UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO SECTION 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For July 31, 2003
Commission File Number: 001-14534
PRECISION DRILLING CORPORATION
(Exact name of registrant as specified in its charter)
4200, 150 - 6TH AVENUE S.W.
CALGARY, ALBERTA
CANADA T2P 3Y7
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F [_] Form 40-F [X]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1)._______
Note: Regulation S-T Rule 101(b)(1) only permits the submission in
paper of a Form 6-K if submitted solely to provide an attached annual report to
security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7):_______
Note: Regulation S-T Rule 101(b)(7) only permits the submission in
paper of a Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws of
the jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- N/A
-------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRECISION DRILLING CORPORATION
Per: /s/ Dale E. Tremblay
---------------------------------------
Dale E. Tremblay
Senior Vice President Finance &
Chief Financial Officer
Date: July 31, 2003
Calgary, Alberta, Canada - July 31, 2003
PRECISION DRILLING CORPORATION ANNOUNCES
IMPROVED SECOND QUARTER RESULTS
Precision Drilling Corporation ("Precision" or the "Corporation") today reports
earnings per share from continuing operations for the three months ended June
30, 2003 of $0.12 compared to $0.03 in the same quarter of 2002. Included in
earnings from continuing operations is a $1.2 million ($0.02 per share) gain on
disposal of equity investments and a $4.3 million ($0.05 per share) write down
of operating assets in the Technology Services segment. Also during the quarter
the Corporation sold its interest in an Argentinean drilling rig joint venture
realizing a gain on disposal of discontinued operations of $4.4 million or $0.08
per share, bringing total earnings per share to $0.20. For the six month period
ended June 30, 2003, earnings per share from continuing operations was $1.42
compared to $1.22 for the same period in 2002.
Revenue of $356.6 million for the quarter increased by $32.2 million or 10% over
the prior year. The majority of this increase came from the Corporation's
Canadian operations. Uncertainty as to the timing and duration of spring breakup
always presents challenges in predicting second quarter operating results and
this year was no exception. Strong first quarter demand for services continued
into the second quarter; however activity levels were curtailed by heavy
snowfalls late in the season and extended periods of rain throughout most of the
Western Canadian Sedimentary Basin limiting access to drilling sites. During the
quarter Precision had as many as 80 drilling rigs waiting on weather conditions
to allow them to go to work. The Corporation's Canadian operations should
continue to be the driver for improved earnings in 2003. Customer requests for
services indicate that the activity shortfall experienced in the second quarter
should be made up in the second half of the year.
The Contract Drilling segment's revenue increased by 14% to $139.1 million in
the second quarter compared to $122.1 million in the same quarter last year. For
the six-months ended June 30, revenue increased 11% from 2002.
In Canada, the rig fleet achieved 5,605 operating days for a utilization rate of
27% in the quarter compared to 4,146 operating days in the same quarter last
year with a 20% utilization rate. The increase in rig operating days of 35% for
the quarter and 23% for the six-month period follows the overall industry
activity. Average day rates were down year over year. Soft demand for rigs
resulted in reduced rates in the latter half of 2002. These lower rates carried
through to 2003. Pricing in Canada is expected to improve in 2003 as anticipated
activity reaches record levels.
During the second quarter the Corporation experienced an increase in
international drilling activity as the number of days increased over the same
quarter in 2002 by 27% to 895 days. The increase in days is the result of
increased activity in Mexico and a one rig project in India. The Corporation has
entered into a second rig contract in India, is mobilizing another rig to the
Middle East and is adding three rigs to its fleet in Mexico.
The service rig fleet generated 77,018 operating hours in the second quarter, up
3% from the same quarter last year. Average hourly rates have remained
consistent with the second quarter of 2002.
In the second quarter, revenue for the Technology Services segment was 5% higher
than the comparable quarter of 2002. Increases were experienced in all
geographical locations except Europe/Africa and the Mexico integrated services
project. The most significant increase was realized in the Middle East division
where revenue increased $6.7 million, or 113%, due to a wireline contract in
Yemen and additional Controlled Pressure Drilling contracts. The US region has
experienced month over month growth in line with the increased rig count.
Revenue for the quarter was contributed from Canada at 31% (2002 - 32%), US 26%
(2002- 24%) and International 43% (2002 - 44%).
