================================================================================
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 August 10, 2005
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
-------
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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: August 10, 2005
PRECISION DRILLING CORPORATION INTERIM REPORT 2
PERIODS ENDED JUNE 30, 2005 AND 2004
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGHLIGHTS
THREE MONTHS ENDED JUNE 30,
(STATED IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 2005 2004 % Change
-----------------------------------------------------------------------------------------------------------------------
FINANCIAL RESULTS
Revenue $ 157,895 $ 134,963 17.0
Operating earnings (1) 24,505 24,065 1.8
Earnings from continuing operations 9,308 10,127 (8.1)
Net earnings 25,851 15,995 61.6
Diluted earnings per share:
From continuing operations 0.07 0.09 (22.2)
Net earnings 0.21 0.14 50.0
Funds provided by continuing operations $ 27,973 $ 11,038 153.4
-----------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2005 2004
-----------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 736,709 $ 557,291
Long-term debt (2) 719,240 718,850
Cash and cash equivalents 306,538 122,012
Long-term debt to long-term debt plus equity (2) 0.22 0.24
-----------------------------------------------------------------------------------------------------------------------
(1) SEE EXPLANATION ON PAGE 5
(2) EXCLUDES CURRENT PORTION OF LONG-TERM DEBT
OVERVIEW
Diluted earnings per share from continuing operations were $0.07 in the second
quarter of 2005 compared to $0.09 in 2004.
Diluted net earnings per share were $0.21 for the
quarter ended June 30, 2005 compared to $0.14 in 2004.
During the quarter, the Corporation entered into a definitive agreement to
sell its Energy Services and International Contract Drilling divisions for
approximately US$2.28 billion with the transaction expected to close on or about
September 1, 2005. The Corporation is also negotiating with a third party for
the sale of its industrial and plant maintenance business carried on by CEDA. As
a result, these businesses have been classified as discontinued operations with
continuing operations now being comprised of Canadian contract drilling, service
rig, snubbing, rentals, and related services businesses.
With respect to the continuing businesses, the Corporation announced in
June 2005 that it was undertaking an examination of the available strategic
alternatives, including determining the viability and method of conversion to an
income trust. Although the Board of Directors has not made any decision with
respect to any specific course of action at this time, it has retained the
appropriate financial, accounting, legal and tax advisors to assist it in
identifying and assessing issues pertaining to a conversion to an income trust.
Any conversion alternatives available to Precision will be subject to review by,
and approval of the Board of Directors and will also be subject to receipt of
all required shareholder and regulatory approvals.
RESULTS OF CONTINUING OPERATIONS
THREE MONTHS ENDED JUNE 30, 2005 2004 % Change
----------------------------------------------------------------------------------------------------------------------
Number of drilling rigs (end of period) 229 225 1.8
Drilling operating days 6,049 5,279 14.6
Drilling revenue per operating day 16,578 15,561 6.5
Number of service rigs (end of period) 239 239 -
Service rig operating hours 72,814 80,986 (10.1)
Service revenue per operating hour 530 458 15.7
----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2005 2004 % Change
----------------------------------------------------------------------------------------------------------------------
Number of drilling rigs (end of period) 229 225 1.8
Drilling operating days 20,048 20,047 -
Drilling revenue per operating day 17,951 16,506 8.7
Number of service rigs (end of period) 239 239 -
Service rig operating hours 212,488 231,679 (8.3)
Service revenue per operating hour 576 507 13.6
----------------------------------------------------------------------------------------------------------------------
As is the norm in the second quarter, weather conditions were a significant
factor affecting activity levels. An early spring break up and dry conditions in
May were boding well for a very strong second quarter. These favorable
conditions came to an abrupt halt in June as record rainfall in Alberta slowed
the movement of oilfield equipment. Dry conditions have returned in July and
activity has quickly ramped up.
Overall the market for our services is very strong with winter pricing for
the most part being maintained through the spring and summer months. The healthy
backlog of work should give service providers pricing leverage going into the
upcoming winter season.
With the exception of snubbing, all operating divisions reported higher
revenue for the quarter. This is particularly noteworthy in well servicing where
service rig operating hours were 10% less than prior year.
