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 May 27, 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
---------
Precision Drilling Corporation
2003 Interim Report -- period ended March 31, 2003
Management's Discussion and Analysis
HIGHLIGHTS
(Stated in thousands of dollars, except per share amounts)
========================================================================================================
Three months ended March 31, 2003 2002 % Change
Financial Results
Revenue $ 600,233 $ 539,626 11.2
Operating earnings (1) 116,038 111,024 4.5
Earnings from continuing operations 71,826 64,476 11.4
Net earnings 84,897 66,829 27.0
Diluted earnings per share:
From continuing operations 1.30 1.19 9.2
After discontinued operations 1.54 1.23 25.2
Cash flow from continuing operations (2) 130,892 114,053 14.8
--------------------------------------------------------------------------------------------------------
========================================================================================================
Mar. 31 Dec. 31
2003 2002
Financial Position
Working capital $ 349,429 $ 210,256
Long-term debt(3) $ 551,870 $ 514,878
Long-term debt to long-term debt plus equity(3) 0.25 0.25
--------------------------------------------------------------------------------------------------------
(1) See explanation on page 2
(2) Cash flow is defined as "Funds provided by continuing operations"
(3) Excludes current portion of long-term debt
This discussion should be read in conjunction with the annual audited
consolidated financial statements of the Precision Drilling Corporation
(Corporation) for the fiscal year ended December 31, 2002, as well as the
Management Discussion and Analysis which appears on pages 37 to 49 of the
Corporation's 2002 annual report, and with the interim financial statements for
the quarter ending March 31, 2003.
OPERATING RESULTS-- Three months ended March 31, 2003
Revenue of $600.2 million increased by $60.6 million or 11% compared to the
first quarter last year. The Corporation experienced increased revenue over 2002
in all geographic areas in which it operates except Latin America where
political instability in Venezuela had a negative impact on oilfield activity.
The largest increase was experienced in Canada where Precision's rig operating
days increased 19%. Revenue in all operating segments increased over the
comparable quarter of the prior year principally due to increased activity in
Canada.
Earnings per share from continuing operations of $1.30 was up 9% over the
prior year comparative quarter of $1.19. Results from continuing operations were
reduced by $0.07 per share due to the net impact of writing down operating
assets, settlement of two disputes and costs incurred related to restructuring
certain operations. The gain on disposal of Energy Industries Inc. (Energy
Industries) added a further $0.24 per share in the current quarter while the
impact of Energy Industries earnings added $0.04 in earnings per share in 2002.
The 2002 comparative numbers have been restated to give effect to the disposal
of Energy Industries and disclose the comparative results as discontinued
operations.
SEGMENT REVIEW
(Stated in thousands of dollars)
================================================================================
Three months ended March 31, 2003 2002
Operating earnings: (1)
Contract Drilling $ 102,389 $ 101,522
Technology Services 10,381 8,023
Rental and Production 8,335 8,993
Corporate and Other (5,067) (7,514)
--------------------------------------------------------------------------------
$ 116,038 $ 111,024
(1) 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
principle 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.
CONTRACT DRILLING
(Stated in thousands of dollars, except per day/hour amounts)
==========================================================================================================
% of % of
Three months ended March 31, 2003 Revenue 2002 Revenue
Revenue $ 335,872 $ 305,583
Expenses:
Operating 197,528 58.8 173,319 56.7
General and administrative 8,639 2.5 9,421 3.1
Depreciation and amortization 25,746 7.7 20,680 6.8
Foreign exchange 1,570 0.5 641 0.2
----------------------------------------------------------------------------------------------------------
Operating earnings $ 102,389 30.5 $ 101,522 33.2
----------------------------------------------------------------------------------------------------------
====================================================================================================
Three months ended March 31, 2003 2002 % Change
Number of drilling rigs (end of period) 241 242 (0.4)
Drilling rig operating days 15,517 13,327 16.4
Drilling revenue per operating day $ 15,952 $ 16,905 (5.6)
Number of service rigs (end of period) 240 242 (0.8)
Service rig operating hours 138,918 129,288 7.4
Service revenue per operating hour $ 496 $ 497 (0.2)
----------------------------------------------------------------------------------------------------
Contract Drilling revenue increased by 10% in the first quarter of 2003
compared to the same period of the prior year. This was driven by activity in
Canada where the Corporation's rig operating days increased by 19% to 14,641 in
2003 from 12,289 in 2002. Although drilling rig activity was up over the prior
year, day rates were lower than the first quarter of 2002. Soft demand for rigs
resulted in declining rates through 2002, which carried over to 2003. Pricing
for drilling rigs in Canada is expected to improve in 2003 as anticipated
activity reaches record levels.
