Precision Drilling Corporation (NYSE:PDS) Q4 2022 Earnings Call Transcript

Kevin Neveu : Sure, Keith. So we have an internal target, which I’m not going to publish at this point. But tell you we’re trying to move in the direction to 50% over the longer term. I do think that if the rig count stays flat for the rest of the year, maybe a little more of a challenge. But we have a number of rigs that are still rolling over and repricing. We expect to see wider deployment both Alpha and EverGreen on the rigs, which are both high-margin product lines. So I think we’ve got a number of pieces in place between repricing existing contracts in the U.S. and adding on additional services to the rig and additional analytics where we’ll have good traction to move in that direction. I’d rather not give the exact target for this year. Some of our customers are not too supportive of.

Keith MacKey : Yes. Makes sense, makes sense. Just on the Canadian 1,500-horsepower conversion. Was this — what was the genesis or the reasoning, I guess, behind why this — why was this rig the rig that was upgraded. The customer specifically want a 1,500-horsepower rig for this application in this play? Or was it a matter of — it was the rig available in Canada and it was the most expedient to convert. Just curious if we should expect to see more of that migration to the 1,500 horsepower rig level in Canada? Or was this a unique situation?

Kevin Neveu : So we actually have two other 1,500 horsepower rigs running in the country right now. And these are just going to be the deeper longer-reaching rigs. I don’t expect a wide-scale migration, but I think that, that market could grow by maybe one or two more rigs over time. So we’ll end up, I think this rig going to work next year. This particular customer, I don’t think will do another rig this size in the near future. And we’ve said in the past that we have around 10, 12 or 14 DC SCR rigs. They are good candidates for upgrades. I think that fits in into the equation. We still have a small handful of 1,500-horsepower rigs in the U.S. are available. So there’s an economic mix between either redeploying a rig in West Texas winterizing it or upgrading a DC SCR rig and to an AC rig, and between the — what the customer is looking for, the spec, the size, the timing, both our customers and customers’ customer.

Operator: Our next question comes from Cole Pereira with Stifel.

Cole Pereira : I wanted to start on maintenance CapEx. So Q4 spending was well above the prior budget. 2023 is also fairly high. I mean, I assume activity expectations haven’t changed that much. So did something else change from a cost perspective there?

Carey Ford : Cole, this is Carey. So we’re not quite sure how clear the communication was on the front end of the conference call because it sounds like there was a technical difficulty with a provider. But we did give some guidance on the 2023 capital plan. So it’s $235 million, but that includes about $30 million to recertifications for the Kuwait rig contracts. It also includes about $16 million or $17 million for the Canadian rig that we’re discussing as an upgrade. And if you take out those two, it’s pretty flat year-over-year, the capital spend, if you look at going from ’22 to 2023 and then the slight increase in 2022 was just a function of taking some early deliveries of capital late in the year, yes. So we’re not seeing a ramp-up in maintenance capital spend per day.

Cole Pereira : Okay. Got it. I just wanted to come back to Kevin’s comments. So did you say that you had natural gas rigs re-contract so far this year? I assume those were at higher rates and anything you can say on the term.