Operating earnings as a percentage of revenue improved moderately from a loss of
11% in the second quarter of 2002 to a loss of 10% this year. Excluding the $4.3
million writedown of operating assets, operating earnings as a percentage of
revenue would have been a loss of 7%. Depreciation expense increased as a result
of asset writedowns, increased capital assets and a gain on disposal of capital
assets in 2002 of $2.7 million compared to a loss on disposal in 2003 of $0.4
million. Total capital expenditures in the Technology Services segment in the
last twelve months have been $233.3 million.
The steps initiated in the first quarter to reduce costs and improve
profitability are continuing. In certain international locations these steps
have proven to be a significant challenge and will require more time and
attention to achieve desired results.
The Technology Services segment continues with its new tool build program.
Management continues to focus on prioritizing the deployment of these new tools
and improving the efficiency of operations in the Technology Services segment.
The Rental and Production segment experienced an increase in revenue of 16% over
the prior year to $63.8 million. The segment's rental division realized higher
revenues due to increased rental days and a modest increase in revenue per
rental day driven by the activity levels in Canada. Industrial plant maintenance
revenue was up on the prior year by 11% due to an increase in activity in
Canada. Due to the seasonality of the business, the second quarter of a year is
typically the busiest quarter for industrial plant maintenance.
Certain statements contained in this press release, including statements which
are related to drivers for improved earnings, customer requests for services and
drilling activity and which may contain words such as "anticipate", "could",
"should", "expect", "believe", "will" and similar expressions and statements
relating to matters that are not historical facts are forward-looking
statements. Such forward-looking statements involve known and unknown risks and
uncertainties which may cause the actual results, performance or achievements of
Precision to be materially different from any future results, performances or
achievements expressed or implied by such forward-looking statements. Such
factors include fluctuations in the market for oil and gas and related products
and services; competition; political and economic conditions in countries in
which Precision does business; the demand for services provided by Precision;
changes in laws and regulations, including environmental, to which Precision is
subject and other factors, which are described in further detail in Precision's
filings with the Securities and Exchange Commission.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
CDN $000'S, EXCEPT PER SHARE AMOUNTS (UNAUDITED) 2003 2002 2003 2002
--------------------------------------------------------------------------------------------------------------------------
Revenue $ 356,561 $ 324,328 $ 956,234 $ 862,931
Expenses:
Operating 267,595 241,571 654,510 580,303
General and administrative 31,952 37,835 68,660 77,874
Depreciation and amortization 37,914 29,904 88,527 70,496
Research and engineering 8,364 8,227 17,645 16,288
Foreign exchange 568 4,214 735 3,794
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346,393 321,751 830,077 748,755
--------------------------------------------------------------------------------------------------------------------------
Operating earnings 10,168 2,577 126,157 114,176
Interest 8,965 8,543 18,400 17,460
Dividend income -- (39) -- (39)
Gain on disposal of investments (1,164) -- (1,164) --
--------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes, non-controlling
interest and discontinued operations 2,367 (5,927) 108,921 96,755
Income taxes:
Current 10,882 11,953 32,917 40,666
Future (15,268) (19,726) (2,812) (11,118)
------------------------------------------------------------------------------------------------------------------------
(4,386) (7,773) 30,105 29,548
--------------------------------------------------------------------------------------------------------------------------
Earnings before non-controlling interest and
discontinued operations 6,753 1,846 78,816 67,207
Non-controlling interest 280 434 566 739
--------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations 6,473 1,412 78,250 66,468
Gain on disposal of discontinued operations 4,389 -- 17,460 --
Discontinued operations, net of tax -- 1,915 49 3,688
--------------------------------------------------------------------------------------------------------------------------
Net earnings 10,862 3,327 95,759 70,156
Retained earnings, beginning of period 704,981 595,648 620,084 528,819
