Precision Drilling Corporation Price & Performance (PDS)

Welcome to Precision Drilling's fourth quarter and year end conference call and webcast.

Today, I'm joined by Kevin Nephew, Precision's President and CEO and Precision Ford, our CFO. Yesterday, we reported our fourth quarter results. Concluding another year of strong cash flow and profitability. In our news release, we revealed our 2025 that the whole Precision team is aligned with Our 2025 priorities remain focused maximizing free cash flow through disciplined capital capital deployment and strict cost management, Enhancing shareholder returns through further debt reduction and increased share repurchases and growing revenue in existing service lines. Before I turn the call over to Kevin and Carey, I would like to remind our listeners that some comments today will refer to non IFRS financial measures and include forward looking statements, which are subject to a number of risks, uncertainties. Forward looking statements and risk factors, Please refer to our news release and other regulatory filings available on SEDAR And Edgar, As a reminder, we express our financial results in Canadian dollars unless otherwise stated. With that, I'll turn it over to Kerry.

Lavonne, and good afternoon. Precision's 2024 annual financial results demonstrated our resilient business model ability to meet our financial commitments despite lower industry activity in certain core markets. Before detailing our 2024 financial results, I will will recap Precision's 2024 strategic priorities and our performance against each. Number one, concentrate organizational efforts on leveraging our scale and generating free cash flow. Generated cash provided by operations of $482,000,000 reached near full utilization on our Canadian Super Series rigs and increased year over year activity in international drilling, Canada drilling and well servicing, by 37%, 1226% respectively We also achieved full synergies our CWC acquisition. Number two, reduce debt by $152,000,000 and allocate 25% to 35% of free cash flow reached the midpoint of both of these targets and lowered our net debt to EBITDA leverage ratio. And number three, continue to deliver operational excellence and strengthen our competitive position and extend market penetration of our Alpha and F Green products. During the year, we nearly doubled our Evergreen revenue year over year and added two new major product offerings on our Super Single rigs, which would let LED mass lighting, and hydrogen combustion catalyst systems, We also invested $52,000,000 into our fleet and grew market share year over year in Canada.

I will now cover annual financial highlights. Revenue of $1,900,000,000 essentially flat year over year adjusted EBITDA by $121,000,000 15% decrease year over year comes from operation of $463,000,000 a 13% decrease with cash from operations of $482,000,000 similar to prior year. We achieved debt reduction of $176,000,000 and $75,000,000 in share repurchases representing 4% of our outstanding shares and generated positive earnings every quarter during 2024 and for the past 10 consecutive quarters. [indiscernible] on to fourth quarter results. Our fourth quarter adjusted EBITDA of $121,000,000 included a share based compensation and non recurring charges of $8,000,000 Non recurring charges included $4,000,000 of rig reactivations, $4,000,000 of severance inventory write downs and year end accrual cleanups. Absent these charges, adjusted EBITDA would have been $144,000,000 In The U. S. Drilling in U. S. Drilling, activity for Precision averaged 34 rigs in Q4, a decrease of one rig from Q3, The operating margins in the quarter absent impacts of IBC and Turnkey were $9,165 just shy of our guidance of $9,500 USD. And $17.19 dollars below Q3 levels. For Q1, we expect normalized margins to range between $8,500 and $9,000 The expected margin decrease is due to slightly lower day rates and higher overhead cost spread over fewer activity days compared to Q4.

In Canada, drilling activity for Precision averaged 65 rigs, an increase of one rig from Q4 twenty twenty four. Daily operating margins in the quarter were $14,559 an increase of approximately $2,131 from Q3 twenty twenty four and slightly below our guidance of $15,000 per day Q4 margins included approximately $4,000,000 or just over $500 per day in rig reactivation costs. As of these costs, margin performance would have exceeded guidance. For Q1, we expect margins to remain consistent with Q4 at $14,500 to $15,000 per day compared to Q1 twenty twenty four margins are down approximately 1,000 per day and this is due to remix and planned rig reactivations versus zero rig reactivations last year. Internationally, Precision drilling activity in the quarter averaged eight rigs, and average day rates were $49,636 in line with the prior year. We expect 2025 activity to be consistent with 2024 levels.

