Good day, and thank you for standing by. Welcome to the Precision Drilling Corporation 2025 Third Quarter Results Conference Call and Webcast. I would now like to hand the conference over to Lavonne Zdunich, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining Precision Drilling's Third Quarter Conference Call and Webcast. Earlier this month, we announced the retirement of Kevin Neveu and the appointment of Carey Ford to President and Chief Executive Officer; Gene Stahl to Chief Operating Officer; and Dustin Honing to Chief Financial Officer. Kevin retires after serving as President and CEO for one of the longest tenures of any oilfield service CEO. We would like to thank Kevin for his many contributions during his time with PD. Before I pass the call over to Carey and Dustin today, I would like to recap some of our Q3 highlights. Precision Drilling activity outperformed industry and our U.S. drilling activity continues to grow. Our operating margins are resilient and within guidance. We increased our 2025 capital budget by $20 million to allow for 5 additional contracted rig upgrades as several of our Canadian and U.S. customers are taking a long-term view of demand for energy. And finally, we are on track to meet our 2025 capital allocation plans, having already achieved our debt reduction target. Please note that some comments today will refer to non-IFRS -- non-IFRS financial measures and include forward-looking statements, which are subject to a number of risks and uncertainties. For more information on financial measures, forward-looking statements and risk factors, please refer to our news release and other regulatory filings available on SEDAR and EDGAR. With that, I will turn it over to Dustin Honing, our new CFO.

Thank you, Lavonne, and good morning or good afternoon, depending on where you're calling today. Our Q3 results demonstrate Precision's commitment to delivering on our strategic priorities and positioning the business for long-term success. We recorded adjusted EBITDA of $118 million, which equates to $129 million before share-based compensation expense compared with prior year EBITDA of $142 million. . In Canada, drilling activity averaged 63 active rigs, a decrease of 9 rigs from Q3 2024, resulting from customer projects being deferred to the upcoming winter season. Our reported Q3 daily operating margins were $13,007 a day compared to $12,877 a day in the third quarter of 2024, well within our prior guidance range. In the U.S., we averaged 36 rigs, an increase of 3 rigs from the previous quarter, primarily due to Precision's strength in gas-weighted basins. In Q3, daily operating margins for the quarter were steady at USD 8,700 a day compared to USD 9,026 a day in the second quarter, also within our prior guidance range. With favorable positioning in the U.S. natural gas market, we continue to add to our U.S. rig count, which has increased from a low of 27 rigs in Q1 to a high of 40 rigs today, a reflection of strong field performance recognized by our customers and the efforts of our sales team. While contract churn continues to challenge activity levels, we are encouraged by the quantity and quality of conversations tied to future opportunities in all basins. Internationally, Precision's drilling activity averaged 7 rigs, down from 8 rigs in prior year Q3. International day rates averaged USD 53,811 a day, an increase of 14% from prior year Q3 due to rigs recertification with nonbillable days recognized in 2024. In our C&P segment, adjusted EBITDA was $19.3 million, which compares to $19.7…

Thank you, Dustin, and good morning and good afternoon. First, I would also like to acknowledge Kevin for his accomplishments and contributions to Precision over his 18 years as CEO. His commitment to high performance and ability to grow the business while navigating industry cycles have certainly left their mark on the company. We wish him well in retirement. Precision is today the leading land driller in Canada, a leader in drilling technology, a high-performance driller in the Middle East, a leading driller in the U.S. and the largest and highest performing well service provider in Canada. The company has a multiyear track record of generating sizable cash flows and now has a strong balance sheet approaching 1x leverage. In short, Precision is well positioned for its next phase of growth. Precision is undoubtedly one of the truly exceptional companies in the energy industry. What sets us apart is our culture, shared passion, commitment to supporting the field, enthusiasm for serving customers, and deep desire to be the best. Precision's culture, core values and people will continue to be the foundation for our success. For our investors, the Precision team will remain excellent stewards of capital and we'll follow through with our commitments, which include our plans for long-term debt reduction and increasing direct returns to shareholders. We will continue to be agile and run lean and we'll be prepared for whatever challenges the commodity market has in store for us. For our customers, we are committed to safety, consistency, reliability and technology that drives performance, reduces costs and delivers the highest quality wellbores. For our employees, Precision will continue to be a fantastic place to work, develop your career and call home. Case in point, Precision just completed a leadership transition in which the company filled 3 key positions,…

[Operator Instructions] Our first question comes from Derek Podhaizer with Piper Sandler.

Carey, congratulations to you. And Kevin, great to see you in the seat.

Thanks, Derek.

