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 October 28, 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: October 28, 2004
Calgary, Alberta, Canada - October 28, 2004
PRECISION DRILLING CORPORATION ANNOUNCES
RESULTS FOR THE THIRD QUARTER
Precision Drilling Corporation ("Precision" or the "Corporation") today
announces its results for the third quarter of 2004. Diluted earnings per share
from continuing operations were $0.68 for the quarter ended September 30, 2004
compared to $0.66 in 2003. Revenue and operating earnings both increased by 26%
with the acquisition of Reeves Oilfield Services Limited ("Reeves") and the land
drilling operations of GlobalSantaFe Corporation contributing significantly to
the increase. This improvement was achieved despite a 13% reduction in Canadian
drilling activity, which was hampered by the much reported wet weather
conditions in western Canada. Although activity levels were lower than the third
quarter of 2003, anticipated strong demand for services going into the winter
drilling season has provided support for pricing improvements across most of our
service lines in Canada.
The increased value of the Canadian dollar relative to the US Dollar had a
significant negative impact in the third quarter of 2004, reducing before tax
earnings by $6.8 million. Most of the Corporation's international operations are
carried on in US dollars and as a result the 6% strengthening of the Canadian
dollar versus the US dollar had a two fold impact. First, the Canadian dollar
equivalent of our net US dollar denominated monetary asset position declined,
leading to a foreign exchange loss being recorded, and second, the Canadian
dollar equivalent of US dollar denominated operating cash flow was reduced.
Stock-based compensation expense amounted to $4.9 million ($0.08 per share) in
the quarter compared to $1.9 million ($0.04 per share) in the third quarter of
2003.
In September, the Corporation launched a branding campaign focused on its
Technology Services segment. This important milestone in the Corporation's
technology services development will see all the businesses that currently make
up the Technology Services segment combined under one brand, "Precision Energy
Services". The segment will have three product lines: Wireline Services,
Drilling & Evaluation Services and Production Services.
CONTRACT DRILLING
Contract Drilling revenue increased by 26% in the third quarter compared to the
same period in 2003 as a result of the acquisition of 31 internationally based
rigs in May 2004 and pricing increases in the Canadian market. These positive
factors were mitigated somewhat by lower activity levels in Canada as a result
of wet weather conditions hindering the movement and operation of drilling rigs.
Western Canada received 23% more rainfall in the third quarter of 2004 than in
the third quarter of 2003 contributing to a 13% reduction in well completions.
Operating earnings as a percentage of revenue declined to 25% from 27% in 2003.
Improved margins in the Canadian market were more than offset by lower margins
realized internationally. Reduced spending by PEMEX, the Mexican National Oil
Company, reduced our activity and profitability in that country. In addition,
expenses were incurred in connection with the integration of the GlobalSantaFe
land drilling business. Foreign exchange fluctuations also contributed to the
reduced profitability of the Contract Drilling segment.
The Canadian drilling rig fleet achieved 9,479 operating days for a utilization
rate of 46% in the quarter compared to 10,848 operating days and a 52%
utilization rate in 2003. The service rig operation was less affected by the wet
conditions in western Canada and saw a slight increase in operating hours from
110,447 in 2003 to 112,637 in 2004.
ENERGY SERVICES
Compared to the same period in 2003, revenues in the Energy Services segment
increased 31% in the third quarter of 2004. This growth was primarily achieved
in international operations. Revenue from Canadian operations remained
relatively flat year over year where the impact of adverse weather conditions
was offset by the addition of Reeves. The same is true for operating earnings
where overall results increased $9.0 million, despite the inclusion of a foreign
exchange loss of $3.4 million. The addition of Reeves contributed significantly
to the profitability of the Energy Services segment in the quarter. The biggest
geographical improvements came from operations in the United States, Latin
America and Asia Pacific.
