Precision Drilling Cuts Debt, Buys Back Shares Amid Flat Rig Market

Date of Call: Feb 12, 2026

Guidance:

• Q1 2026: Canada average active rigs >74 from prior year Q1; Canada operating margins CAD 14,000-CAD 15,000/day; US average active rigs in line with 37 from prior quarter; US operating margins $8,000-$9,000/day; International runs 7 rigs; CMP EBITDA slightly exceeds prior year.
• Full-year 2026: Capital expenditures CAD 245M (CAD 182M sustaining/infrastructure, CAD 63M upgrades); Depreciation CAD 305M; Cash interest expense CAD 45M; Effective tax rate 25%-30%; SG&A flat at ~$95M; Share-based compensation $25M-$45M; Long-term target net debt to EBITDA <1x; Free cash flow allocated to shareholders up to 50%.

Business Commentary:

Shareholder Returns and Debt Reduction:

• Precision Drilling reduced its debt by CAD 101 million, achieving a net debt to adjusted EBITDA ratio of 1.2 times, and repurchased CAD 76 million worth of shares.
• This was part of the company's strategy to enhance shareholder returns and maximize free cash flow despite declining industry activity.

Operational Performance and Market Position:

• The company's adjusted EBITDA for Q4 was $126 million, compared to prior year EBITDA of $121 million, with a peak rig count of 87 in Canada during Q1 2026.
• The performance was bolstered by resilient drilling margins, increased Canadian market share, and high U.S. rig utilization, establishing Precision as the second most active driller in North America.

Capital Investments and Upgrade Opportunities:

• Precision Drilling allocated CAD 263 million to capital expenditures in 2025, with CAD 156 million for sustaining and infrastructure, and CAD 107 million for upgrades.
• The investments were aimed at enhancing rig assets and leveraging upgrade opportunities underpinned by firm customer contracts, particularly in the Montney and heavy oil regions.

Strategic Priorities and Customer Relationships:

• The company focused on driving revenue growth and deepening customer relationships through performance conversations and digital platforms like Alpha and Clarity.
• By offering upgraded rig solutions and creative commercial arrangements, Precision aimed to capture demand across diverse North American basins and increase its customer base running multiple rigs.

International Operations and Expansion:

• Precision's international segment averaged 7 active rigs, with day rates up 8% year-on-year, and the company pursued opportunities in the Middle East and Argentina.
• The strategic move to enter the Argentine market via an MOU with a local drilling contractor aimed to de-risk complexities and leverage Precision's technological offerings.

Sentiment Analysis:

Overall Tone: Positive

• “Precision Drilling had a successful 2025... differentiating activity levels and financial outperformance in a flat to declining North American market.” "We enter 2026 with a net debt to EBITDA ratio of 1.2 times... with over $445 million in total liquidity." "Our platform provides multiple avenues to achieve this priority." "We are excited about the potential to expand our presence in a growing region."

Q&A:

• Question from Derek Podhaizer (Piper Sandler): Can you provide more context on the Kuwait rig demobilization and potential reactivations in the Middle East, and the upside to the current 7 active rigs?
  Response: In Kuwait, two idle rigs are available for redeployment; in Saudi Arabia, one rig reactivated recently, with potential for more, bringing active count to 7 or 8.

• Question from Derek Podhaizer (Piper Sandler): What is the potential upside to the US rig count mentioned in guidance, and what drives it?
  Response: Encouraging customer conversations for additional deployments in Marcellus, Haynesville, Permian, and Rockies, driven by performance and efficiency, not by market share gains.

• Question from Keith Mackey (RBC Capital Markets): Can you break down the Q1 US margin guidance and expectations for reactivation costs?
  Response: Q1 US margin guidance reflects mixed pricing trends, leverage of Alpha technology, and fixed cost absorption; reactivation costs expected to be similar to recent trends.

• Question from Keith Mackey (RBC Capital Markets): How did the Argentina MOU opportunity arise, and what are the hopes for it?
  Response: The MOU with San Antonio International allows Precision to offer rigs and digital technology in Argentina via a partner, de-risking market entry; potential for 1-3 rigs over the next couple of years.

• Question from Aaron MacNeil (TD Securities): Has ARC's removal of Attachie Phase Two impacted Canadian basin demand for Super Triples?
  Response: No significant change in short-term demand observed; Precision remains active with all Super Triples and Singles; long-term outlook remains solid due to strong takeaway capacity and deep resources.

• Question from Aaron MacNeil (TD Securities): What would a contract look like for the Argentina direct leasing opportunity?
  Response: Contract includes two revenue streams: payment from partner for operational support and direct leasing from customer for the rig, with mobilization/demobilization costs contemplated.

• Question from Tim Monachello (ATB Capital Markets): What will capital allocations look like after reaching the deleveraging target?
  Response: Will continue to increase direct allocations to shareholders as debt levels decrease; form (buybacks, dividends) may vary based on market conditions.