International drilling days increased 7% primarily due to a one-rig project
in India. Two rigs were moved from Venezuela to Mexico where the Corporation is
now operating seven rigs.
The service rig fleet generated 7% more operating hours in the first quarter
of 2003 compared to 2002 while average hourly rates remained relatively
unchanged.
Operating earnings as a percentage of revenue for Contract Drilling declined
to 30.5% from 33.2%. The underlying variable and fixed cost structure is
virtually unchanged from the prior year with little cost escalation. The decline
in operating earnings margin is primarily due to activity disruption in
Venezuela and lower pricing for drilling in Canada. While Canadian first quarter
drilling rig activity was higher than prior year, the surge in demand was too
late to entirely compensate for the price deterioration experienced during the
latter nine months of 2002. In addition, 2003 operating earnings was reduced by
charges of $3.3 million resulting from the writedown of operating assets upon
cancellation of an international contract and the settlement of a long-standing
dispute.
During the quarter the Corporation acquired the operating assets and
business of MacKenzie Caterers (1984) Ltd. This transaction added 17 late-model
camp structures, increasing the total number of camps owned and operated by the
Corporation to 92.
TECHNOLOGY SERVICES
(Stated in thousands of dollars)
========================================================================================================
% of % of
Three months ended March 31, 2003 Revenue 2002 Revenue
Revenue $ 214,740 $ 186,196
Expenses:
Operating 154,310 71.9 133,301 71.6
General and administrative 22,725 10.6 21,833 11.7
Depreciation and amortization 20,508 9.6 15,690 8.4
Research and engineering 9,281 4.3 8,061 4.3
Foreign Exchange (2,465) (1.2) (712) (0.3)
--------------------------------------------------------------------------------------------------------
Operating earnings $ 10,381 4.8 $ 8,023 4.3
--------------------------------------------------------------------------------------------------------
================================================================================
Three months ended March 31, 2003 2002 % Change
Wireline jobs performed 10,002 9,252 8.1
Directional wells drilled 750 415 80.7
Well testing/CPD man-days(1) 24,747 19,236 28.6
--------------------------------------------------------------------------------
(1) Controlled Pressure Drilling (CPD)
Revenue for the Technology Services segment was 15% higher than the
comparable quarter of 2002 due to the increase in all geographical markets
except Latin America where the political instability in Venezuela negatively
impacted operations in that country. The largest dollar increase was experienced
in Canada where revenue was up 19% to $110.6 million, consistent with contract
drilling activity. Revenue was contributed from Canada at 52%, US at 18% and
international at 30% in comparison to the prior year at 51%, 19% and 30%
respectively.
The Corporation's improved and expanded technology has allowed it to realize
operational efficiencies and increased market share. The enhanced EMpulse(TM)
electromagnetic (EM) measurement-while-drilling (MWD) system delivered
significant operational efficiencies during the first quarter, which contributed
to increased market share and financial performance.
Operating earnings as a percentage of revenue increased modestly to 4.8%
from 4.3% in the previous year.
During the quarter the Corporation took significant steps to reduce costs
and improve profitability without limiting the ability to globalize our core
product offerings within the Technology Services segment. The employee count
within the Technology Services segment has been reduced by approximately 5%. The
cost of these actions along with the writedown of unusable assets reduced
operating earnings in the first quarter of 2003 by $6.3 million.
The Corporation's next step involves moving away from pure technology
development to prioritization of deployment and efficiency of operations as new
tools are introduced to the market. Proper prioritization of deployment will
result in new technologies being put to work in markets where operations can
relatively quickly reach a size that can benefit from economies of scale. The
focus is also being returned to our core businesses ensuring we optimize the
markets we are already in. One of the bigger challenges at this stage will be to
acquire the skilled people necessary to operate and support the new tools in the
field. Recruiting and training skilled field technicians is now a priority for
the Technology Services segment.