Operating costs have escalated somewhat as a result of crew wage increases
implemented in October 2004 and increases in third party materials and labor
required for our equipment maintenance programs. Operating margins have,
however, improved year over year with operating expenses as a percentage of
revenue declining to 64.3% from 68.4% in the second quarter of 2004. This is a
strong performance for the traditionally slow second quarter. Equipment repairs
and maintenance expenditures, while substantial, are in line with our
expectations.
At first glance, general and administrative costs appear to have increased
by over $8 million in the second quarter. While costs have increased as a result
of options granted in the last half of 2004 and additional expenses incurred in
relation to internal and external audit functions in this post Sarbanes Oxley
world, there are also a number of severance, financial advisory and legal fees
not associated with ongoing business which amounted to approximately $4 million
in the quarter.
It is also important to note that during the six to nine month period
following the sales transactions mentioned earlier, general and administrative
expenses will be reduced as the corporate functions will be sized to match the
needs of the smaller business.
The effective tax rate on income from continuing operations has increased
in 2005 as a result of the increased
non-deductible options expense and a tax law change in the second quarter that
was made effective January 1, 2005.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's liquidity position continues to improve with cash flow from
operations and from the exercise of stock options exceeding net capital spending
by $185 million in the first six months of 2005. As a result the Corporation's
cash balance has increased to $307 million and the $335 million revolving bank
credit facility remains undrawn. During July 2005 the Corporation issued 244,950
shares on the exercise of stock options.
QUARTERLY FINANCIAL SUMMARY
(STATED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS,
WHICH ARE PRESENTED ON A DILUTED BASIS) 2004 2005
Quarters ended September 30 December 31 MARCH 31 JUNE 30
----------------------------------------------------------------------------------------------------------------------
Revenue 218,023 313,978 382,407 157,895
Operating earnings (1) 61,799 113,879 153,020 24,505
Earnings from continuing operations 36,995 60,582 88,281 9,308
Per share 0.31 0.49 0.71 0.07
Net earnings 42,707 88,183 138,518 25,851
Per share 0.36 0.71 1.11 0.21
Funds provided by continuing operations 56,477 114,627 122,075 27,973
----------------------------------------------------------------------------------------------------------------------
2003 2004
Quarters ended September 30 December 31 March 31 June 30
----------------------------------------------------------------------------------------------------------------------
Revenue 211,131 263,907 361,524 134,963
Operating earnings (1) 53,084 88,729 131,570 24,065
Earnings from continuing operations 29,538 42,486 80,427 10,127
Per share 0.27 0.38 0.71 0.09
Net earnings 35,765 52,958 100,519 15,995
Per share 0.32 0.48 0.89 0.14
Funds provided by continuing operations 62,618 86,522 129,506 11,038
----------------------------------------------------------------------------------------------------------------------
(1) OPERATING EARNINGS - NON-GAAP MEASURE
OPERATING EARNINGS IS NOT A RECOGNIZED MEASURE UNDER CANADIAN GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (GAAP). MANAGEMENT BELIEVES THAT IN ADDITION TO
NET EARNINGS, OPERATING EARNINGS IS A USEFUL SUPPLEMENTAL MEASURE AS IT PROVIDES
AN INDICATION OF THE RESULTS GENERATED BY THE CORPORATION'S PRINCIPAL BUSINESS
ACTIVITIES PRIOR TO CONSIDERATION OF HOW THOSE ACTIVITIES ARE FINANCED OR HOW
THE RESULTS ARE TAXED IN VARIOUS JURISDICTIONS. INVESTORS SHOULD BE CAUTIONED,
HOWEVER, THAT OPERATING EARNINGS SHOULD NOT BE CONSTRUED AS AN ALTERNATIVE TO
NET EARNINGS DETERMINED IN ACCORDANCE WITH GAAP AS AN INDICATOR OF PRECISION'S
PERFORMANCE. PRECISION'S METHOD OF CALCULATING OPERATING EARNINGS MAY DIFFER
FROM OTHER COMPANIES AND, ACCORDINGLY, OPERATING EARNINGS MAY NOT BE COMPARABLE
TO MEASURES USED BY OTHER COMPANIES.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS INTERIM REPORT, INCLUDING STATEMENTS
WHICH MAY CONTAIN WORDS SUCH AS "COULD", "PLANS", "SHOULD", "ANTICIPATES",
"EXPECT", "BELIEVE", "WILL" AND SIMILAR EXPRESSIONS AND STATEMENTS RELATING TO
MATTERS THAT ARE NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS, AND ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THESE STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO
STATEMENTS AS TO: OUR EXPECTED CLOSING OF THE SALE OF OUR ENERGY SERVICES AND
INTERNATIONAL CONTRACT DRILLING, OUR EXAMINATION OF AVAILABLE STRATEGIC
ALTERNATIVES FOR OUR CONTINUING BUSINESS, THE CORPORATION'S MARKET SHARE AND
POSITION IN THE DOMESTIC AND INTERNATIONAL DRILLING MARKETS; ANTICIPATED
REDUCTIONS IN OUR GENERAL AND ADMINISTRATIVE EXPENSES AND OTHER SUCH MATTERS.
