Precision Boosts Revenue 13% from Third Quarter '09
Precision Drilling Trust reported revenue of $286 million for the fourth quarter of 2009, an increase of 13% over the third quarter of 2009. The increase was attributed to higher rig activity due to continued demand for rigs drilling oil wells and an increase in demand for rigs drilling gas wells and services on oil wells. Earnings before interest, taxes, loss on asset decommissioning, depreciation and amortization and foreign exchange ("EBITDA") were $93 million an increase of $7 million or 8% in the fourth quarter compared to the third quarter of 2009. EBITDA margin as a percentage of revenue decreased one percentage point from the third quarter primarily due to a decrease in the number of idle but contracted rigs in the fourth quarter. Precision's term contracts provide the Trust with a base of activity and during the fourth quarter 48% of overall drilling rig utilization days were generated from term contracts with term contract utilization day concentration in Canada at 36%, the United States at 59% and Mexico at 100%.
For the quarter ended December 31, 2009, revenue decreased by 15% and EBITDA declined 31% from the fourth quarter of 2008. The decrease in revenue and EBITDA is due to significantly lower customer demand on an industry-wide basis, partially mitigated by Precision's acquisition in December 2008 of Grey Wolf, Inc ("Grey Wolf"), an onshore drilling contractor in the United States and Mexico. Precision reported a net loss of $25 million or negative $0.09 per diluted unit for the quarter ended December 31, 2009, compared to net earnings of $92 million or $0.66 per diluted unit in the fourth quarter of 2008. During the fourth quarter Precision decommissioned 38 drilling rigs, 30 well servicing rigs and nine snubbing units resulting in a non-cash loss on decommissioning of $82 million and a net loss per diluted unit after tax of $0.20. Other items included in the loss for the fourth quarter of 2009 were a $27 million increase in finance charges and a foreign exchange gain of $18 million. The net loss per unit was also impacted by the increase in units outstanding from the equity issuances during 2009.
For the year ended December 31, 2009, net earnings were $162 million or $0.63 per diluted unit, a decrease of $141 million or 47% compared to $303 million or $2.23 per diluted unit for the year ended December 31, 2008. Net earnings decreased due to the loss from decommissioning rigs, increased financing charges and lower utilization rates throughout North America partially offset by growth in Precision's rig fleet in the United States. Earnings were supported by high-margin term contracts and a $123 million foreign exchange gain, but these favourable factors did not offset lower earnings from the sharp reduction in equipment utilization and customer pricing compared to 2008 results. Rig utilization days for 2009 were 5% higher than the prior year due to growth in Precision's United States operations. EBITDA for 2009 totaled $407 million, a 7% decrease from $437 million in 2008.
"December 31, 2009 marks the end of the first full year of the new Precision," stated Kevin Neveu, President and Chief Executive Officer. "The sequential improvement in drilling and servicing activity Precision experienced in the fourth quarter started in October and continuing through the end of the year is a strong indicator of our customer's need to replace hydrocarbon production and reserves as soon as the economics prove viable. The combination of improving commodity prices and the developments in unconventional drilling process is playing into Precision's North American high performance high value growth strategy as Precision continues to expand our operations into the emerging markets such as Marcellus, Eagle Ford and the Cardium oil play in Alberta. Currently Precision has 213 rigs operating with 133 in Canada, 78 in the United States and two in Mexico.
"On a full year basis, 2009 was a difficult period for all North American service providers and Precision has weathered through many difficult challenges. I am proud of the many accomplishments of Precision and its truly remarkable people. Namely, achieving the best safety record in company history; reducing long-term debt; integrating Grey Wolf; delivering 16 new rig builds on time, on budget, and under term contract; high-grading fleet quality through tier upgrades; rationalizing less productive assets; and delivering the safe, high performance, high value service that our customers demand.
"The recommendation to convert the Trust to a corporation is an exciting and necessary step in the continued growth of Precision. Our strategy is to provide high performance, high value services to continue to grow Precision, both in North America and internationally. It is important that Precision align its capital structure to embrace these growth initiatives and adjust to the new trust tax regime in Canada that takes effect in 2011. We look forward to the annual general meeting and support from our unitholders to convert," concluded Mr. Neveu.
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