RENTAL AND PRODUCTION
(Stated in thousands of dollars)
====================================================================================================
% of % of
Three months ended March 31, 2003 Revenue 2002 Revenue
Revenue $ 49,621 $ 47,847
Expenses:
Operating 35,164 70.9 33,002 69.0
General and administrative 2,590 5.2 2,494 5.2
Depreciation and amortization 3,319 6.7 3,294 6.9
Foreign exchange 213 0.4 64 0.1
----------------------------------------------------------------------------------------------------
Operating earnings $ 8,335 16.8 $ 8,993 18.8
----------------------------------------------------------------------------------------------------
================================================================================
Three months ended March 31, 2003 2002 % Change
Equipment rental days (000's) 222 174 27.6
Plant maintenance man-days (000's) 60 58 3.4
--------------------------------------------------------------------------------
The Rental and Production segment experienced an increase in revenue of 4%
over the prior year to $49.6 million. Industrial plant maintenance revenue was
in line with the prior year while revenue in the oilfield rental business
increased in line with Canadian rig activity. Due to the seasonality of the
business, the first quarter of a year is typically the slowest quarter for plant
maintenance in Canada.
Operating earnings as a percentage of revenue is down slightly from the
prior year due to the product mix in industrial plant maintenance.
CORPORATE AND OTHER EXPENSES
Corporate and other expenses of $5.1 million for the first quarter 2003 have
decreased $2.4 million or 33% from the first quarter in 2002.
The primary cause for the decrease is the benefit recorded as a result of
the settlement of a dispute arising from a previous divestment.
OTHER ITEMS
Interest expense for the three months ended March 31, increased $0.5 million
or 6% from the same period in 2002. The increase is due to a higher average net
debt balance as the outstanding average net debt increased from $610.5 million
for the first quarter 2002 to $663.6 million in 2003. The increase in average
net debt is principally due to capital spending in excess of funds provided from
operations during the final nine months of 2002. Net debt is defined as
long-term debt, including current portion, plus bank indebtedness less cash.
The effective tax rate on earnings before income taxes, non-controlling
interest and discontinued operations for the three months ended March 31 was
32.4% in 2003, down from the 36.6% rate in 2002.
During the quarter, the Corporation issued 199,250 shares on the exercise of
stock options.
LIQUIDITY AND CAPITAL RESOURCES
Funds generated from continuing operations were $130.9 million, up 15% from
the prior year comparative. Working capital increased from $210.3 million at
December 31, 2002 to $349.4 million at March 31, 2003 and the working capital
ratio improved from 1.54 to 1.84. As a result of seasonally high first quarter
revenue, the accounts receivable balance as at March 31 represents the peak for
the Corporation's accounts receivable balance. Subsequent to the quarter end
collections of accounts receivable have been strong.
During the quarter the Corporation spent $76.7 million on capital asset
additions and a further $6.8 million on business acquisitions. The principal
capital additions related to the Corporations expansion within the Technology
Services segment as the Corporation continues its new technology roll out and
global expansion. The Technology Services segment accounted for 78% of the
capital additions in the quarter. The Corporation received $60.4 million on the
sale of Energy Industries and $6.2 million from the exercise of stock options
while generating a net $42.7 million from debt facilities.
The Corporation's total borrowings at March 31, 2003 amounted to $675.8
million of which 54% was fixed and 46% was floating. The Corporation's long-term
debt to long-term debt plus equity ratio remained constant at 0.25. Precision
had unused lines of credit amounting to $132.1 million at the end of the
quarter.
OUTLOOK
The Corporation's commitment to international expansion will continue with a
heightened focus on sustainable profitability. That being said, the anticipated
activity levels in Canada, where the Corporation enjoys a dominant position,
will be the driver for improved earnings. The impetus for increased oilfield
service activity in Canada will be the economics of natural gas supply and
demand in North America. Natural gas storage levels in the US and Canada
declined dramatically over the past winter, which, combined with declining
production capability, calls into question the ability to meet energy demands
going forward. Expectations for heightened activity appear well founded based
upon demand for the Corporation's services in the early part of 2003.
Precision's US operations should benefit from these same favorable business
fundamentals as drilling activity increases to close the gap between energy
supply and demand. The active rig count in the US has increased from 834 to 983,
a 18% increase, over the last six months.
Our optimism for the Canadian market will be tempered somewhat in the second
quarter of 2003 by the negative impact of weather conditions. While this is
typically the slowest time of the year due to spring break up, this year's late
heavy snowfalls followed by extended periods of rain across many of our
operating areas will delay the resumption of drilling activity.