THESE STATEMENTS ARE BASED ON CERTAIN ASSUMPTIONS AND ANALYSES MADE BY THE
CORPORATION IN LIGHT OF ITS EXPERIENCE AND ITS PERCEPTION OF HISTORICAL TRENDS,
CURRENT CONDITIONS AND EXPECTED FUTURE DEVELOPMENTS AS WELL AS OTHER FACTORS IT
BELIEVES ARE APPROPRIATE IN THE CIRCUMSTANCES. HOWEVER, WHETHER ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS WILL CONFORM WITH THE CORPORATION'S EXPECTATIONS AND
PREDICTIONS IS SUBJECT TO A NUMBER OF KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE CORPORATION'S
EXPECTATIONS, INCLUDING: FLUCTUATIONS IN THE PRICE AND DEMAND OF OIL AND GAS;
FLUCTUATIONS IN THE LEVEL OF OIL AND GAS EXPLORATION AND DEVELOPMENT ACTIVITIES;
FLUCTUATIONS IN THE DEMAND FOR WELL SERVICING, CONTRACT DRILLING AND ANCILLARY
OILFIELD SERVICES; THE EXISTENCE OF COMPETITORS, TECHNOLOGICAL CHANGES AND
DEVELOPMENTS IN THE OIL AND GAS INDUSTRY; THE ABILITY OF OIL AND GAS COMPANIES
TO RAISE CAPITAL; THE EFFECTS OF SEVERE WEATHER CONDITIONS ON OPERATIONS AND
FACILITIES; THE EXISTENCE OF OPERATING RISKS INHERENT IN WELL SERVICING,
CONTRACT DRILLING AND ANCILLARY OILFIELD SERVICES; POLITICAL CIRCUMSTANCES
IMPEDING THE PROGRESS OF WORK IN ANY OF THE COUNTRIES IN WHICH THE CORPORATION
DOES BUSINESS; IDENTIFYING AND ACQUIRING SUITABLE ACQUISITION TARGETS ON
REASONABLE TERMS; GENERAL ECONOMIC, MARKET OR BUSINESS CONDITIONS, INCLUDING
STOCK MARKET VOLATILITY; CHANGES IN LAWS OR REGULATIONS, INCLUDING TAXATION,
ENVIRONMENTAL AND CURRENCY REGULATIONS; THE LACK OF AVAILABILITY OF QUALIFIED
PERSONNEL OR MANAGEMENT; AND OTHER UNFORESEEN CONDITIONS WHICH COULD IMPACT ON
THE USE OF SERVICES SUPPLIED BY THE CORPORATION.
CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS REPORT ARE
QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE THAT THE
ACTUAL RESULTS OR DEVELOPMENTS ANTICIPATED BY THE CORPORATION WILL BE REALIZED
OR, EVEN IF SUBSTANTIALLY REALIZED, THAT THEY WILL HAVE THE EXPECTED
CONSEQUENCES TO OR EFFECTS ON THE CORPORATION OR ITS BUSINESS OR OPERATIONS. THE
CORPORATION ASSUMES NO OBLIGATION TO UPDATE PUBLICLY ANY SUCH FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
(STATED IN THOUSANDS OF DOLLARS) 2005 2004
----------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 306,538 $ 122,012
Accounts receivable 207,543 309,292
Income taxes recoverable 1,793 --
Inventory 6,711 7,734
Assets of discontinued operations (Note 4) 541,148 497,036
----------------------------------------------------------------------------------------------------------------------
1,063,733 936,074
Property, plant and equipment, net of accumulated depreciation 927,592 897,584
Intangibles, net of accumulated amortization 511 498
Goodwill 266,827 266,827
Other assets 8,200 9,116
Assets of discontinued operations (Note 4) 1,742,143 1,741,950
----------------------------------------------------------------------------------------------------------------------
$ 4,009,006 $ 3,852,049
----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 92,513 $ 120,432
Income taxes payable -- 13,624
Liabilities of discontinued operations (Note 4) 234,511 244,727
----------------------------------------------------------------------------------------------------------------------
327,024 378,783
Long-term debt 719,240 718,850
Future income taxes 367,176 354,268
Future income taxes of discontinued operations (Note 4) 75,110 78,407
Shareholders' equity:
Share capital 1,301,886 1,274,967
Contributed surplus 33,631 26,024
Cumulative translation adjustment (21,113) (20,933)
Retained earnings 1,206,052 1,041,683
----------------------------------------------------------------------------------------------------------------------
2,520,456 2,321,741
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$ 4,009,006 $ 3,852,049
----------------------------------------------------------------------------------------------------------------------
Common shares outstanding (000's) 122,762 121,580
Common share purchase options outstanding (000's) 5,858 6,696
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(STATED IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 2005 2004 2005 2004
-------------------------------------------------------------------------------------------------------------------
Revenue $ 157,895 $ 134,963 $ 541,302 $ 496,487
Expenses:
Operating 101,580 92,253 291,113 279,133
General and administrative 20,215 12,031 40,009 31,009
Depreciation and amortization 11,804 11,779 33,173 35,721
Foreign exchange (209) (5,165) (518) (5,011)
-------------------------------------------------------------------------------------------------------------------
133,390 110,898 363,777 340,852
-------------------------------------------------------------------------------------------------------------------
Operating earnings 24,505 24,065 177,525 155,635
Interest 10,802 10,257 22,341 18,201
Gain on disposal of investments - (42) - (42)
-------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes 13,703 13,850 155,184 137,476
Income taxes:
Current 662 13,755 44,687 34,014
Future 3,733 (10,032) 12,908 12,908
-------------------------------------------------------------------------------------------------------------------
4,395 3,723 57,595 46,922
-------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations 9,308 10,127 97,589 90,554
Discontinued operations, net of tax (Note 4) 16,543 5,868 66,780 25,960
-------------------------------------------------------------------------------------------------------------------
Net earnings 25,851 15,995 164,369 116,514
Retained earnings,
beginning of period 1,180,201 894,798 1,041,683 794,279
-------------------------------------------------------------------------------------------------------------------
Retained earnings,
end of period $ 1,206,052 $ 910,793 $ 1,206,052 $ 910,793
-------------------------------------------------------------------------------------------------------------------
Earnings per share from continuing operations:
Basic $ 0.08 $ 0.09 $ 0.80 $ 0.81
Diluted $ 0.07 $ 0.09 $ 0.78 $ 0.80
-------------------------------------------------------------------------------------------------------------------
Earnings per share:
Basic $ 0.21 $ 0.14 $ 1.34 $ 1.05
Diluted $ 0.21 $ 0.14 $ 1.32 $ 1.03
-------------------------------------------------------------------------------------------------------------------
Common shares outstanding (000's) 122,762 111,817 122,762 111,817
Weighted average shares outstanding (000's) 122,727 111,741 122,521 111,353
Diluted shares outstanding (000's) 125,013 113,098 124,765 112,858
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(STATED IN THOUSANDS OF DOLLARS) 2005 2004 2005 2004
---------------------------------------------------------------------------------------------------------------
Cash provided by (used in):
Continuing operations:
Earnings from continuing operations $ 9,308 $ 10,127 $ 97,589 $ 90,554
Items not affecting cash:
Stock based compensation 2,684 1,414 5,464 2,943
Depreciation and amortization 11,804 11,779 33,173 35,721
Gain on disposal of investments - (42) - (42)
