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 29, 2004
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/ Jan M. Campbell
------------------------
Jan M. Campbell
Corporate Secretary
Date: July 29, 2004
Calgary, Alberta, Canada - July 29, 2004
PRECISION DRILLING CORPORATION
ANNOUNCES IMPROVED SECOND QUARTER EARNINGS
Precision Drilling Corporation ("Precision" or the "Corporation") today
announces improved results for the quarter ended June 30, 2004 compared to the
same quarter in 2003. Diluted earnings per share from continuing operations were
$0.29 compared to $0.16 in 2003. Diluted net earnings per share were $0.28 in
the second quarter of 2004 compared to $0.16 in 2003. Earnings from continuing
operations and net earnings were both increased in the second quarter of 2004 by
a $4.4 million ($0.05 per share) foreign exchange gain on temporary bank
borrowings incurred in connection with business acquisitions completed in the
quarter.
During the quarter the Corporation completed the acquisition of Reeves Wireline
Ltd. and the land drilling business of GlobalSanteFe for US $164.9 and US $316.5
respectively. The GlobalSanteFe acquisition added a drilling operation complete
with experienced people, 31 well-maintained rigs and operating contracts in five
countries, transforming Precision into the third largest player in the
international market. Reeves' unique Compact(TM) wireline technology will allow
Technology Services to service a broader market, particularly in the more mature
oilfields throughout the world.
To finance these acquisitions, the Corporation completed in May a public
offering of US $300 million, 5.625% Notes due in 2014 and in July a public
offering of 4,000,000 common shares for gross proceeds of approximately US $200
million. In conjunction with the Notes offering the Corporation sought and
received a rating of Baa2 (positive outlook) from Moody's to complement its
Standard & Poors rating of BBB+ (stable outlook) and its Dominion Bond Rating
Service rating of BBB (stable trend). With these transactions Precision
maintains its strong balance sheet allowing the continuance of our internal
growth initiatives and the exploration of acquisition opportunities as they
arise.
Contract Drilling revenue increased by 31 % in the second quarter compared to
the same period last year while operating earnings increased by 114%. The
increase in operating earnings as a percentage of revenue was driven primarily
by year over year drilling and service rig rate increases in the Canadian
market. Operating efficiency initiatives undertaken in the service rig operation
have also lead to cost savings. International drilling operations saw activity
increase with two rigs being added in Mexico, increased activity in Venezuela,
and with the acquisition of 31 rigs.
The Canadian Drilling rig fleet achieved 5,297 operating days for a 26%
utilization rate in the quarter compared to 5,605 operating days and a 27%
utilization rate in the comparable quarter of the prior year. Activity was
slowed by wet weather which rendered ground conditions unsuitable for well site
construction and equipment transportation.
Service rig hours increased by 3,968 or 5% in the second quarter of 2004
compared to the same quarter of 2003. The increased activity occurred in the
northwestern portion of our operating area where customers were more willing to
transport rigs to complete work to take advantage of sustained high crude oil
and natural gas prices. This was offset somewhat by lower activity in the
southeastern portion of our operating area as a result of wet weather
conditions.
Technology Services revenue increased by 26% to $179.6 million from $142.7
million in the second quarter of 2003. The increase is attributable to improving
activity levels in the US market, the commencement of new contracts in the Asia
Pacific region, more wells being completed on the Burgos integrated services
project and the acquisition of Reeves Wireline in May. These improvements were
offset somewhat by reductions in Canada and the non-Burgos operations in Mexico.
Operating earnings, however, declined by $2.8 million in the second quarter
compared to the same period in 2003. Activity levels in Canada were curtailed by
wet weather conditions and the operation was unable to maintain winter pricing
levels. This operation has significant fixed costs that can not be quickly
adjusted downward when revenue expectations are not met and when operating
capability must be maintained to meet the high demand for service that is
expected to return when weather permits. The region also incurred higher repair
and maintenance costs in anticipation of a speedier pick up in activity.
Non-Burgos operations in Mexico also suffered in comparison to the prior year as
contracts for Testing/CPD and Drilling Services came to an end.
Elsewhere, there were encouraging signs especially in Burgos, Asia/Pacific and
United States where revenue and operating earnings grew, compared to the prior
year.