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 including,
but not limited to, statements as to: future capital expenditures, including the
amount and nature thereof; oil and gas prices and demand; expansion and other
development trends of the oil and gas industry; business strategy; expansion and
growth of the Corporation's business and operations, including the Corporation's
market share and position in the domestic and international drilling markets;
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 an gas companies to
raise capital; the effects of severe weather conditions on operations and
facilities; the existence of operating risks inherent in the 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
(Stated in thousands of dollars)
====================================================================================================
March 31, December 31,
2003 2002
(unaudited)
Assets
Current assets:
Cash $ 26,697 $ 17,315
Accounts receivable 614,057 443,799
Income taxes recoverable 2,921 7,804
Inventory 120,463 132,909
----------------------------------------------------------------------------------------------------
764,138 601,827
Property, plant and equipment, net of accumulated depreciation 1,529,635 1,521,444
Intangibles, net of accumulated amortization 70,773 72,380
Goodwill 537,692 546,921
Other assets 17,880 17,443
----------------------------------------------------------------------------------------------------
$ 2,920,118 $ 2,760,015
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ 98,480 $ 95,321
Accounts payable and accrued liabilities 290,763 268,568
Current portion of long-term debt 25,466 27,682
----------------------------------------------------------------------------------------------------
414,709 391,571
Long-term debt 551,870 514,878
Future income taxes 327,128 318,547
Non-controlling interest 2,305 2,019
Shareholders' equity:
Share capital 919,125 912,916
Retained earnings 704,981 620,084
----------------------------------------------------------------------------------------------------
1,624,106 1,533,000
$ 2,920,118 $ 2,760,015
Common shares outstanding (000's) 54,266 54,067
Common share purchase options outstanding (000's) 4,039 4,119
Consolidated Statements of Earnings and Retained Earnings (unaudited)
(Stated in thousands of dollars, except per share amounts)
======================================================================================================
Three months ended March 31, 2003 2002
Revenue $ 600,233 $ 539,626
Expenses:
Operating 387,377 339,622
General and administrative 36,698 40,205
Depreciation and amortization 50,746 40,721
Research and engineering 9,281 8,061
Foreign Exchange 93 (7)
------------------------------------------------------------------------------------------------------
484,195 428,602
Operating Earnings 116,038 111,024
Interest 9,435 8,917
------------------------------------------------------------------------------------------------------
Earnings before income taxes,
non-controlling interest and discontinued operations 106,603 102,107
Income taxes:
Current 22,035 28,718
Future 12,456 8,608
------------------------------------------------------------------------------------------------------
34,491 37,326
Earnings before non-controlling interest and discontinued operations 72,112 64,781
Non-controlling interest 286 305
------------------------------------------------------------------------------------------------------
Earnings from continuing operations 71,826 64,476
Gain on disposal of discontinued operations (Note 4) 13,071 --
Discontinued operations, net of tax (Note 4) -- 2,353
------------------------------------------------------------------------------------------------------
Net earnings 84,897 66,829
Retained earnings, beginning of period 620,084 528,819
------------------------------------------------------------------------------------------------------
Retained earnings, end of period $ 704,981 $ 595,648
Earnings per share before discontinued operations:
Basic $ 1.33 $ 1.21
Diluted $ 1.30 $ 1.19
------------------------------------------------------------------------------------------------------
Earnings per share:
Basic $ 1.57 $ 1.25
Diluted $ 1.54 $ 1.23
------------------------------------------------------------------------------------------------------
Common shares outstanding (000's) 54,266 53,388
Weighted average shares outstanding (000's) 54,161 53,253
Diluted shares outstanding (000's) 55,149 54,189
Consolidated Statements of Cash Flow (unaudited)
(Stated in thousands of dollars)
===============================================================================================
Three months ended March 31, 2003 2002
Cash provided by (used in):
Continuing operations:
Net earnings $ 71,826 $ 64,476
