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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 27, 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: October 27, 2005
P R E S S R E L E A S E
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Calgary, Alberta, Canada -- October 27, 2005
PRECISION DRILLING CORPORATION ANNOUNCES
68% INCREASE IN OPERATING RESULTS, EXCLUDING ONE-TIME ITEMS
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Diluted earnings per share from continuing operations were $0.02 in the third
quarter of 2005 compared to $0.31 in 2004. Diluted earnings per share from
continuing operations was reduced by $0.50 in 2005 as a result of a number of
one time items the first of which is the $65.5 million premium on repayment of
the Corporation's outstanding debentures and the second of which is the $20.3
million market value adjustment to the shares of Weatherford International Ltd.
("Weatherford") received on the sale of the Energy Services and International
Contract Drilling divisions.
Excluding one time items related to the Corporation's recent asset disposal and
reorganization activities, diluted earnings per share from continuing operations
in the third quarter of 2005 was $0.52 compared to $0.31 in 2004. This 68%
increase reflects the strong market for oilfield services in Canada and
favorable weather conditions allowing activity levels to rise to meet demand.
Increased demand has resulted in improved pricing for all of the Corporation's
service offerings.
On August 31, the Corporation completed the sale of its Energy Services and
International Contract Drilling divisions to Weatherford for a purchase price
consisting of 26,000,000 common shares of Weatherford and $1,130,000,000 cash
consideration and recognized an associated gain of $1.262 billion. On September
13, Precision closed the sale of CEDA International Corporation, which carried
on the Industrial Services business, for cash proceeds of $274,000,000,
recognizing a gain of $123 million.
In September, the Corporation announced its intention to reorganize its
remaining operations and holdings into an income trust and on October 4 the
associated Notice of Special Meeting of Securityholders and Information Circular
was mailed to securityholders. The special meeting to consider the conversion is
scheduled to take place on October 31, 2005 with the actual conversion taking
place on or about November 7, 2005. Pursuant to the reorganization, shareholders
will be entitled to receive in exchange for each common share held (i) one unit
of the Trust; (ii) their pro-rata share of the 26 million common shares of
Weatherford owned by Precision; and (iii) their pro-rata share of up to $850
million of cash. The Weatherford shares will not be subject to any resale
restrictions, however, Precision will not be able to complete the reorganization
or transfer the Weatherford shares until a registration statement filed by
Weatherford is declared effective by the U.S. Securities and Exchange
Commission. Based on current business conditions, it is anticipated that the
Board of Trustees of the Trust will set the initial regular distributions to the
Trust's unitholders at approximately $0.24 per Trust Unit per month with the
first such payment expected to be made in the month following the effective date
of the reorganization.
Also in September, Precision provided irrevocable redemption notices for the
repayment of all of its outstanding debentures and on October 17, 2005 paid
approximately $767 million to fulfill this obligation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30
2005 2004 % Change
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Number of drilling rigs (end of period) 229 226 1.3
Drilling operating days 12,539 9,479 32.3
Drilling revenue per operating day 16,259 15,029 8.2
Number of service rigs (end of period) 238 239 --
Service rig operating hours 122,620 112,636 8.9
Service revenue per operating hour 551 479 15.0
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NINE MONTHS ENDED SEPTEMBER 30
2005 2004 % Change
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Number of drilling rigs (end of period) 229 226 1.8
Drilling operating days 32,587 29,526 10.4
Drilling revenue per operating day 17,300 16,031 7.9
Number of service rigs (end of period) 238 239 --
Service rig operating hours 335,108 344,315 (2.7)
Service revenue per operating hour 567 498 13.9
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Hank Swartout, Precision's Chairman, President and Chief Executive Officer,
noted that "Precision's continuing operations have not been impacted by the sale
and trust conversion processes. Ultimately, Precision is a service company and
continues to focus on what has made it successful, building and maintaining
long-term customer relationships. We will continue to work closely with our
customers this winter to ensure a safe, efficient, and mutually successful
drilling season."
Rig demand remains extremely strong and the wet weather conditions throughout
the second quarter further enhanced the situation in the third quarter as ground
conditions dried in July. The impact of this pent up demand resulted in an
outstanding quarter for revenues and earnings as the backlog of wells to be
drilled created a combination of positive factors. First, winter pricing held up
through the spring and into the summer and second, whenever equipment became
available there were customers that were prepared to put it to work immediately.
This contributed to the 81% increase in operating earnings in the third quarter
of 2005 relative to 2004.
Overall, the oil and gas service industry will benefit from the pricing leverage
established from third quarter activity. Accordingly, increased pricing for the
winter season will take effect in the fourth quarter.
All operating divisions reported significant revenue increases year over year.