--------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of period $ 715,843 $ 598,975 $ 715,843 $ 598,975
==========================================================================================================================
Earnings per share from continuing operations:
Basic $ 0.12 $ 0.03 $ 1.44 $ 1.24
Diluted $ 0.12 $ 0.03 $ 1.42 $ 1.22
==========================================================================================================================
Earnings per share:
Basic $ 0.20 $ 0.06 $ 1.77 $ 1.31
Diluted $ 0.20 $ 0.06 $ 1.74 $ 1.28
==========================================================================================================================
Common shares outstanding (000's) 54,399 53,877 54,399 53,877
Weighted average shares outstanding (000's) 54,325 53,612 54,243 53,434
Diluted shares outstanding (000's) 55,203 55,047 55,174 54,638
CONSOLIDATED BALANCE SHEETS
JUNE 30, December 31,
CDN $000's 2003 2002
----------------------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
Current assets:
Cash $ 10,957 $ 17,315
Accounts receivable 414,956 443,799
Income taxes recoverable 7,568 7,804
Inventory 114,081 132,909
----------------------------------------------------------------------------------------------------------------
547,562 601,827
Property, plant and equipment, net of accumulated depreciation 1,573,462 1,521,444
Intangibles, net of accumulated amortization 69,150 72,380
Goodwill 537,692 546,921
Other assets 11,217 17,443
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$ 2,739,083 $ 2,760,015
======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ 114,503 $ 95,321
Accounts payable and accrued liabilities 237,890 268,568
Current portion of long-term debt 22,653 27,682
----------------------------------------------------------------------------------------------------------------
375,046 391,571
Long-term debt 411,144 514,878
Future income taxes 311,400 318,547
Non-controlling interest 2,585 2,019
Shareholders' equity:
Share capital 923,065 912,916
Retained earnings 715,843 620,084
----------------------------------------------------------------------------------------------------------------
1,638,908 1,533,000
----------------------------------------------------------------------------------------------------------------------
$ 2,739,083 $ 2,760,015
======================================================================================================================
Common shares outstanding (000's) 54,399 54,067
Common share purchase options outstanding (000's) 3,741 4,119
CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
CDN $000's (unaudited) 2003 2002 2003 2002
--------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in):
Continuing operations:
Net earnings $ 6,473 $ 1,412 $ 78,250 $ 66,468
Items not affecting cash:
Depreciation and amortization 37,914 29,904 88,527 70,496
Gain on disposal of investments (1,164) -- (1,164) --
Future income taxes (15,268) (19,726) (2,812) (11,118)
Non-controlling interest 280 434 566 739
Amortization of deferred financing costs 322 324 644 648
Unrealized foreign exchange gain on
long-term debt (7,807) (2,854) (12,551) (3,235)
----------------------------------------------------------------------------------------------------------------------
Funds provided by continuing operations 20,750 9,494 151,460 123,998
Changes in non-cash working capital balances 149,607 124,842 (1,097) 28,250
--------------------------------------------------------------------------------------------------------------------------
170,357 134,336 150,363 152,248
Discontinued operations:
Net earnings 4,389 1,915 17,509 3,688
Items not affecting cash:
Gain on disposal of discontinued operations (4,389) -- (17,460) --
Depreciation and amortization -- 593 133 1,175
Future income taxes -- (45) -- 369
--------------------------------------------------------------------------------------------------------------------------
Funds provided by discontinued operations -- 2,463 182 5,232
Investments:
Business acquisitions -- -- (6,800) --
Purchase of property, plant and equipment (91,657) (59,612) (168,383) (106,392)
Purchase of intangibles -- (1,971) (6) (2,086)
Proceeds on sale of property, plant and equipment 6,909 11,144 11,146 17,302
Proceeds on disposal of discontinued operations 6,914 -- 67,274 --
Proceeds on disposal of investments 7,620 -- 7,620 --
Investments (115) -- (874) (147)
----------------------------------------------------------------------------------------------------------------------
(70,329) (50,439) (90,023) (91,323)
Financing:
Increase in long-term debt -- -- 44,960 10,119
Repayment of long-term debt (135,731) (80,100) (141,171) (86,445)
Issuance of common shares on exercise of options 3,940 14,603 10,149 20,025
Change in bank indebtedness 16,023 (483) 19,182 4,131