Items not affecting cash:
Depreciation and amortization 50,746 40,721
Future income taxes 12,456 8,608
Non-controlling interest 286 305
Amortization of deferred financing costs 322 324
Unrealized foreign exchange loss (gain) on long-term debt (4,744) (381)
-----------------------------------------------------------------------------------------------
Funds provided by continuing operations 130,892 114,053
Changes in non-cash working capital balances (150,704) (96,592)
-----------------------------------------------------------------------------------------------
(19,812) 17,461
Discontinued operations:
Net earnings 13,071 2,353
Items not affecting cash:
Gain on disposal of discontinued operations (13,071) --
Depreciation and amortization -- 453
Future income taxes -- 414
-----------------------------------------------------------------------------------------------
Funds provided by discontinued operations -- 3,220
Investments:
Business acquisitions (Note 3) (6,800) --
Purchase of property, plant and equipment (76,726) (46,780)
Purchase of intangibles (6) (115)
Proceeds on sale of property, plant and equipment 4,237 6,158
Proceeds on disposal of discontinued operations (Note 4) 60,360 --
Investments (759) (147)
-----------------------------------------------------------------------------------------------
(19,694) (40,884)
Financing:
Increase in long-term debt 44,960 10,119
Repayment of long-term debt (5,440) (6,345)
Issuance of common shares on exercise of options 6,209 5,422
Change in bank indebtedness 3,159 4,614
48,888 13,810
-----------------------------------------------------------------------------------------------
Increase (decrease) in cash 9,382 (6,393)
Cash, beginning of period 17,315 13,231
Cash, end of period $ 26,697 $ 6,838
-----------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements (unaudited)
(Tabular amounts stated in thousands of dollars, except per share amounts)
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, 2002. 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, 2002 contained in the Corporation's 2002 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. ACQUISITION
In February, the Corporation acquired the operating assets of MacKenzie
Caterers (1984) Ltd., a provider of oilfield camp and catering services. The net
assets acquired were property, plant and equipment. No value was assigned to
intangibles or goodwill.
4. DISPOSAL OF SUBSIDIARY
Effective January 1, 2003 the Corporation sold its 100% owned subsidiary,
Energy Industries Inc., for cash proceeds of $60.4 million, net of transaction
costs and bank indebtedness assumed by the purchaser. Energy Industries Inc. was
not considered a core business to the Corporation's energy services
globalization strategy. Results of Energy Industries Inc.'s operations have been
disclosed as discontinued operations in comparative periods. Energy Industries
Inc. was a component of the Rental and Production segment.
5. STOCK-BASED COMPENSATION PLANS
The Corporation uses the intrinsic value based method to account for share
options and accordingly, no compensation costs have been recognized in the
financial statements. In accordance with the Corporation's stock option plans,
these options have an exercise price equal to the market price at date of grant.
The per share weighted average fair value of stock options granted during the
three month period ended March 31, 2003 was $21.10 based on the date of grant
using the Black-Scholes option pricing model with the following assumptions:
average risk-free interest rate of 3.67%, average expected life of 3.6 years and
expected volatility of 49%.
Had the Corporation determined compensation costs based on the fair value at
the date of grant for stock options granted since January 1, 2002; net earnings
and earnings per share (EPS) would have decreased to the pro forma amounts
indicated below. These pro forma amounts reflect compensation cost amortized
over the options vesting period.
================================================================================
Three months ended March 31, 2003 2002
Net earnings - As reported $ 84,897 $ 66,829
- Pro forma 82,531 66,078
Diluted EPS - As reported $ 1.54 $ 1.23
- Pro forma 1.50 1.22
--------------------------------------------------------------------------------
6. GUARANTEES
The Corporation has entered into agreements indemnifying certain parties
primarily with respect to environmental, tax and specific third party claims
associated with businesses sold by the Corporation. Due to the nature of the
indemnifications, the maximum exposure under these agreements cannot be
estimated. No amounts have been recorded for such indemnities as the
Corporation's obligations under them are not probable and estimable.