In our C and P segment, adjusted EBITDA in the quarter was $16,000,000 a $4,000,000 increase from the prior year quarter. Adjusted EBITDA was positively impacted by a 6% increase in wealth service hours reflecting A full quarter with the CWC service rigs expect results to improve in Q1 with increased rates, activity and rental performance. Capital expenditures for the quarter of $59,000,000 and for the year, they were $217,000,000 Due to timing of equipment deliveries, deliveries our capital expenditures were slightly higher than our guidance of $210,000,000 For 2025 capital plan of $225,000,000 is comprised of $175,000,000 for sustaining an infrastructure, and $50,000,000 for upgrades and expansion. This plan will increase or decrease based on activity levels and contracted customer upgrades. Moving to our contract book, As of February 12, we had an average of 43 contracts in hand for the first quarter and an average of 37 contracts for the full year 2025. Based on customer conversations for Super Triple and upgraded Super Single grades, We expect the number of Canadian contracts to increase over the coming quarters. Moving to the balance sheet. As of December 31, our long term debt position net of cash was $748,000,000 and our total liquidity position approximately $600,000,000 excluding letters of credit.

Net debt to trailing twelve month EBITDA ratio is approximately 1.4 times and our average cost of debt is 6.9%. For 2025, it is clear that we are nearing our long term capital structure target of below one times leverage and we continue to balance our cash liquidity, debt maturities, total debt and leverage ratios while optimizing our cost of capital. This year, we plan to reduce debt by at least $100,000,000 and have increased our long term debt reduction goal from $600,000,000 to $700,000,000 between 2022 and 2027. As of December 31, 2024, we have reduced debt by $435,000,000 of this period and now have an additional $265,000,000 reduction over the next three years to achieve our goal. Moving on to guidance for 2025. We expect depreciation of $300,000,000 cash and interest expense of $65,000,000 effective tax rate of 25% to 30% with low cash taxes SG and A before share based comp expense of $100,000,000 share based comp expense of $25,000,000 to $35,000,000 with a share price range of $80 to $100 assuming a 1x multiplier. Please note that this is a preliminary estimate and we will provide updated guidance on our Q1 call following the settlement of past grants and issuance of new grants, later this quarter.

That concludes my prepared comments. I'll now turn the call over to Ken. Thank you, Gary. So I will speak to our outlook for 2025 and I'll provide some additional perspectives on precisions strategic priorities, which Levan outlined earlier. We start with our strategic priorities. As this is core to how we execute Precision. First, we believe this is key messaging for Precision's investors Precision. We're laying out exactly what we intend to accomplish. And that our investors can count on us to deliver against those commitments. We've been providing this guidance and meeting or exceeding our targets for over nine years. We believe this important messaging provides our investors with that clear line of sight as to how we'll continue to create value and what we can be held accountable for. Internally, this Precision priorities are essential driver of the Precision culture From these annual priorities, we build out the individual objectives for each leader in the organization. Those individual objectives are then cascaded down throughout the full organization in order to virtually every employee understands where they fit how their work impacts shareholder value. This organization wide alignment model ensures that every element of our business that we can control is tightly monitored, measured and controlled.

And that we can deliver every result we commit to. For most of the past decade, our primary strategy has been creating shareholder value. By reducing debt and converting enterprise value from debt to equity. To support this strategy, we've crafted annual priorities intended to optimize the value of our services Seeking returns on rig investments and ultimately maximize free cash flow. And for the past decade, this free cash flow has been primarily prioritized towards debt reduction. [indiscernible] Using this strategic process, we retired over $1,400,000,000 in debt bought back over hundred and $50,000,000 of stock. We fully commercialized our Elfa automation suite We introduced and commercialized our evergreen solutions We continue to invest in rig upgrades when supported by customer contracts. We have integrated two consolidating acquisitions and grown our Canadian drilling well service market share. We've reloaded our international business in long term contracts in steady predictable cash flow U. S. Segments got a little more challenging. I'll come back to that in a few moments. Now, Carrie mentioned that we're nearing our target long term capital structure. And with that, we've been slowly transitioning our strategy first increasing the allocation of cash to share buybacks and now throttling down our pace of debt reduction.

Embedded in this cash allocation shift is creating the financial flexibility to consider more growth focused investments such as additional fleet upgrades, and exploring potential tuck in style acquisitions. With that, me come back to our U. S. Drilling segment where I commented earlier this has been a little more challenging for us. The U. S. Land market in general has been in delays for the last twenty four months. Led in 2023 with gas directed activities playing and in 2024, with drilling efficiencies among many other factors negatively impacting oil directed activity. When this release began, Precision's market share was underpinned by strong customer relationships and market conditions in both the Haynesville and the Marcellus. We've reinforced that very favorable customer position over the past couple of years very encouraged by the gas opportunities we see looking forward. [indiscernible] I will go out in a limb and predict the gas drilling activity will end 2025.