Wireline Services generated the largest increase in results from 2003 levels,
with improvements coming from both the core business as well as from the
addition of Reeves. Continued capital spending in 2004, to round out LWD and RST
service offerings, resulted in increased depreciation charges and a slight
decline in operating earnings for Drilling & Evaluation Services. Business
levels for this product-line have not yet reached a sustainable threshold where
the global fleet is enjoying continuous utilization of assets. The outlook for
the balance of the year appears promising as we are experiencing an increase in
jobs being awarded for our drilling and evaluation services. The Production
Services division experienced mixed performances with some regions achieving
excellent results, while others, such as Canada, struggled in adverse business
environments. With renewal of a key North Sea contract and the start-up of other
international projects before year end we are anticipating a stronger finish to
2004.
In spite of utilization growing pains within our drilling and evaluation
business we have been encouraged by the performance of our new RST and LWD
tools. Several key customer trials were successfully completed around the world
in the third quarter, with both reliability and performance demonstrating top
tier industry standards. With respect to Wireline, we have been very encouraged
by the addition of Reeves to our existing business. We believe Reeves' unique
technology, as well as its cost effective service solutions, will provide
exciting opportunities for our formation evaluation business in mature basins.
RENTAL AND PRODUCTION
The Rental and Production segment saw a 9% increase in revenue, with the
majority of the increase coming from the industrial plant maintenance business.
The Canadian rental business experienced a slight decrease in rental days,
however the impact on revenue was more than offset by pricing increases.
Operating margins remained relatively consistent year over year in both
businesses.
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 the outlook for the balance of the year for our Energy
Services segment, statements 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 within the meaning of the United States Private Securities Litigation
Reform Act of 1995. 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 U.S. Securities and Exchange Commission.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
CDN $000'S, EXCEPT PER SHARE AMOUNTS (UNAUDITED) 2004 2003 2004 2003
--------------------------------------------------------------------------------------------------------------------------
Revenue $ 570,047 $ 450,942 $ 1,645,729 $ 1,376,501
Expenses:
Operating 370,784 299,156 1,053,559 927,075
General and administrative 48,408 38,166 132,006 104,384
Depreciation and amortization 53,888 41,789 145,342 125,472
Research and engineering 13,097 13,208 37,279 30,834
Foreign exchange 6,796 (2,335) 1,801 (1,569)
----------------------------------------------------------------------------------------------------------------------
492,973 389,984 1,369,987 1,186,196
--------------------------------------------------------------------------------------------------------------------------
Operating earnings 77,074 60,958 275,742 190,305
Interest 13,087 8,540 31,981 26,752
Gain on disposal of investments (2,532) (1,862) (2,574) (3,026)
--------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before
income taxes and non-controlling interest 66,519 54,280 246,335 166,579
Income taxes:
Current 20,659 4,316 76,154 37,352
Future 3,770 13,509 5,785 10,758
----------------------------------------------------------------------------------------------------------------------
24,429 17,825 81,939 48,110
--------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before
non-controlling interest 42,090 36,455 164,396 118,469
Non-controlling interest 1,056 -- 1,298 --
--------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations 41,034 36,455 163,098 118,469
Discontinued operations, net of tax 1,673 (690) (3,877) 9,047
--------------------------------------------------------------------------------------------------------------------------
Net earnings 42,707 35,765 159,221 127,516
Retained earnings, beginning of period 910,793 705,556 794,279 613,805
--------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of period $ 953,500 $ 741,321 $ 953,500 $ 741,321
==========================================================================================================================
Earnings per share from continuing operations:
Basic $ 0.69 $ 0.67 $ 2.87 $ 2.18
Diluted $ 0.68 $ 0.66 $ 2.83 $ 2.15