So just maybe a question around some of the comments you made for 2026, the limited visibility in the first part of the year. Obviously, you have some contract term, short-term duration contracts. When can we start seeing those extend a little bit here and get some term back into your contracts? I'm just thinking about the interplay of a lot of the customer-funded upgrades that you've talked about and how that can then lead into extending the terms as we move through 2026?

Yes. I think I was going to go around North America on customer contracts. We are seeing a bit more commitment to longer-term contracts in the Montney. I'd say that would be where our longest duration contracts are. We're seeing some longer-term contracts in heavy oil, but not quite to the degree that we're seeing in the Montney. In the U.S., we're certainly seeing longer-term contracts in the Marcellus. We have a couple of 2-year contracts that we've signed this year, lot of 1-year contracts and then some shorter-term contracts. I think the contract duration is going to be the shortest in the oil basins as there's been a bit more volatility in that commodity. And in the Haynesville, we're seeing some short term and some slightly longer term, maybe 1 year to 18-month contracts. And I'll just add, I think Dustin made a comment here about some of the conversations we're having with customers. We don't have -- I think we have one contract in our book that starts -- that we booked that starts in 2026, but we are having a number of constructive conversations with customers for both oil and gas targets in the U.S. for work starting in 2026. But it's kind of yet to be seen how long those contract commitments are going to be.

Okay. That's helpful color. And then just on the rig upgrades, obviously, you've done a lot here in 2025. I think the number is almost 30. We start thinking about 2026 and then as you start thinking about your budget around for CapEx and what that means for free cash flow, how much more rig upgrades do you expect to do? I guess what's the population that you have of your rigs going -- that are available to be upgraded. Just want to start contextually thinking about what rig upgrades can look like for next year, what it means for CapEx?

Yes. I think we -- I would just start with the capital commitments that we made to investors on debt paydown and share repurchases. We will start with commitments, maybe similar levels next year. Hopefully, we raise the commitment to deliver returns directly to shareholders. So we'll start with that. And then we'll have our regular maintenance, which has been trending kind of in the $150 million a year range at this activity level. And then beyond that, frankly, I hope we have a lot of upgrades. This is an excellent opportunity to generate a significant financial return for our customers. It's certainly the highest return opportunity we have out of all of our options. We have an embedded advantage on completing the upgrades with a 40-acre tech center in Nisku and a 20-acre tech center in Houston that are fully staffed with experts on completing these upgrades. So we have a cost advantage. And then also, it usually comes with -- or I would say almost always comes with a contract that locks in the return. So I hope we have more. I think as we continue to see longer reach horizontals in the U.S., that will drive demand from our customers for upgrades. We expect to see more pad configuration upgrades in the heavy oil in Canada. And I think it will be more -- it'll be much more than 0. I don't know if we'll hit the same level that we do this year, but I don't think that these upgrade requests are going to stop.

Our next question comes from Keith MacKey with RBC Capital Markets.

Certainly echo Derek's comments on congrats to you, Carey, Dustin and Gene. I think maybe, Carey, if we could just kind of start out with, and you did discuss it in your prepared remarks. But I'm not, at this point, expecting wholesale strategy change from Precision, but certainly some tweaks from how you might see the business to how Kevin might have seen it. Can you just talk about some of those factors and sort of how your priorities will stand going forward as you take on the CEO role?

Yes, sure. I think that's a fair question, Keith. And certainly early days, but I have been with the company for 15 years. I would say that the strategy that we've been working with over my tenure as CFO for the past 10 years. I was heavily involved in developing it, particularly around cost control, capital allocation, return to shareholders and kind of hand-in-hand on how we look at operating the business and dealing with customers. Where I think the initial focus will be on supporting field operations, the best we can, and proving to our field that we're delivering the best support we can. And then also with customers doing, I would say, a more thorough job of proving to customers that we are delivering the best performance in the industry. And we've got lots of new tools to do that and a commitment by our sales and operations and technology teams to follow through on that. And beyond that, I would just say that there's a lot of things that are working for Precision right now. So I'm not looking to change the things that are working. You look at kind of the laundry list that I closed my comments with about our contract book and market share and I think we had a revenue decline of 3% year-over-year this quarter, which I think you would be hard-pressed to find a service provider with a similar geographic footprint to us that had a similar resiliency in revenue. So there are a lot of things that are working. But I think there's a few areas where we can sharpen our focus.

Okay. I appreciate the comments. And just one on the margin per day guidance, specifically speaking to any mobilization or activation costs. It looks like in the U.S., you had about $502 a day of impact in Q3. Can you just talk about what that might look like in Canada and the U.S. for Q4, please?

So Keith, this is Dustin here. In Canada, we'll have a little bit tied to the rigs we've mobilized up, but I wouldn't view it as substantial as one of those rigs has already been delivered. And then when you look in the U.S., we've kind of seen a little bit of a constant run rate with some of the reactivation following the momentum of staging all of these incremental rigs from Q1 into Q3. So I think that's a reasonable run rate you can expect kind of with the contract term that we've been absorbing so far in the short term.