At a higher level than we've seen in the last several quarters. But I believe Precision is well positioned to gain share and grow utilization in these areas. Oil activity on the other hand appears to remain constrained by operator capital discipline operator consolidation, and some continued efficiency impacts I am not going up the limb to predict an increased oil activity. On the contrary, flat feels like the right call in oil activity. Now that said, rig efficiency continues to be an important competitive differentiator and this presents an opportunity for Precision. With this market backdrop, I believe that Precision has growth opportunities And to that end, we made some adjustments with our US team. Late last year, we restructured our operations group to flatten up the management structure and to improve our focus on customer needs, specifically leveraging our success in the gas basins to the oil focused customers.

We also enhanced our sales organization with additional sales and marketing expertise to better communicate the efficiencies we can deliver [indiscernible] and the cost savings our Evergreen products deliver, along with the overall safety and efficiency our highly skilled crews provide. As noted in our capital plans, we've earmarked $30,000,000 for U. S. Rig upgrades which I expect will largely be focused on long resource overhaul capability enhancements. We believe our intense focus on The U. S. Will improve our while ensuring we continue to capture the new rig opportunities, which seem to be emerging in gas. Close the loop on our strategic priorities, U. S. Focused initiative is captured in our third priority to grow existing revenue and existing service lines Through contracted upgrades, optimized pricing, utilization and opportunistic tuck in acquisitions.

To touch on the acquisition topic for a moment, we believe that drive to efficiency across the drilling industry is a technology and scale based exercise. Believe this will marginalize the rigs that don't have the technology or the scale to deliver the operating and cost efficiency that the oil and gas operators demand. [indiscernible] And we'll have the financial capability to pursue tuck in deals which is important to us, but only if we can achieve the appropriate value in these transactions. Turning to Canada, the outlook remains very good indeed. Now has been some short term concern mainly focused on the potential of U. S. Tariffs on Canadian energy. The more recent clarity around potentially reduced tariffs for the energy versus other Canadian exports has moderated that concern. And the delay in implementation of the tariffs also seems to encourage further Canadian to U. S. Negotiations aimed at exempting energy entirely. Which I believe benefits everyone. Looking back to the fourth quarter, Canadian drilling activity tailed off more than we expected for the traditional Christmas break And we believe this was due primarily to bunch of exhaustion. We were encouraged by how quickly customers activated our rigs immediately following Christmas.

We rebounded to 98 rigs by January sorry, repeat that. We were bounded to 79 rigs by January the then to 81 to a few days later. This level has held firm through today. Breakup will be weather driven not budget constrained we have good customer indications that activity during breakup will exceed last year's record level and should have grown 50 rigs operating straight through the spring breakup period. Second half activity should also benefit from increased customer demand once LNG Canada fully starts up. It is likely that we'll be upgrading more Super Singles to PAD systems as the efficiency gains these rigs deliver allow us to capture a larger portion of value we create, As Kerry noted in his comments, we activated three rigs in December We are activating another super singles during the first quarter should be steady for a customer in May. In our Canadian Well Servicing segment, we also experienced a steeper than expected slowdown over Christmas The winter activation ramp up was also slower we experienced during July segment. It seems that some of the tariff uncertainty slowed down customer decision making We have noticed an improvement in customer urgency and demand once the lower potential tariffs were clarified.

Our active service rig count today is now hovering in the mid-90s, similar to the activity level this time last year.

As a side note, during the fourth quarter, we entered a joint venture with two First Nations groups of British Columbia.

They invested along with Precision in several fully recertified service rig spreads Since the inception of this JV, the available rigs have been essentially fully utilized by Montney operators looking to support First Nation I'm excited about this opportunity for both Precision and our First Nations business partners in the interest to see this expand and perhaps more include more First Nations groups and additional milestones. Those customers looking to support the local First Nations communities, this is an excellent avenue for all stakeholders. Turning to our international business, we oil activity looks to remain flat for the balance of $20.25. We have not received any suspension requests in Saudi Arabia, and we do not believe we will. Remember that we're a relatively small player in our market. Our grade operations should remain firm for this year and into next year with long term contracts in place. Now we have seen an influx of unconventional gas inquiries for multiple rigs in three different regions.

Most of these are looking to utilize North American style of pad rigs and technology to pursue shale gas developments. I will intentionally remain very vague about this project as these projects as other drillers and some perhaps listening to this call also be pursuing these inquiries. Now it's unlikely any of these rigs would spud before year end. As contract negotiations, equipment certifications, and mobilization times preclude a rapid deployment. So I'll wrap up my comments by reaffirming the Precision entire organization is aligned to deliver our strategic objectives which are all aimed at increasing shareholder value.