Future income taxes 3,733 (10,032) 12,908 12,908
Amortization of deferred financing costs 458 360 917 680
Unrealized foreign exchange gain on
long-term monetary items (14) (2,568) (3) (2,220)
---------------------------------------------------------------------------------------------------------------
Funds provided by continuing operations 27,973 11,038 150,048 140,544
Changes in non-cash
working capital balances 89,749 175,671 59,436 94,822
---------------------------------------------------------------------------------------------------------------
117,722 186,709 209,484 235,366
Discontinued operations:
Funds provided by
discontinued operations (Note 4) 59,633 27,709 142,547 74,801
Changes in non-cash working capital
balances of discontinued operations 28,880 (18,447) (48,264) (40,244)
---------------------------------------------------------------------------------------------------------------
88,513 9,262 94,283 34,557
Investments:
Business acquisitions - (658,212) - (658,842)
Purchase of property, plant and equipment (88,490) (55,253) (161,450) (108,981)
Purchase of intangibles - - (20) -
Proceeds on sale of property,
plant and equipment 8,609 6,533 17,121 11,246
Proceeds on disposal of investments - 48 - 48
Proceeds on disposal of discontinued operations - 15,000 - 40,746
Investments - (1,340) - (1,340)
---------------------------------------------------------------------------------------------------------------
(79,881) (693,224) (144,349) (717,123)
Financing:
Increase in long-term debt - 520,873 - 522,136
Repayment of long-term debt (5) (6,898) (9) (11,263)
Deferred financing costs on long term debt - (4,985) - (4,985)
Issuance of common shares on
exercise of options 2,626 6,236 25,117 36,771
Change in bank indebtedness - 2,533 - (76,114)
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2,621 517,759 25,108 466,545
---------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 128,975 20,506 184,526 19,345
Cash and cash equivalents,
beginning of period 177,563 20,209 122,012 21,370
---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 306,538 $ 40,715 $ 306,538 $ 40,715
---------------------------------------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(TABULAR AMOUNTS STATED IN THOUSANDS OF DOLLARS)
1. BASIS OF PRESENTATION
These interim financial statements were prepared using accounting policies
and methods of their application consistent with those used in the preparation
of the Corporation's audited financial statements for the year ended December
31, 2004, except as noted below. These interim financial statements conform in
all respects to the requirements of generally accepted accounting principles in
Canada for annual financial statements with the exception of certain note
disclosures regarding balance sheet items and transactions occurring prior to
the current reporting period. As a result, these interim financial statements
should be read in conjunction with the Corporation's audited financial
statements for the year ended December 31, 2004 contained in the Corporation's
2004 annual report.
2. SEASONALITY OF OPERATIONS
The majority of the Corporation's operations are carried on in Canada. The
ability to move heavy equipment in the Canadian oil and natural gas fields is
dependent on weather conditions. As warm weather returns in the spring, the
winter's frost comes out of the ground rendering many secondary roads incapable
of supporting the weight of heavy equipment until they have thoroughly dried
out. The duration of this "spring breakup" has a direct impact on the
Corporation's activity levels. In addition, many exploration and production
areas in northern Canada are accessible only in winter months when the ground is
frozen hard enough to support equipment. The timing of freeze up and spring
breakup affects the ability to move equipment in and out of these areas. As a
result, late March through May is traditionally our slowest time.
3. CHANGES IN ACCOUNTING ESTIMATE
Effective January 1, 2005 Precision changed the useful life of its drilling
rigs for purposes of determining depreciation expense to 5,000 utilization days
from 4,150 utilization days (3,650 operating days), and its drill string to
1,500 from 1,100 operating days. Utilization days include both operating and rig
move days. This change in accounting estimate has been applied prospectively and
resulted in $3.1 million reduction of depreciation expense for the three months
ended and a $7.9 million reduction for the six months ended June 30, 2005. Of
these amounts $1.1 million and $4.3 million relate to continuing operations for
the three and six months ended June 30, 2005, respectively.
4. DISCONTINUED OPERATIONS
On June 6, 2005, the Corporation entered into an agreement to dispose of
its Energy Services and International Contract Drilling divisions to Weatherford
International Ltd. for proceeds of approximately US$900 million and 26 million
common shares of Weatherford International. The transaction is expected to close
on or about September 1, 2005 and is subject to regulatory approvals and other
customary closing conditions. In addition, in the second quarter of 2005, the
Corporation adopted a formal plan to dispose of its industrial and plant
maintenance business carried on by CEDA. These dispositions are in accordance
with an extensive process undertaken by the Corporation's board of directors to
explore avenues of valuation creation for the Corporation's shareholders.