Research and engineering expense rose year over year as increased resources have
been put towards completing the design, testing and build out of the Rotary
Steerable tools in various hole sizes. R&E associated with the Reeves
acquisition is also reflected for the first time. Depreciation increased in line
with the continued build out of the logging-while-drilling (LWD),
measurement-while-drilling (MWD) and rotary steerable fleets.
Rental and Production revenue declined by $7.5 million or 12% in the second
quarter compared to the second quarter of 2003. This decrease stemmed from the
industrial plant maintenance business which experienced a slowing of activity
with our Fort McMurray area oilsands customers who delayed or cancelled several
projects. Activity in the rental operation was relatively consistent year over
year with rental rates improving somewhat.
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) 2004 2003 2004 2003
--------------------------------------------------------------------------------------------------------------------------
Revenue $ 418,691 $ 345,641 $ 1,083,856 $ 933,611
Expenses:
Operating 297,970 255,072 685,832 631,109
General and administrative 42,287 32,988 84,543 68,212
Depreciation and amortization 41,923 35,022 91,648 83,880
Research and engineering 12,374 8,746 24,188 17,645
Foreign exchange (5,298) 547 (4,986) 648
----------------------------------------------------------------------------------------------------------------------
389,256 332,375 881,225 801,494
--------------------------------------------------------------------------------------------------------------------------
Operating earnings 29,435 13,266 202,631 132,117
Interest 10,706 8,943 18,894 18,212
Gain on disposal of investments (42) (1,164) (42) (1,164)
--------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income
taxes and non-controlling interest 18,771 5,487 183,779 115,069
Income taxes:
Current 19,954 11,543 56,847 34,111
Future (17,805) (15,333) 2,015 (2,751)
----------------------------------------------------------------------------------------------------------------------
2,149 (3,790) 58,862 31,360
==========================================================================================================================
Earnings from continuing operations before
non-controlling interest 16,622 9,277 124,917 83,709
Non-controlling interest 429 280 1,286 566
--------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations 16,193 8,997 123,631 83,143
Discontinued operations, net of tax (198) (375) (7,117) 8,608
--------------------------------------------------------------------------------------------------------------------------
Net earnings 15,995 8,622 116,514 91,751
Retained earnings, beginning of period 894,798 696,934 794,279 613,805
==========================================================================================================================
Retained earnings, end of period $ 910,793 $ 705,556 $ 910,793 $ 705,556
==========================================================================================================================
Earnings per share from continuing operations:
Basic $ 0.29 $ 0.17 $ 2.22 $ 1.53
Diluted $ 0.29 $ 0.16 $ 2.19 $ 1.51
==========================================================================================================================
Earnings per share:
Basic $ 0.29 $ 0.16 $ 2.09 $ 1.69
Diluted $ 0.28 $ 0.16 $ 2.06 $ 1.66
==========================================================================================================================
Common shares outstanding (000's) 55,909 54,399 55,909 54,399
Weighted average shares outstanding (000's) 55,871 54,325 55,677 54,243
Diluted shares outstanding (000's) 56,549 55,203 56,429 55,174
CONSOLIDATED BALANCE SHEETS
JUNE 30, December 31,
CDN $000's 2004 2003
--------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current assets:
Cash $ 40,715 $ 21,370
Accounts receivable 527,751 544,850
Inventory 110,589 99,088
Assets of discontinued operations -- 21,150
----------------------------------------------------------------------------------------------------------------
679,055 686,458
Property, plant and equipment, net of accumulated depreciation 1,930,803 1,588,250
Intangibles, net of accumulated amortization 158,161 65,262
Goodwill 771,639 527,443
Other assets 14,571 8,932
--------------------------------------------------------------------------------------------------------------------