There should be no doubt that we believe we are turning the corner on nearly a decade of debt reduction. As we're increasing our allocation of cash to shareholders, we are looking to invest in our business for targeted growth.

I want to take all precision stakeholders Precision their patients through the volatility and experiences We want to thank the employees at Precision for delivering on our 2024 commitments and I know we are all looking forward to our previous year in 2025. That, I'll turn the call back to operator for questions.

Our first question comes from Aaron MacNeil with TD Cowen. Your line is open.

Hey, everyone. Thanks for taking my questions. Kevin, one of your competitors is guiding to lower U. S. Activity in Q1 and slightly lower margins. I know you mentioned you've got 34 rigs earning revenue in The U. S. And 30 marked as active on the website. So I don't think I'm making a huge leap to assume here that there's a couple idle, but contract rigs in The U. S. And so was just hoping you could speak to contract duration for those rigs and you think you can sort of backfill that activity with new work Erin, thanks for the question. Really key question kind of on our U. S. Strategy right now. So there's been an awful lot of churn in The U. S. And a lot of that in oil, a lot of these are very short term, well to well pads, pad type contracts. And that's going to continue through the next couple of quarters in The U. S. So I think there is downside risk. Now I didn't talk about the changes we put in place to try and leverage our capabilities better in the oil based basins, I wouldn't tell you that I'm really thinking about the first couple of quarters of this year as being flat.

But I think that we have we'll get traction both in gas and with some of our actions It should help us later in the year, but it's going to take a while. And there's I think there's downside risk don't think our contract book covers us in the first couple of quarters. But we've got our set churn pretty well over the past few months and expect us to manage well going forward. Got you. Makes sense. I know I'm probably being too acute here, but at a reason recent energy conference, a few Haynesville producers suggested they wanted to see significantly higher gas prices before they put new rigs to work and can appreciate that Haynesville isn't the only area where you might see an uptick in gas focus activity, but Yes. Erin, so I think I put the same narrative you've heard in that Precision range that customers are comfortable with ranges from kind of high 3s to mid 4s for non XTAS. We understand that. We've had a number of conversations with customers, both in the Marcellus and in the we'll have some churn this quarter. But expect there are rig counts in those areas will stay pretty firm, maybe move up a little bit And I think we we see opportunities right now that haven't been committed to yet but could emerge in Q2 and Q3.

Thank you.

Our next question comes from Kurt Hallead with Benchmark. Your line is open.

Hey, good morning.

Everybody. Thanks for the color. And insights as always.

I guess I just wanted to maybe kick off the Q and A on the Canadian front.

So Kevin, you referenced still a very constructive outlook. With respect to activity levels However, coming back to Carrie's comment about margins in the first quarter, being down on a year on year basis. How do we think that progresses throughout the course of the year? Is Is the first quarter going to be a low point? Do you got some momentum there? Are some of the headwinds? Maybe kind of flush that out a little bit more for us for help us? [indiscernible] I would say that on the the margin forecast for Q1, it's a combination of two things. One, we have some rig reactivations that are negatively impacting margins just like we had in Q4. And we also have a little bit of rig mix that's slightly shallower than what we had last year in Q1. And that's kind of a result of the strength of the super single market, so the heavy oil market remains really strong. If we look at day rates by rig class and margin by rig class, we have not seen any degradation in pricing or margins. It's just the rig mix been shifted a little bit more towards the super signals, which is causing that just a little bit of pressure on margins. [indiscernible] certainly on the non contracted rigs that will carry during the year in Canada, but I think stays really constant in activity.

Our sales team is really focused on ensuring that we capture our fair share of the value. So I do expect there'll be some pricing traction the year progresses. We certainly have an expectation that LNG Canada will increase rig demand, especially on fripples.

That will add more pricing attention and give us more opportunity. So I think we're pretty optimistic on margins trending throughout the year. All right, great. And then maybe on a follow-up, this question might be easy for you to punt [indiscernible] We're all kind of flying blind here. So let's fly blind together. On the tariff front, right, you guys referenced that you made some purchases of drill pipe going into the fourth quarter and it has a patient of some tariff dynamics. When you look at the potential business risk and business exposure, whether it be broader context of is it going to impact oil exports into The U. S. Is it going to impact any of the Canadian E and Ps? How they kind of approach the market? Again, you referenced buying some drill pipes in the 4Q, did you buy enough drill pipe to last you through the full year? Again, let's fly blind together on this, Kevin. Yes. Kurt, this is something we saw a lot of time on. We did a detailed deep dive for our Board few days ago to should understand kind of what the levers are that we have First thing I'd tell you is that when the tariff discussion was kind of dropped from 25% down to 10%, was kind of a huge side relief among the Canadian operating companies.