On February 12, 2004, the Corporation sold substantially all of the assets
of Fleet Cementers Inc. On May 7, 2004 the Corporation sold the assets of the
Polar Completions division. On August 31, 2004 the Corporation sold its 65%
interest in United Diamond Ltd.
Results of the operations of these businesses have been classified as
results of discontinued operations. The following table provides additional
information with respect to amounts included in the results of discontinued
operations.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2005 2004 2005 2004
----------------------------------------------------------------------------------------------------------
Revenue
Energy services $ 217,040 $ 164,660 $ 498,765 $ 372,857
International contract drilling 78,177 67,826 150,889 118,849
Industrial and plant maintenance 56,809 48,868 110,841 87,489
Other - 4,131 - 18,123
----------------------------------------------------------------------------------------------------------
$ 352,026 $ 285,485 $ 760,495 $ 597,318
----------------------------------------------------------------------------------------------------------
Gain (loss) on disposal of
Fleet Cementers' assets $ - $ 595 $ - $ (348)
----------------------------------------------------------------------------------------------------------
Results of operations before income taxes
Energy services $ 495 $ (12,758) $ 56,259 $ 14,578
International contract drilling 16,861 15,740 29,930 27,222
Industrial and plant maintenance 8,510 7,593 15,224 10,502
Other (4,261) (5,096) (8,796) (6,291)
Writedown of assets held for sale - - - (6,117)
----------------------------------------------------------------------------------------------------------
21,605 5,479 92,617 39,894
Income tax expense (recovery) 5,062 (223) 25,837 12,300
----------------------------------------------------------------------------------------------------------
Results of operations, before
Non-controlling interest 16,543 5,702 66,780 27,594
Non-controlling interest - 429 - 1,286
----------------------------------------------------------------------------------------------------------
$ 16,543 $ 5,273 $ 66,780 $ 26,308
----------------------------------------------------------------------------------------------------------
Discontinued operations $ 16,543 $ 5,868 $ 66,780 $ 25,960
----------------------------------------------------------------------------------------------------------
The following table provides additional information with respect to amounts
included in the balance sheet as assets/liabilities of discontinued operations:
2005 2004
-------------------------------------------------------------------------------
Accounts receivable 405,831 381,707
Inventory 122,890 106,618
Future income tax asset 12,427 8,711
-------------------------------------------------------------------------------
541,148 497,036
-------------------------------------------------------------------------------
Capital assets 1,247,296 1,239,104
Goodwill 468,681 468,586
Future income tax asset 26,166 34,260
-------------------------------------------------------------------------------
1,742,143 1,741,950
-------------------------------------------------------------------------------
Accounts payable 207,402 219,940
Income taxes payable 22,416 17,479
Future income tax liability 4,664 7,270
Other 29 38
-------------------------------------------------------------------------------
234,511 244,727
-------------------------------------------------------------------------------
Future income tax liability 75,110 78,407
-------------------------------------------------------------------------------
The following table provides additional information with respect to
amounts included in the cash flow statement of funds provided by (used in) as
discontinued operations:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2005 2004 2005 2004
-----------------------------------------------------------------------------------------------------------
Net earnings of discontinued operations $ 16,543 $ 5,868 $ 66,780 $ 25,960
Items not affecting cash:
Loss (gain) on disposal of
discontinued operations - (595) - 348
Stock based compensation 1,850 484 3,945 1,006
Depreciation and amortization 37,988 30,236 73,355 56,801
Non-controlling interest - 429 - 1,286
Writedown of assets of
discontinued operations - - - 3,293
Future income taxes 3,979 (7,767) (1,710) (12,884)
Unrealized foreign exchange loss (gain) on
long-term monetary items (727) (946) 177 (1,009)
-----------------------------------------------------------------------------------------------------------
Funds provided by discontinued operations $ 59,633 $ 27,709 $ 142,547 $ 74,801
-----------------------------------------------------------------------------------------------------------
5. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the
current financial statement presentation.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of second quarter ended June 30, 2005, an evaluation of the
effectiveness of Precision's "disclosure controls and procedures" (as such term
is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) was carried out by Precision's principal
executive officer and principal financial officer. Based upon that evaluation,
the principal executive officer and principal financial officer have concluded
that as of the end of that fiscal quarter, Precision's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
Precision in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission rules and forms.