$ 3,554,229 $ 2,908,385
====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ 71,795 $ 147,909
Accounts payable and accrued liabilities 269,322 260,545
Income taxes payable 23,209 7,373
Current portion of long-term debt 13,553 17,158
Liabilities of discontinued operations -- 5,212
----------------------------------------------------------------------------------------------------------------
377,879 438,197
Long-term debt 905,181 399,422
Future income taxes 354,112 320,599
Future income taxes of discontinued operations -- 1,107
Non-controlling interest 13,303 3,771
Shareholders' equity:
Cumulative translation adjustment 1,231 -
Contributed surplus 17,260 14,266
Share capital 974,470 936,744
Retained earnings 910,793 794,279
----------------------------------------------------------------------------------------------------------------
1,903,754 1,745,385
====================================================================================================================
$ 3,554,229 $ 2,908,385
====================================================================================================================
Common shares outstanding (000's) 55,909 54,846
Common share purchase options outstanding (000's) 2,408 3,393
CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
CDN $000's (UNAUDITED) 2004 2003 2004 2003
--------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in):
Continuing operations:
Earnings from continuing operations $ 16,193 $ 8,997 $ 123,631 $ 83,143
Items not affecting cash:
Stock-based compensation 1,898 2,254 3,949 3,926
Depreciation and amortization 41,923 35,022 91,648 83,880
Gain on disposal of investments (42) (1,164) (42) (1,164)
Future income taxes (17,805) (15,333) 2,015 (2,751)
Non-controlling interest 429 280 1,286 566
Amortization of deferred financing costs 360 322 680 644
Unrealized foreign exchange loss (gain) on
long-term monetary items (3,514) (8,267) (3,229) (13,731)
--------------------------------------------------------------------------------------------------------------------
Funds provided by continuing operations 39,442 22,111 219,938 154,513
Changes in non-cash working capital balances 162,697 146,236 51,459 (3,477)
==========================================================================================================================
202,139 168,347 271,397 151,036
Funds provided by (used in) discontinued
operations (695) (1,821) (4,593) (4,051)
Changes in non-cash working capital balances of
discontinued operations (5,473) 3,831 3,119 3,560
--------------------------------------------------------------------------------------------------------------------------
(6,168) 2,010 (1,474) (491)
Investments:
Business acquisitions (658,212) -- (658,842) (6,800)
Purchase of property, plant and equipment (55,253) (91,657) (108,981) (168,389)
Proceeds on sale of property, plant and 6,533 6,909 11,246 11,146
equipment
Proceeds on disposal of investments 48 7,620 48 7,620
Proceeds on disposal of discontinued operations 15,000 6,914 40,746 67,274
Investments (1,340) (115) (1,340) (874)
----------------------------------------------------------------------------------------------------------------------
(693,224) (70,329) (717,123) (90,023)
Financing:
Increase in long-term debt 520,873 -- 522,136 44,960
Repayment of long-term debt (6,898) (135,731) (11,263) (141,171)
Deferred financing costs on long-term debt (4,985) -- (4,985) --
Issuance of common shares on exercise of options 6,236 3,940 36,771 10,149
Change in bank indebtedness 2,533 16,023 (76,114) 19,182
----------------------------------------------------------------------------------------------------------------------
517,759 (115,768) 466,545 (66,880)
==========================================================================================================================
Increase (decrease) in cash 20,506 (15,740) 19,345 (6,358)
Cash, beginning of period 20,209 26,697 21,370 17,315
==========================================================================================================================
Cash, end of period $ 40,715 $ 10,957 $ 40,715 $ 10,957
==========================================================================================================================
SEGMENT INFORMATION
THREE MONTHS ENDED JUNE 30, 2004 Contract Technology Rental and Corporate
CDN $000's (unaudited) Drilling Services Production and Other Total
---------------------------------------------------------------------------------------------------------------------
