker #1: All right, John. Thanks.

Carey Ford: All right, Josh. Thanks.

Speaker #5: I'm not showing any further questions at this time. I'd like to turn the call back over to Levon for any closing remarks.

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 #7: Thank you, everyone, for joining today and taking the time to learn a little bit more about Precision Drilling. Should you have any follow-up questions, please reach out to the Investor Relations team.

Lavonne Zdunich: Thank you everyone for joining today and taking the time to learn a little bit more about Precision Drilling. Should you have any follow-up questions, please reach out to the investor relations team. Thank you again.

Speaker #7: Thank you again.

Operator: Thank you, ladies and gentlemen. This concludes today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

Q2 2026 Precision Drilling Corp Earnings Call

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