Well Servicing's 25% increase was somewhat lower than Contract Drilling's 43%
increase due to the natural time lag between drilling and completing wells.
Operating costs were lower as a percentage of revenue despite crew wage
increases that were implemented in the fourth quarter of 2004. Operating
expenses declined from 58% of revenue in the third quarter of 2004 to 53% in
2005. Equipment repair and maintenance expenditures were lower on a per day
basis as scheduled expenditures were spread over a higher activity level
relative to last year. In addition, operating expenses have not increased as
much as customer pricing.
General and administrative costs for the third quarter were slightly higher than
the same period in 2004. As a percentage of revenue, general and administrative
costs fell to 5.5% from 6.4 %. General and administrative costs should further
decline as the corporate function continues to be sized to meet the needs of
Precision's smaller business organization.
Depreciation expense remained relatively consistent as the impact of increased
activity was offset by the change in the estimated useful life of drilling rigs
from 4,150 to 5,000 utilization days effective January 1, 2005.
CERTAIN STATEMENTS CONTAINED IN THIS PRESS RELEASE, INCLUDING STATEMENTS
RELATING TO OUR PROPOSED REORGANIZATION AND THE WEATHERFORD SHARES, AND
STATEMENTS THAT MAY CONTAIN WORDS SUCH AS "ANTICIPATE", "COULD", "SHOULD",
"EXPECT", "BELIEVE", "WILL" AND SIMILAR ARE NOT HISTORICAL FACTS AND ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. 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 REGULATIONS, TO WHICH PRECISION IS
SUBJECT AND OTHER FACTORS, WHICH ARE DESCRIBED IN FURTHER DETAIL IN PRECISION'S
FILINGS WITH THE US 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) 2005 2004 2005 2004
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Revenue $ 300,016 $ 218,023 $ 841,318 $ 714,510
Expenses:
Operating 158,581 127,109 449,694 406,242
General and administrative 16,486 13,942 56,495 44,951
Depreciation and amortization 18,923 17,488 52,096 53,209
Foreign exchange (5,930) (2,315) (6,448) (7,326)
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188,060 156,224 551,837 497,076
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Operating earnings 111,956 61,799 289,481 217,434
Interest
Long-term 11,971 13,107 36,238 31,414
Other 39 10 207 38
Income (4,784) (165) (6,878) (299)
Premium on redemption of bonds 65,483 -- 65,483 --
Unrealized loss in market value on short-term
investments 20,262 -- 20,262 --
Gain on disposal of investments -- (2,532) -- (2,574)
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Earnings from continuing operations before
income taxes 18,985 51,379 174,169 188,855
Income taxes:
Current 171,612 10,978 216,299 44,992
Future (155,009) 3,406 (142,101) 16,314
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16,603 14,384 74,198 61,306
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Earnings from continuing operations 2,382 36,995 99,971 127,549
Discontinued operations, net of tax 1,380,266 5,712 1,447,046 31,672
==================================================================================================================================
Net earnings 1,382,648 42,707 1,547,017 159,221
Retained earnings, beginning of period 1,206,052 910,793 1,041,683 794,279
Adjustment on cash purchase of employee stock
options, net of tax - $9,823 (18,741) -- (18,741) --
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Retained earnings, end of period $ 2,569,959 $ 953,500 $ 2,569,959 $ 953,500
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Earnings per share from continuing operations:
Basic $ 0.02 $ 0.31 $ 0.81 $ 1.12
Diluted $ 0.02 $ 0.31 $ 0.80 $ 1.11
==================================================================================================================================
Earnings per share:
Basic $ 11.22 $ 0.36 $ 12.60 $ 1.40
Diluted $ 11.00 $ 0.36 $ 12.36 $ 1.38
==================================================================================================================================
Common shares outstanding (000's) 123,883 121,346 123,883 121,346
Weighted average shares outstanding (000's) 123,285 118,308 122,778 113,688
Diluted shares outstanding (000's) 125,686 119,816 125,145 115,156
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, December 31,
CDN $000'S 2005 2004
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(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,585,247 $ 122,012
Marketable securities, at lower of cost or market (market
value - $2,072,749) 2,072,749 --
Accounts receivable 356,335 309,292
Inventory 6,603 7,734
Other assets 7,742 --
Assets of discontinued operations -- 497,036
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4,028,676 936,074
Property, plant and equipment, net of accumulated
depreciation 925,112 897,584
Intangibles, net of accumulated amortization 487 498
Goodwill 266,827 266,827
Other assets -- 9,116
Assets of discontinued operations -- 1,741,950
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$ 5,221,102 $ 3,852,049