==========================================================================================================================
Earnings per share:
Basic $ 0.72 $ 0.66 $ 2.80 $ 2.35
Diluted $ 0.71 $ 0.65 $ 2.77 $ 2.31
==========================================================================================================================
Common shares outstanding (000's) 60,673 54,639 60,673 54,639
Weighted average shares outstanding (000's) 59,154 54,514 56,844 54,334
Diluted shares outstanding (000's) 59,908 55,334 57,578 55,226
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, December 31,
CDN $000'S 2004 2003
--------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current assets:
Cash $ 79,422 $ 21,370
Accounts receivable 636,155 539,370
Inventory 111,425 95,210
Assets of discontinued operations -- 30,508
-----------------------------------------------------------------------------------------------------------------
827,002 686,458
Property, plant and equipment, net of accumulated depreciation 1,932,174 1,584,954
Intangibles, net of accumulated amortization 160,058 65,262
Goodwill 767,415 527,443
Other assets 10,096 8,932
Assets of discontinued operations -- 35,336
---------------------------------------------------------------------------------------------------------------------
$ 3,696,745 $ 2,908,385
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ -- $ 147,909
Accounts payable and accrued liabilities 327,101 258,803
Income taxes payable 25,890 7,136
Current portion of long-term debt -- 17,158
Liabilities of discontinued operations -- 7,191
-----------------------------------------------------------------------------------------------------------------
352,991 438,197
Long-term debt 732,154 399,422
Future income taxes 359,903 320,599
Future income taxes of discontinued operations -- 1,107
Non-controlling interest 9,545 3,771
Shareholders' equity:
Share capital 1,265,258 936,744
Contributed surplus 21,445 14,266
Cumulative translation adjustment 1,949 --
Retained earnings 953,500 794,279
-----------------------------------------------------------------------------------------------------------------
2,242,152 1,745,289
---------------------------------------------------------------------------------------------------------------------
$ 3,696,745 $ 2,908,385
=====================================================================================================================
Common shares outstanding (000's) 60,673 54,846
Common share purchase options outstanding (000's) 3,433 3,393
CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
CDN $000'S (UNAUDITED) 2004 2003 2004 2003
--------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in):
Continuing operations:
Earnings from continuing operations $ 41,034 $ 36,455 $ 163,098 $ 118,469
Items not affecting cash:
Stock-based compensation 4,934 1,946 8,883 5,872
Depreciation and amortization 53,888 41,789 145,342 125,472
Gain on disposal of investments (2,532) (1,862) (2,574) (3,026)
Future income taxes 3,770 13,509 5,785 10,758
Non-controlling interest 1,056 -- 1,298 --
Amortization of deferred financing costs 465 321 1,145 965
Unrealized foreign exchange (gain) loss on
long-term monetary items 480 (394) (2,749) (14,125)
---------------------------------------------------------------------------------------------------------------------
Funds provided by continuing operations 103,095 91,764 320,228 244,385
Changes in non-cash working capital balances (60,639) (83,491) (10,874) (85,143)
--------------------------------------------------------------------------------------------------------------------------
42,456 8,273 309,354 159,242
Funds provided by (used in) discontinued operations 1,898 1,450 110 (709)
Changes in non-cash working capital balances of
discontinued operations (5,260) (849) (447) 886
--------------------------------------------------------------------------------------------------------------------------
(3,362) 601 (337) 177
Investments:
Business acquisitions (1,160) -- (660,002) (6,800)
Purchase of property, plant and equipment (83,629) (69,049) (192,610) (237,438)
Purchase of intangibles (314) -- (314) --
Proceeds on sale of property, plant and 13,371 5,500 24,617 16,646
equipment
Proceeds on disposal of investments 5,829 2,960 5,877 10,580
Proceeds on disposal of discontinued operations 8,553 -- 49,299 67,274
Investments 1,340 144 (730)
----------------------------------------------------------------------------------------------------------------------
(56,010) (60,445) (773,133) (150,468)
--------------------------------------------------------------------------------------------------------------------------
