Precision Drilling (PDS) Expects FY15 CapEx at $493M

Precision Drilling (NYSE: PDS) announced that planned capital expenditures for 2015 are $493 million.

2015 Capital Plan and Update on 2014 Capital Plan

The 2015 capital expenditure plan includes $361 million for expansion capital, $112 million for sustaining and infrastructure expenditures and $20 million to upgrade existing rigs. We expect that the $493 million will be split $474 million in the Contract Drilling Services segment and $19 million in the Completion and Production Services segment.

Precision's expansion capital plan includes the completion and deployment of 16 previously announced new build drilling rigs and no additional rig deliveries. The previously announced new build drilling rigs include: fifteen Super Triple rigs for deployment in the U.S. in the first half of 2015 and one Super Triple rig expected to be deployed in Kuwait late in the second quarter.

The 2015 capital plan includes the completion of the rig upgrades previously contracted in 2014.

Precision's sustaining and infrastructure capital plan is based upon currently anticipated activity levels for 2015 and scheduled infrastructure projects including completing construction of the training rig at our Nisku, Alberta facility.

We anticipate 2014 capital expenditures to be approximately $885 million, down $23 million from our previous guidance. Carry forward capital expenditures of $350 million have been included in the 2015 capital expenditure guidance of $493 million.

Precision currently has 217 Tier 1 drilling rigs and will have 238 Tier 1 drilling rigs upon delivery of all announced new builds, up from 93 Tier 1 rigs in 2009. To date in 2014, we have completed and delivered 13 new build drilling rigs of the 18 planned deliveries for 2014.

Asset Divestiture: U.S. Coil Tubing Operations

Precision announced today that it divested its U.S. coil tubing assets for total cash consideration of C$44 million. The transaction closed on Friday, November 28, 2014. Precision will focus on delivering High Performance, High Value services through our remaining Completion & Production Services business lines in Canada and the U.S.

Quote from Precision's CEO

"Our 2015 capital plan reflects our commitment to support Precision's High Performance, High Value service offering. By the middle of 2015, we expect to have a fleet of 238 Tier 1 Super Series drilling rigs operating in Canada, the U.S. and internationally. Our Tier 1 fleet helps deliver maximum efficiency, which is desired by our customers in any commodity price environment."

"While the current market is adjusting to recent rapid oil price declines, we remain intensely focused on cost management with a variable cost business model and balance sheet designed to address changing market conditions. Our contracted rig deliveries in 2014 and 2015 and strong contract position of existing Tier 1 assets provide us increased visibility for activity through 2015. Following the delivery of the 16 rigs, I expect our rig building activity will be idled until we see an improved commodity price environment and rising customer new build demand. We remain focused on generating strong cash flow from our existing asset base, prudently selecting the most attractive capital projects and returning value to shareholders in the form of share price appreciation and dividends."

Quote from Precision's CFO

"Precision's capital structure is efficient, low cost and flexible. As a result of continued strong operational performance and recent divestitures our liquidity position is strong with a sizable cash balance and an undrawn revolving credit facility. We have no debt maturities until 2019 and our average interest rate on existing debt is 6.2%. While we continue to maintain financial flexibility to manage the cyclicality of the business, we will evaluate all potential uses of excess cash to ensure capital structure efficiency."

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