• Question from Tim Monachello (ATB Capital Markets): How much of the 2026 upgrade capital is committed, and which markets offer opportunities?
  Response: Only a portion (est. 15-30%) of the $63M upgrade capital is fully committed; opportunities in Canada's Montney and heavy oil, and US's Marcellus, Haynesville, and Permian.

• Question from Tim Monachello (ATB Capital Markets): Do you expect US rig count to move higher in H2 2026?
  Response: Customer visibility is short-term (mostly 6 months out); market outlook remains generally flat.

• Question from Tim Monachello (ATB Capital Markets): Will Argentina rigs be upgraded from the US fleet or new builds?
  Response: Would use idle Super Triple rigs from the US fleet, with any required upgrades and mobilization costs factored into contract economics.

• Question from John Daniel (Daniel Energy Partners): Is US growth from displacing competitors or customer rig adds?
  Response: Growth is at least half from displacements, more so than customer rig additions.

• Question from John Daniel (Daniel Energy Partners): How does customer consolidation influence Precision's appetite for business consolidation?
  Response: Consolidation is possible if financially attractive and synergistic, but not a strategic priority.

• Question from John Daniel (Daniel Energy Partners): How many rig upgrades does the 2026 budget contemplate?
  Response: Approximately 10 upgrades, with significant variability in cost per upgrade.

• Question from Joseph Schachter (SER): Which rigs were decommissioned, and why is there no scrap value on assets held for sale?
  Response: Decommissioned rigs were non-competitive due to evolving drilling complexity; assets held for sale will be stripped for parts and scrapped without a specific timeline.

• Question from Joseph Schachter (SER): What drove the $17M charge related to drill pipe?
  Response: Charge due to shortened drill pipe lifespan from increased well complexity and some disposals at a loss, reflecting an industry-wide dynamic, not a Precision-specific issue.

Contradiction Point 1

Capital Allocation and Share Repurchase Priority

Contradiction on whether buybacks are a priority before or after deleveraging.

What are your thoughts on the recent earnings results? - Tim Monachello (ATB Capital Markets)

2025Q4: As debt levels decrease, allocations to shareholders (via buybacks and potentially dividends) will increase. - Carey Ford(CEO)

How will capital allocation look post-deleveraging with increased share repurchase guidance? - Derek Potheiser (Piper Sandler)

2025Q3: Will start with commitments to debt paydown and share repurchases, similar to 2025, aiming to increase shareholder returns. - Carrie Ford(CEO)

Contradiction Point 2

Outlook on U.S. Gas Basin Activity and Visibility

Contradiction on the visibility and certainty of customer plans for U.S. gas basins.

What are your thoughts on the company's Q2 earnings performance? - Derek Podhaizer (Piper Sandler)

2025Q4: Upside potential is driven by active conversations with customers in the Marcellus, Haynesville, Permian, and Rockies basins, all focused on performance-based contracts... Growth is expected to be modest. - Carey Ford(CEO)

What is the potential upside to the U.S. rig count under the guidance, and which contracts or basins are involved? - Tim Monticello (ATB Capital Markets)

2025Q3: The company has a decent view but limited visibility beyond early 2026. - Carey Ford(CEO)

Contradiction Point 3

Strategic Outlook for Canadian "Telescoping Double" Rig Segment

Contradiction on company's strategic interest in consolidating an oversupplied segment.

What are the key takeaways from John Daniel's earnings call at Daniel Energy Partners? - John Daniel (Daniel Energy Partners)

2025Q4: Consolidation is not a strategic priority. Targets are evaluated purely on financial grounds... - Carey Ford(CEO)

How does customer consolidation impact your business consolidation strategy? - Derek John Podhaizer (Piper Sandler & Co.)

2025Q2: The company (Precision) is not likely to be the consolidator, but believes other players should step in... - Kevin A. Neveu(CFO) and Carey Thomas Ford(CEO)

Contradiction Point 4

Nature and Duration of U.S. Rig Upgrade Contracts

Contradiction on whether upgrades require long-term contracts or can be short-term.

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2025Q4: Upgrade contracts are demand-driven and customer-requested. - Carey Ford(CEO) and Dustin Honing(CFO)

Of the $63 million 2026 upgrade capital, how much is already committed, which markets offer the best opportunities, and how does this affect your contracted status? - Aaron MacNeil (TD Cowen)

2025Q2: Most upgrades... mean contracts don't always need to be 2-year terms. - Carey Thomas Ford(CEO)

Contradiction Point 5

U.S. Rig Count Growth Timeline and Drivers

Contradiction on the timeframe for achieving internal U.S. rig count targets.

What are the key factors driving Q2 revenue growth? - Tim Monachello (ATB Capital Markets)

2025Q4: The view of flat activity is based on short-term customer planning (typically 6 months). - Carey Ford(CEO)

Will there be U.S. rig count stability or an increase in H2 2026? - Derek John Podhaizer (Piper Sandler & Co.)

2025Q2: The company's internal target is to increase U.S. rig count to 40-45... by managing oil rig churn. - Kevin A. Neveu(CFO)