7. SEGMENT INFORMATION
================================================================================================================
Contract Technology Rental and Corporate
Three months ended March 31 Drilling Services Production and Other Total
2003
Revenue $ 335,872 $ 214,740 $ 49,621 $ -- $ 600,233
Operating earnings 102,389 10,381 8,335 (5,067) 116,038
Research and engineering -- 9,281 -- -- 9,281
Depreciation and amortization 25,746 20,508 3,319 1,173 50,746
Total assets 1,421,031 1,238,468 179,365 81,254 2,920,118
Goodwill 257,531 251,589 28,572 -- 537,692
Capital expenditures * 8,298 60,028 3,849 4,557 76,732
----------------------------------------------------------------------------------------------------------------
2002
Revenue $ 305,583 $ 186,196 $ 47,847 $ -- $ 539,626
Operating earnings 101,522 8,023 8,993 (7,514) 111,024
Research and engineering -- 8,061 -- -- 8,061
Depreciation and amortization 20,680 15,690 3,294 1,057 40,721
Total assets 1,417,525 1,057,149 246,387 48,712 2,769,773
Goodwill 257,531 250,045 37,801 -- 545,377
Capital expenditures * 9,841 28,163 8,611 280 46,895
----------------------------------------------------------------------------------------------------------------
* Excludes business acquisition
Shareholder Information HEAD OFFICE ACCOUNT QUESTIONS
Precision Drilling Corporation Our Transfer Agent can help you
Directors 4200, 150-6th Avenue S.W. with a variety of shareholder
W.C. (Mickey) Dunn (3) Calgary, Alberta, Canada T2P 3Y7 related services, including:
Edmonton, Alberta Telephone: 403-716-4500 - Change of address
Robert J.S. Gibson (1) (3) Facsimile: 403-264-0251 - Lost share certificates
Calgary, Alberta Website: www.precisiondrilling.com - Transfer of stock to another
Steven C. Grant (2) BANKER person
Houston, Texas Royal Bank of Canada - Estate settlement
Murray K. Mullen (2) Calgary, Alberta You can call our Transfer Agent
Calgary, Alberta LEGAL COUNSEL toll free at: 1-888-267-6555
Patrick M. Murray (1) Borden Ladner Gervais LLP You can write to them at:
Dallas, Texas Calgary, Alberta Computershare Trust Company
Frederick W. Pheasey (3) AUDITORS of Canada
Edmonton, Alberta KPMG LLP 100 University Avenue, 9th Floor
Hank B. Swartout Calgary, Alberta Toronto, Ontario M5J 2Y1
Calgary, Alberta STOCK EXCHANGE LISTINGS Or you can e-mail them at:
H. Garth Wiggins (1) Common shares of Precision caregistryinfo@computershare.com
Calgary, Alberta Drilling Corporation are listed on The Shareholders of record who receive
(1) Audit Committee member Toronto Stock Exchange under more than one copy of this report
(2) Compensation Committee member the trading symbol PD and on the can contact our Transfer Agent and
(3) Corporate Governance Committee member New York Stock Exchange under arrange to have their accounts
the trading symbol PDS. consolidated. Shareholders who own
OFFICERS
Hank B. Swartout Toronto (TSX) Precision shares through a brokerage
Chairman of the Board, January 1, 2003 firm can contact their broker to
President to March 31, 2003 request consolidation of
and Chief Executive Officer High: $56.68 their accounts.
Dale E. Tremblay Low: $47.75 ONLINE INFORMATION
Senior Vice President Finance Volume traded: 17.8 million To receive our news releases by
and Chief Financial Officer New York (NYSE) e-mail, or to view this interim
John R. King January 1, 2003 report, please visit our website at
Senior Vice President to March 31, 2003 www.precisiondrilling.com and refer
Technology Services Group High: US $37.99 to the Investor Relations section.
M.J. (Mick) McNulty Low: US $31.10 ESTIMATED QUARTERLY
Senior Vice President Volume traded: 14.7 million RELEASE DATES
Operations Finance TRANSFER AGENT
R.T. (Bob) German AND REGISTRAR 2003 Second Quarter
Vice President Finance and Computershare Trust August 1, 2003
Chief Accounting Officer Company of Canada 2003 Third Quarter
Jan M. Campbell Calgary, Alberta October 30, 2003
Corporate Secretary TRANSFER POINT
Computershare Trust
Company, Inc.
New York, New York
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: May 27, 2003
Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and
rules promulgated thereunder, certain certifications are required in respect of
annual and periodic reports filed with the Securities and Exchange Commission.
Although quarterly reports furnished to the SEC on Form 6-K are "current" and
not "periodic" reports, and do not require certification, the following
certifications are given here voluntarily.
CERTIFICATION
I, Hank B. Swartout, certify that:
1. I have reviewed this quarterly report on Form 6-K of Precision Drilling
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
May 27, 2003
/s/ Hank B. Swartout
-----------------------------------
Hank B. Swartout
President & Chief Executive Officer
CERTIFICATION
I, Dale E. Tremblay, certify that:
1. I have reviewed this quarterly report on Form 6-K of Precision Drilling
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
May 27, 2003
/s/ Dale E. Tremblay
-----------------------------------------------
Dale E. Tremblay
Senior Vice-President & Chief Financial Officer
FORM 6K EXHIBIT INDEX
EXHIBIT NO. PAGE
----------- ----
99.1 906 Certification - Chief Executive Officer 19
99.2 906 Certification - Chief Financial Officer 20