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 153,240 $ 120,432
Income taxes payable 161,705 13,624
Current portion of long-term debt 765,133 --
Liabilities of discontinued operations -- 244,707
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1,080,078 378,763
Long-term debt -- 718,850
Future income tax liability 212,167 354,268
Liabilities of discontinued operations -- 78,427
Shareholders' equity:
Share capital 1,323,709 1,274,967
Contributed surplus 35,189 26,024
Cumulative translation adjustment -- (20,933)
Retained earnings 2,569,959 1,041,683
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3,928,857 2,321,741
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$ 5,221,102 $ 3,852,049
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Common shares outstanding (000's) 123,883 121,580
Common share purchase options outstanding (000's) 3,921 6,696
CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
CDN $000'S, EXCEPT PER SHARE AMOUNTS (UNAUDITED) 2005 2004 2005 2004
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Cash provided by (used in):
Continuing operations:
Earnings from continuing operations $ 2,382 $ 36,995 $ 99,971 $ 127,549
Items not affecting cash:
Stock-based compensation 1,812 2,619 7,276 5,562
Depreciation and amortization 18,923 17,488 52,096 53,209
Gain on disposal of investments -- (2,532) -- (2,574)
Premium on redemption of bonds 65,483 -- 65,483 --
Unrealized loss in market value on short-term 20,262 -- 20,262 --
investments
Future income taxes (155,009) 3,406 (142,101) 16,314
Amortization of deferred financing costs 457 465 1,374 1,145
Unrealized foreign exchange gain on
long-term monetary items (9,057) (1,964) (9,060) (4,184)
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Funds provided by (used in) continuing operations (54,747) 56,477 95,301 197,021
Changes in non-cash working capital balances 106,929 (34,941) 166,365 59,881
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52,182 21,536 261,666 256,902
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Discontinued operations:
Funds provided by discontinued operations 53,330 48,516 195,877 123,317
Changes in non-cash working capital balances of
discontinued operations (21,286) (30,958) (69,550) (71,202)
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32,044 17,558 126,327 52,115
Investments:
Business acquisitions, net of cash acquired (30,421) (1,160) (30,421) (660,002)
Purchase of property, plant and equipment (77,155) (83,629) (238,605) (192,610)
Purchase of intangibles -- (314) (20) (314)
Proceeds on sale of property, plant and equipment 8,941 13,371 26,062 24,617
Proceeds on disposal of investments -- 5,829 -- 5,877
Proceeds on disposal of discontinued operations 1,306,280 8,553 1,306,280 49,299
Investments -- 1,340 -- --
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1,207,645 (56,010) 1,063,296 (773,133)
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Financing:
Increase in long-term debt -- -- -- 522,136
Repayment of long-term debt (3) (161,994) (12) (173,257)
Deferred financing costs on long-term debt -- (627) -- (5,612)
Issuance of common shares on exercise of options 15,405 13,584 40,522 50,355
Issuance of common shares, net of costs -- 276,455 -- 276,455
Purchase of employee stock options (28,564) -- (28,564) --
Change in bank indebtedness -- (71,795) -- (147,909)
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(13,162) 55,623 11,946 522,168
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Increase in cash and cash equivalents 1,278,709 38,707 1,463,235 58,052
Cash and cash equivalents, beginning of period 306,538 40,715 122,012 21,370
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Cash and cash equivalents, end of period $ 1,585,247 $ 79,422 $ 1,585,247 $ 79,422
====================================================================================================================================
CANADIAN DRILLING OPERATING STATISTICS
NINE MONTHS ENDED SEPTEMBER 30,
2005 2004
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Market Market
Precision Industry* Share % Precision Industry* Share %
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Number of drilling rigs 229 738 31.0 226 686 32.9
Number of operating days (spud to release) 32,587 109,477 29.8 29,526 92,896 31.8
Wells drilled 5,783 17,288 33.5 5,644 15,981 35.3
Average days per well 5.6 6.3 5.2 5.8
Metres drilled (000's) 6,414 19,655 32.6 5,905 16,901 34.9
Average metres/day 197 180 200 182
Average metres/well 1,109 1,137 1,046 1,058
Rig utilization rate (%) 52.1 55.6 47.8 49.8
* Excludes non-CAODC rigs.
A conference call to review the third quarter 2005 results has been scheduled
for 12:00 noon MST on Thursday, October 27, 2005. The conference call dial-in
number is 1-800-814-4861.
A live webcast will be accessible at WWW.PRECISIONDRILLING.COM by selecting
Investor Relations.
FOR FURTHER INFORMATION, PLEASE CONTACT HANK B. SWARTOUT, CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER, 4200, 150 6TH AVENUE S.W., CALGARY, ALBERTA T2P
3Y7, TELEPHONE: (403) 716-4500, FAX: (403) 264-0251; WEBSITE:
WWW.PRECISIONDRILLING.COM.