Revenue $ 182,739 $ 179,604 $ 56,348 $ -- $ 418,691
Operating earnings 41,319 (13,189) 9,613 (8,308) 29,435
Research and engineering -- 12,374 -- -- 12,374
Depreciation and amortization 14,734 22,733 3,271 1,185 41,923
Total assets 1,774,647 1,515,784 177,471 86,327 3,554,229
Goodwill 387,265 355,772 28,702 -- 771,739
Capital expenditures* 22,334 23,714 3,020 6,185 55,253
---------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, 2003 Contract Technology Rental and Corporate
CDN $000's (unaudited) Drilling Services Production and Other Total
---------------------------------------------------------------------------------------------------------------------
Revenue $ 139,082 $ 142,727 $ 63,832 $ -- $ 345,641
Operating earnings 19,298 (10,430) 14,190 (9,792) 13,266
Research and engineering -- 8,746 -- -- 8,746
Depreciation and amortization 12,660 18,193 2,973 1,196 35,022
Total assets 1,274,722 1,225,377 178,104 60,880 2,739,083
Goodwill 257,531 241,340 28,572 -- 527,443
Capital expenditures 21,698 61,180 3,345 5,434 91,657
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2004 (1) Contract Technology Rental and Corporate
CDN $000's (unaudited) Drilling Services Production and Other Total
---------------------------------------------------------------------------------------------------------------------
Revenue $ 569,990 $ 406,818 $ 107,048 $ -- $ 1,083,856
Operating earnings 189,927 16,604 19,354 (23,254) 202,631
Research and engineering -- 24,188 -- -- 24,188
Depreciation and amortization 39,091 43,388 6,573 2,596 91,648
Total assets 1,774,647 1,515,784 177,471 86,327 3,554,229
Goodwill 387,265 355,772 28,702 -- 771,739
Capital expenditures* 39,535 49,437 9,465 10,524 108,981
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2003 Contract Technology Rental and Corporate
CDN $000's (unaudited) Drilling Services Production and Other Total
---------------------------------------------------------------------------------------------------------------------
Revenue $ 474,394 $ 345,764 $ 113,453 $ -- $ 933,611
Operating earnings 123,823 2,668 22,461 (16,835) 132,117
Research and engineering -- 17,645 -- -- 17,645
Depreciation and amortization 38,273 36,946 6,292 2,369 83,880
Total assets 1,274,722 1,225,377 178,104 60,880 2,739,083
Goodwill 257,531 241,340 28,572 -- 527,443
Capital expenditures* 29,996 121,208 7,194 9,991 168,389
---------------------------------------------------------------------------------------------------------------------
*EXCLUDES BUSINESS ACQUISITIONS
(1) CERTAIN EXPENSES HAVE BEEN RECLASSIFIED FROM GENERAL AND ADMINISTRATIVE
EXPENSES TO BE MORE APPROPRIATELY INCLUDED IN RESEARCH AND ENGINEERING.
CANADIAN DRILLING OPERATING STATISTICS
FOR THE SIX MONTHS ENDED JUNE 30,
2004 2003
---------------------------------- -----------------------------------
Market Market
Precision Industry* Share % Precision Industry* Share %
---------------------------------- -----------------------------------
Number of drilling rigs 225 683 32.9 226 651 34.7
Number of operating days (spud to release) 20,065 63,735 31.5 20,246 59,815 33.8
Wells drilled 3,530 9,964 35.4 3,496 8,533 41.0
Average days per well 5.7 6.4 5.8 7.0
Metres drilled (000's) 3,799 10,882 34.9 3,643 9,272 39.3
Average metres/day 189 171 180 155
Average metres/well 1,076 1,092 1,042 1,087
Rig utilization rate (%) 48.9 51.6 49.6 51.0
* Excludes non-CAODC rigs.
A conference call to review the second quarter 2004 results has been scheduled
for 12:00 noon MST on Thursday, July 29, 2004. 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 Drilling Corporation (TSX: PD and PD.U; NYSE: PDS) is a global
oilfield services company providing a broad range of drilling, production and
evaluation services with focus on fulfilling customer needs through
fit-for-purpose technologies for the maturing oilfields of the 21st century.
With corporate offices in Calgary, Alberta, Canada and Houston, Texas, and
research facilities in the U.S. and Europe, Precision employs more than 10,000
people conducting operations in more than 30 countries. Precision is committed
to providing efficient and safe services to create value for our customers, our
shareholders and our employees.
FOR FURTHER INFORMATION, PLEASE CONTACT DALE E. TREMBLAY, SENIOR VICE PRESIDENT
FINANCE AND CHIEF FINANCIAL OFFICER, 4200, 150 6TH AVENUE S.W., CALGARY, ALBERTA
T2P 3Y7, TELEPHONE: (403) 716-4500, FAX: (403) 264-0251; WEBSITE:
WWW.PRECISIONDRILLING.COM.