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(115,768) (65,980) (66,880) (52,170)
--------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (15,740) 20,380 (6,358) 13,987
Cash, beginning of period 26,697 6,838 17,315 13,231
--------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 10,957 $ 27,218 $ 10,957 $ 27,218
==========================================================================================================================
SEGMENT INFORMATION
THREE MONTHS ENDED JUNE 30, 2003 Contract Technology Rental and Corporate
CDN $000's (unaudited) Drilling Services Production and Other Total
---------------------------------------------------------------------------------------------------------------------
Revenue $ 139,082 $ 153,647 $ 63,832 $ -- $ 356,561
Operating earnings 19,552 (15,449) 14,275 (8,210) 10,168
Research and engineering -- 8,364 -- -- 8,364
Depreciation and amortization 12,660 21,085 2,973 1,196 37,914
Total assets 1,274,722 1,225,377 178,104 60,880 2,739,083
Goodwill 257,531 251,589 28,572 -- 537,692
Capital expenditures 21,698 61,180 3,345 5,434 91,657
---------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, 2002 Contract Technology Rental and Corporate
CDN $000's (unaudited) Drilling Services Production and Other Total
---------------------------------------------------------------------------------------------------------------------
Revenue $ 122,120 $ 146,991 $ 55,217 $ -- $ 324,328
Operating earnings 15,764 (15,965) 10,480 (7,702) 2,577
Research and engineering -- 8,227 -- -- 8,227
Depreciation and amortization 11,479 13,986 3,370 1,069 29,904
Total assets 1,259,952 1,027,329 237,227 80,103 2,604,611
Goodwill 257,531 250,045 37,801 -- 545,377
Capital expenditures 9,163 48,859 3,099 462 61,583
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 (1) Contract Technology Rental and Corporate
CDN $000's (unaudited) Drilling Services Production and Other Total
---------------------------------------------------------------------------------------------------------------------
Revenue $ 474,394 $ 368,387 $ 113,453 $ -- $ 956,234
Operating earnings 124,315 (6,485) 22,610 (14,283) 126,157
Research and engineering -- 17,645 -- -- 17,645
Depreciation and amortization 38,273 41,593 6,292 2,369 88,527
Total assets 1,274,722 1,225,377 178,104 60,880 2,739,083
Goodwill 257,531 251,589 28,572 -- 537,692
Capital expenditures* 29,996 121,208 7,194 9,991 168,389
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2002 Contract Technology Rental and Corporate
CDN $000's (unaudited) Drilling Services Production and Other Total
---------------------------------------------------------------------------------------------------------------------
Revenue $ 426,680 $ 333,187 $ 103,064 $ -- $ 862,931
Operating earnings 117,861 (7,942) 19,473 (15,216) 114,176
Research and engineering -- 16,288 -- -- 16,288
Depreciation and amortization 32,030 29,676 6,664 2,126 70,496
Total assets 1,259,952 1,027,329 237,227 80,103 2,604,611
Goodwill 257,531 250,045 37,801 -- 545,377
Capital expenditures 19,004 77,022 11,710 742 108,478
---------------------------------------------------------------------------------------------------------------------
* EXCLUDES BUSINESS ACQUISITIONS
(1) CERTAIN EXPENSES HAVE BEEN RECLASSIFIED BETWEEN SEGMENTS TO MORE
APPROPRIATELY REFLECT OPERATING EARNINGS.
CANADIAN DRILLING OPERATING STATISTICS
FOR THE SIX MONTHS ENDED JUNE 30,
2003 2002
----------------------------------------------------------------------
Market Market
Precision Industry* Share % Precision Industry* Share %
----------------------------------------------------------------------
Number of drilling rigs 226 651 34.7 223 644 34.6
Number of operating days (spud to release) 20,246 59,815 33.8 16,435 47,092 34.9
Wells drilled 3,496 8,533 41.0 2,598 6,662 39.0
Average days per well 5.8 7.0 6.3 7.1
Metres drilled (000's) 3,643 9,272 39.3 2,827 7,322 38.6
Average metres/day 180 155 172 155
Average metres/well 1,042 1,087 1,088 1,099
Rig utilization rate (%) 49.6 51.0 40.4 40.4
* Excludes non-CAODC rigs.
A conference call to review the second quarter 2003 results has been scheduled
for 12:00 noon MST on Thursday, July 31, 2003. The conference call dial-in
number is 1-800-814-4853.
A live webcast will be accessible at WWW.PRECISIONDRILLING.COM by selecting
Investor Relations.
Precision, headquartered in Calgary, Alberta, Canada, is the largest Canadian
integrated oilfield and industrial services contractor. Precision Drilling
Corporation is listed on The Toronto Stock Exchange under the trading symbol
"PD" and on the New York Stock Exchange under the trading symbol "PDS".
FOR FURTHER INFORMATION, PLEASE CONTACT DALE E. TREMBLAY, SENIOR VICE PRESIDENT
FINANCE AND CHIEF FINANCIAL OFFICER, TELEPHONE: (403) 716-4500, FAX: (403)
264-0251; WEBSITE: WWW.PRECISIONDRILLING.COM.