Our next question comes from Aaron MacNeil with TD Cowen.

Congrats to everyone. I would certainly echo that and looking forward to seeing where you guys take things. Maybe I'll build on Keith's question, Carey. I was just hoping you could comment on a few specific items like performance-based contracts, your comfort with the operating regions or business lines and your approach to M&A? And if those sort of factors differ from your predecessor?

Okay. So I would say with regards to M&A, no change. I mean I was involved in every kind of M&A discussion we've had probably over the last 15 years. And I think there's nothing strategic that we see on the M&A front. I think there's some transactions we could complete if the price was right, but there's not a transaction out there that we would view as strategic that we would need to pay up for. So no change on that. I think the other thing I would say on M&A would be we're proving, and this year, in particular, that there are ways to grow our business organically without M&A. And we're doing that through high utilization of assets, improved pricing, rig upgrades, technology add-ons, EverGreen add-ons. And so I think there's a bit more runway on that growth avenue. With regard to performance-based contracts, I think -- I might have a slightly different view on that, but it's not much different. I think there are good opportunities for performance-based contracts. The industry has certainly -- it's more prevalent in the industry than it would have been 2 or 3 years ago. And we're seeing more unique applications to insert performance clauses into our contracts in both the Canadian market and the U.S. market. And so we're not -- we're not opposed to them. We have several performance-based contracts, and they're working well on delivering financial returns as well as driving performance for our rigs. So I think that -- I don't think you're going to see a step change in how we look at performance-based contracts, but I would be surprised if we didn't see more of them in the future.

Okay. And then just -- sorry, the last piece of the first question was just presumably you're comfortable with the operating regions and business lines you're currently in?

Correct. I think we're not looking to add any service lines onto our current business lines. And when we look at expanding internationally, we've said it before, and I agree with it today that the markets that we're in, Kuwait and Saudi Arabia are very good markets in the Middle East. It has been difficult to grow outside of those markets because the return profile of deploying new capital has been unattractive. And if we can make that change or find opportunities where that does change, we could grow in that region in the Middle East. And maybe there's another region or 2 that we grow in the future, but nothing to report or telegraph at this point.

Okay. And then for the follow-up, I'm sure you guys gave this a lot of thought before moving additional rigs to Canada. But how do you sort of wrap your head around the downside mitigation in terms of adding supply to the market that's generally been pretty good for the last couple of years. And you also mentioned a unique customer contract structure in the prepared remarks. Can you elaborate on what you mean by that?

Yes. I mean that -- this was a 5-rig contract for a major customer in Canada, where we moved 2 rigs from the U.S. market to Canada, but also we're able to get long-term contracts on 3 other rigs in the Canadian market. So we were able to look at the contract package and the capital committed for that contract package and the contract term and the return that the contract delivered for all those rigs. And together as a package, it was a very attractive opportunity for us, and we were uniquely positioned to be able to capture it. So I think it was just a unique situation that allowed us to move 2 rigs to the Canadian market. Now your question about supplying more rigs to the market, and I just want to be clear on the comments that we delivered both in our press release and I believe Dustin delivered on his -- on his press release, we expect to be at 100% utilization on Super Triples this winter drilling season. So we are addressing higher demand for Precision Drilling Super Triples. And I don't know what that means for the rest of the market in triples in Canada. But certainly, for our rig class, we expect to be at 100% utilization.

Our next question comes from John Daniel with Daniel Energy Partners.

I guess, Carey, well, congrats -- everyone, congrats, by the way. This question is for Gene. I know it's too early to say how many rig upgrades you're going to do next year, but I'm curious if you could just speak to the demand for more upgrades next year?

John, thanks. So working closely with all of our customers here in the U.S. and trying to understand what they need for rig requirements, what their drilling programs look like and then we've got 3 classes of Super Triples. So our regular 1,500 -- our 1,500 EER and our ST-2000. And so depending on what their drilling program looks like, they've got a steady program, and we've got a rig that we can upgrade for them at a reasonable price, and we can come to contract terms, then we'll go ahead and see if we can move forward with the upgrade.

Okay. But when I look at the 5 rigs that you're doing for Canada, can you just speak to how that evolved the opportunity? How long were the discussions? And could you be surprised next year, all of a sudden that you're going to have 5 to 10 more upgrades. So just -- I'm just trying to get a feel for what the opportunity could be?