Financing:
Increase in long-term debt -- 35,980 522,136 80,940
Repayment of long-term debt (161,994) (4,486) (173,257) (145,657)
Deferred financing costs of long-term debt (627) -- (5,612) --
Issuance of common shares on exercise of options 13,584 6,115 50,355 16,264
Issuance of common shares 276,455 -- 276,455 --
Change in bank indebtedness (71,795) 21,275 (147,909) 40,457
----------------------------------------------------------------------------------------------------------------------
55,623 58,884 522,168 (7,996)
--------------------------------------------------------------------------------------------------------------------------
Increase in cash 38,707 7,313 58,052 955
Cash, beginning of period 40,715 10,957 21,370 17,315
--------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 79,422 $ 18,270 $ 79,422 $ 18,270
==========================================================================================================================
SEGMENT INFORMATION
CDN $000's (unaudited) Contract Energy Rental and Corporate
Three months ended September 30, Drilling Services Production and Other Total
-----------------------------------------------------------------------------------------------------------------------
2004
Revenue $ 287,721 $ 229,246 $ 53,080 $ -- $ 570,047
Operating earnings (loss) 71,469 9,245 9,507 (13,147) 77,074
Research and engineering -- 13,097 -- -- 13,097
Depreciation and amortization 24,474 24,334 3,626 1,454 53,888
Total assets 1,863,678 1,557,996 177,993 97,078 3,696,745
Goodwill 383,041 355,672 28,702 -- 767,415
Capital expenditures 34,551 43,464 2,126 3,802 83,943
-----------------------------------------------------------------------------------------------------------------------
2003
Revenue $ 227,490 $ 174,593 $ 48,859 $ -- $ 450,942
Operating earnings (loss) 62,011 275 9,175 (10,503) 60,958
Research and engineering -- 13,208 -- -- 13,208
Depreciation and amortization 19,961 17,558 3,072 1,198 41,789
Total assets 1,342,054 1,260,539 174,117 82,980 2,859,690
Goodwill 257,531 241,340 28,572 -- 527,443
Capital expenditures 32,798 27,609 2,269 6,373 69,049
-----------------------------------------------------------------------------------------------------------------------
CDN $000's (unaudited) Contract Energy Rental and Corporate
Nine months ended September 30, Drilling Services Production and Other Total
-----------------------------------------------------------------------------------------------------------------------
2004
Revenue $ 857,711 $ 627,890 $ 160,128 $ -- $ 1,645,729
Operating earnings (loss) 261,396 21,886 28,861 (36,401) 275,742
Research and engineering -- 37,279 -- -- 37,279
Depreciation and amortization 63,565 67,528 10,199 4,050 145,342
Total assets 1,863,678 1,557,996 177,993 97,078 3,696,745
Goodwill 383,041 355,672 28,702 -- 767,415
Capital expenditures* 74,086 92,901 11,611 14,326 192,924
-----------------------------------------------------------------------------------------------------------------------
2003
Revenue $ 701,884 $ 512,305 $ 162,312 $ -- $ 1,376,501
Operating earnings (loss) 185,834 173 31,636 (27,338) 190,305
Research and engineering -- 30,834 -- -- 30,834
Depreciation and amortization 58,234 54,307 9,364 3,567 125,472
Total assets 1,342,054 1,260,539 174,117 82,980 2,859,690
Goodwill 257,531 241,340 28,572 -- 527,443
Capital expenditures* 62,794 148,817 9,463 16,364 237,438
-----------------------------------------------------------------------------------------------------------------------
*EXCLUDES BUSINESS ACQUISITIONS
CANADIAN DRILLING OPERATING STATISTICS
NINE MONTHS ENDED SEPTEMBER 30,
2004 2003
----------------------------------------------------------------------
Market Market
Precision Industry* Share % Precision Industry* Share %
----------------------------------------------------------------------
Number of drilling rigs 226 686 32.9 224 654 34.3
Number of operating days (spud to release) 29,526 92,896 31.8 31,094 91,830 33.9
Wells drilled 5,644 15,981 35.3 6,128 15,137 40.5
Average days per well 5.2 5.8 5.1 6.1
Metres drilled (000's) 5,905 16,901 34.9 6,265 15,899 39.4
Average metres/day 200 182 201 173
Average metres/well 1,046 1,058 1,022 1,050
Rig utilization rate (%) 47.8 49.8 50.6 51.7
* Excludes non-CAODC rigs.
A conference call to review the third quarter 2004 results has been scheduled
for 12:00 noon MST on Thursday, October 28, 2004. The conference call dial-in
number is 1-800-814-4857.
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 corporate subsidiary
offices in 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, TELEPHONE: (403) 716-4500, FAX: (403)
264-0251; WEBSITE: WWW.PRECISIONDRILLING.COM.