During the second quarter ending June 30, 2005, there were no changes in
Precision's internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, Precision's internal
control over financial reporting.
It should be noted that while Precision's principal executive officer and
principal financial officer believe that Precision's disclosure controls and
procedures provide a reasonable level of assurance that they are effective, they
do not expect that Precision's disclosure controls and procedures or internal
control over financial reporting will prevent all errors and fraud. A control
system, no matter how well conceived or operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
SHAREHOLDER INFORMATION
DIRECTORS
W.C. (MICKEY) DUNN (2) (3)
EDMONTON, ALBERTA
ROBERT J.S. GIBSON (1) (3)
CALGARY, ALBERTA
PATRICK M. MURRAY (1)
DALLAS, TEXAS
FREDERICK W. PHEASEY (2) (3)
EDMONTON, ALBERTA
ROBERT L. PHILLIPS (2) (3)
VANCOUVER, BRITISH COLUMBIA
HANK B. SWARTOUT
CALGARY, ALBERTA
H. GARTH WIGGINS (1)
CALGARY, ALBERTA
(1) AUDIT COMMITTEE MEMBER
(2) COMPENSATION COMMITTEE MEMBER
(3) CORPORATE GOVERNANCE AND NOMINATING COMMITTEE MEMBER
OFFICERS
HANK B. SWARTOUT
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
IAN E. KELLY
SENIOR VICE PRESIDENT,
INTERNATIONAL DRILLING
JOHN R. KING
SENIOR VICE PRESIDENT,
ENERGY SERVICES
M.J. (MICK) MCNULTY
SENIOR VICE PRESIDENT,
OPERATIONS FINANCE
R.T. (BOB) GERMAN
VICE PRESIDENT AND
CHIEF ACCOUNTING OFFICER
JAN M. CAMPBELL
CORPORATE SECRETARY
HEAD OFFICE
PRECISION DRILLING CORPORATION
4200, 150-6TH AVENUE S.W.
CALGARY, ALBERTA, CANADA
T2P 3Y7
TELEPHONE: 403-716-4500
FACSIMILE: 403-264-0251
WEBSITE: www.precisiondrilling.com
LEAD BANK
ROYAL BANK OF CANADA
CALGARY, ALBERTA
LEGAL COUNSEL
BORDEN LADNER GERVAIS LLP
CALGARY, ALBERTA
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
NEW YORK, NEW YORK
AUDITORS
KPMG LLP
CALGARY, ALBERTA
STOCK EXCHANGE LISTINGS
Common shares of Precision Drilling Corporation are listed on The Toronto Stock
Exchange under the trading symbol PD and PD.U, and on the New York Stock
Exchange under the trading symbol PDS.
TRADING PROFILE
TORONTO (TSX:PD)
April 1, 2005 to
June 30, 2005
High: $52.06
Low: $43.41
Volume traded: 53.9 million
NEW YORK (NYSE:PDS)
April 1, 2005 to
June 30, 2005
High: US $41.64
Low: US $34.63
Volume traded: 44.9 million
TRANSFER AGENT AND REGISTRAR
COMPUTERSHARE TRUST COMPANY OF CANADA
Calgary, Alberta
TRANSFER POINT
COMPUTERSHARE TRUST COMPANY, INC.
NEW YORK, NEW YORK
ACCOUNT QUESTIONS
Our Transfer Agent can help you with a variety of shareholder related services,
including:
*Change of address
*Lost share certificates
*Transfer of stock to another person
*Estate settlement
You can call our Transfer Agent toll free at: 1-888-267-6555 You can write to
them at:
COMPUTERSHARE TRUST COMPANY OF CANADA
100 University Avenue
9th Floor
Toronto, Ontario M5J 2Y1
Or you can email them at:
caregistryinfo@computershare.com
Shareholders of record who receive more than one copy of this report can contact
our Transfer Agent and arrange to have their accounts consolidated. Shareholders
who own Precision shares through a brokerage firm can contact their broker to
request consolidation of their accounts.
online information
To receive our news releases by e-mail, or to view this interim report, please
visit our web site at www.precisiondrilling.com and refer to the Investor
Relations section.
ESTIMATED RELEASE DATES FOR FINANCIAL RESULTS
2005 Third Quarter -
October 27, 2005