Precision Drilling Corporation (NYSE:PDS) Q1 2022 Results Conference Call April 28, 2022 2:00 PM ET

Company Participants

Carey Ford - Senior Vice President and Chief Financial Officer

Kevin Neveu - President and Chief Executive Officer

Conference Call Participants

Taylor Zurcher - Tudor, Pickering, Holt

Aaron MacNeil - TD Securities

Waqar Syed - ATB

John Gibson - BMO Capital Markets

Cole Pereira - Stifel

Keith MacKey - RBC Capital Markets

Josef Schachter - Schachter Energy

Operator

Good day and thank you for standing by. Welcome to the Precision Drilling Corporation 2022 First Quarter 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. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Carey Ford, Senior Vice President and Chief Financial Officer. Please go ahead.

Carey Ford

Thanks, Shannon, and good afternoon. Welcome to Precision Drilling's first quarter 2022 earnings conference call and webcast. Participating with me today is Kevin Neveu, President and Chief Executive Officer. Precision reported its first quarter results through a press release earlier this morning. Please note that the financial results are in Canadian dollars unless otherwise indicated.

Also, please note some of our comments today will refer to non-IFRS financial measures and will include forward-looking statements regarding Precision's future results and prospects, which are subject to a number of risks and uncertainties. Please see our news release and other regulatory filings for more information on financial measures, forward-looking statements and risk factors.

Prior to Kevin providing an operational outlook and update, I will review our first quarter financial results. Our first quarter results reflect a very good start to the year with increasing activity, day rates and margins and leading-edge indicators pointing to even stronger financial results in the second half of the year. Although the first quarter business performance improved dramatically from the first quarter 2021, our adjusted EBITDA of $37 million decreased 32% from the first quarter 2021. The decrease in adjusted EBITDA primarily results from a $48 million share-based compensation accrual charge without which adjusted EBITDA would have been $84 million.

Revenue was $351 million, an increase of 49% from Q1 2021. In the U.S., drilling activity for Precision averaged 51 rigs in Q1, an increase of six rigs from Q4. And daily operating margins in the quarter, absent any turnkey or idle-but-contracted impact were US$5,672 essentially flat from Q4 2021. The normalized margins are slightly lower than the guidance provided due to additional staffing of rigs to build hot crews and start-up costs during the quarter. For Q2, we expect normalized margins to increase approximately $1,500 per day. With repricing of spot market rigs, improved fixed cost absorption and technology pull-through, we expect normalized margins to continue expanding through the second half of the year.