Yes. So it's a blend of heavy oil rigs and a blend of Triples. Obviously, Carey just spoke to the Triples viewpoint. And heavy oil with Super Single rigs, we have 48 of them. As the Clearwater starts to evolve and they expand their well design, they're looking for year-round operations. Typically, that can mean 100 more days of utilization for us as a drilling contractor. And so converting those single-mode rigs to pad rigs is something that's of interest to our customers and to ourselves and that's where the growth would come from.

Got it. Apologies for what's going to be a drilling 101 question here. But you did the 27 rig upgrades this year or you'll do them. Can you remind me what a potential rig upgrade cycle could be? When do you have to bring those 27 back in?

Oh, you mean the time it takes to complete an upgrade?

Yes, just -- yes, I'm sorry for such a basic question, but I'm slow today.

You know, it's a -- for what for what we're doing, some of the rig upgrades might be an in-basin upgrade where in a rig move, we're installing a new piece of equipment from [indiscernible]. A longer-term upgrade might be doing a pad configuration for Super Single and that would be 3 to 4 months. The rigs that we moved up, the Super Triples, those were probably 2- to 3-month upgrades to get those rigs ready. So we're not looking at any kind of 6 to 9-month upgrades. Most of them are going to be pretty quick, inside a week to 3 or 4 months.

And it speaks to our rig design and our capability to use our inventories and upgrade to our spec. So I think a differentiator for Precision, certainly.

Our next question comes from Tim Monachello with ATB Capital Markets.

Everybody, long-time listener and first-time caller in a while. Congrats, Carey, Dustin and Gene for much deserved promotions and Kevin for a great career. First question just around Canada. Interesting to see a couple of rigs being moved out of the U.S. into Canada Super Triple market. And with your comment that you're fully utilized for -- or expecting to be fully utilized for the winter drilling season, do you think there's more opportunity to move rigs out of the U.S. into Canada?

I think for this winter drilling season, no. And we don't currently have deep discussions with customers about moving more rigs. But over time, over the next couple of years, I mean, LNG Canada Phase 2, other LNG opportunities, there could be more demand for Super Triple rigs. And certainly, the rigs that we have in Canada are delivering good performance for our customers. So there may be opportunities in the future, but I would say it would be for next winter drilling season.

Okay. That makes sense. And then the U.S., obviously, the oil basins, the outlook is a little bit circumspective, I would think. In the gas basins, you've seen almost 20% rig activity growth in gas in the U.S. year-to-date. And you have a unique footprint in the gas basins with a pre fragmented customer base. So I expect you have a decent view from a lot of customers on what their expectations are going forward for activity. Could you talk a little bit about your expectations for U.S. gas drilling activity over the next, I don't know, 6 to 12 months?

Yes. I think we have a decent viewpoint on where activity might be going on gas. I think the Marcellus is, I would say, steady to low growth. There might be some -- what we've seen is there's been a bit of high-grading within the basin. So as we've added more rigs to the basin, there's been a few instances where a rig has gone down. So they haven't -- our additions there haven't necessarily resulted in basin growth. In the Haynesville, I think most people look at the Haynesville as swing producer for LNG exports and natural gas production in general. So we could see higher activity in the Haynesville over the next year if gas prices are supportive. But I wouldn't say that we have a -- as we stated in our press release, we don't have much of a view on that demand beyond early 2026.

What's the motivating factor behind, I guess, higher activity levels this year considering gas prices have been fairly uneconomic in the U.S. Is it just LNG export and building supply? Is that what you're seeing?

Yes, I think there's -- I think most people are seeing a wave of demand on both natural gas-fired generation for data servers and electrification of the economy and then LNG exports. And so I think some customers are looking through any short-term volatility in gas prices and looking at the longer-term demand outlook.

Okay. That's helpful. And then could you just provide a quick overview of what the geographies, the 27 upgrades you're going to?

So it's really a mix, Tim. But think of it, we obviously commented on the 2 Montney rigs that we're going to bring up from the U.S. into Canada. Heavy oil is really a key area we've invested a lot. So this would be our Clearwater Basin and then more into the unconventional plays in SAGD. One comment on that, we've seen a lot of enthusiasm with our customers on these upgrades where we have recognized a lot of upfront payments throughout the year to help support these upgrades as well. And then when you look down to the U.S., it's primarily weighted to the Haynesville and the Marcellus. But we have had some upgrade opportunities with high torque equipment in the Rockies and even in the Permian.

And I would just add to that, Tim, I believe we said this in the press release, but the vast majority of the upgrades are going to areas in North America where we expect to have year-over-year increases in activity. So it's a little bit out of stuff with kind of the broader market, but in the Haynesville, in the Marcellus heavy oil, and in the Montney, we expect that higher year-over-year activity, and that's what was driving these upgrades.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Lavonne for any further remarks.

Thank you for taking the time to learn more about Precision Drilling today. And with that, we will sign off. Everyone, enjoy your day. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.