So I think what that means is that the tariffs are far less impactful than large swings in WTI.

Or large swings to Canadian exchange rate.

And so far, what we've seen is that the tariff has actually caused the exchange rate to be more unfavorable to the Canadian dollar, which is more favorable to our customers. So I'm going to project an oil. So a little bit of that tariff impact has been marginalized out by the exchange rate change I still worry more about the larger macro impacts We don't know what's going to happen with Russia. We don't know what's going to happen in The Middle East right now. There's a lot of uncertainty there.

And I think those macro events could have more impact on activity than the material efficient. But I think we'll have a little bit of friction in some of our cost if the maximum tariffs are exercised We've got a very diverse supply chain. We've got I think, ways to manage around the tariffs, the general manufacturing, bypassing some of the areas that are tariff stricken. So I mean, our conclusion with the Board is that the macro risk that we always face every day in this business is still there. And the tariff risk has been mitigated by the lower [indiscernible] [indiscernible] I'm not sure if that answers your question, but we're feeling pretty comfortable about things right now.

No, no. Everything is a moving target these days. But so I appreciate your insight.

Our next question comes from Sean Mitchell with Daniel Entry Partners. Your line is open.

Hi, guys. Good morning or good afternoon. Thanks for taking my question. Just wanted to kind of poke around on the activity front We've heard rumblings of some of the private guys starting to pick up rigs again.

More recently. And I think we understand, obviously, there's been a lot of M and A in the market on the larger E and Ps and some of those assets that get bought take a while to kind of figure out what they're going sell, but you're starting to see some of that. Do you guys see any of that in the customer mix or in the conversations with some of the private guys on the E and P front looking to put stuff back to work? And is that offset by more public companies laying stuff down or how should we think about it? Because I know think the market is basically and you're in line with it is saying flat activity especially for the oil market 2025. But got to think at some point some of these private guys put rigs back to work and I'm just trying to see if you have any commentary on that.

Yes, Sean. If you follow the public data on Precision, you'll find that we have two rigs right now. It's a fairly new private [indiscernible] Short answer is yes, we do see some capital coming back into D and P space. That's a good sign.

I'm also encouraged by the recent IPO as a vet in oil service. I IPO and a LNG IPO [indiscernible] So it does seem like there's capital coming back in.

Private capital usually kind of leading edge IPO is going to follow that. Although this seems to be a bit encouraging, There's no question talking to investors over the past I'd say forty five days really since January, since the election actually, but in first part of this year. Our investors seem to feel better about investing in this political environment in The U. S. Than they did year ago.

I think we're going to have a lot more people looking closer at energy, looking closer at oil and gas. Looking closer at oil and gas services. Certainly, we're seeing it in just the investor mix we're getting [indiscernible] going back to your original question, yes, private equity is coming into the space Early and small and slow, but it's good to get a Yes. And then maybe one more follow on on that front, just activity. As we think about 25 being kind of flattish, maybe there's some gas rig activity in the back of the year. But as you roll into 'twenty six, I guess my bigger larger question would be, we've had five sixty five rigs running in The U. S. Essentially for a while now. It seems like it's kind of flattish through this year, maybe up a little, maybe down a little. If you roll into 2026 and things there's actually a call on rigs and [indiscernible] How do you think the industry will respond or some of the people that have been laid off, are they coming back or like will we have kind of a labor problem getting people back to work, I guess is what I would say.

Yes. Sean, a couple of parts to your question there. First of all, I would tell you that if the rig count stays flat this year, I think the the technology advanced drillers, there's probably four or five of us that fall in a bucket.

Probably have more rigs running and the less technology advanced or less scale based rigs probably have fewer rigs running. So I think it will be a market share shift in a flat environment.

Because our customers still want efficiency and want more and more efficiency. You need alpha automation, you need large fab rigs that can drill multi well. Pads with with sequential drilling need all of that to get the maximum efficiency. I think that trend is going to continue throughout 2025.

I would tell you that over the last over this last cycle kind of post COVID, we've been quite surprised by the bracity of our recruiting programs and how well that's worked for us.

We haven't seen a problem recruiting. It's tight labor market. We're getting lots of inquiries for jobs We process lots of resumes and lots of applications. We sort through them, find the right guys and hire them.

I don't think we'll be labor constrained If there's a call on rigs and the rig count goes up, I think that the larger scale b strollers will benefit the most because efficiency will matter in everybody's mind going forward. Got it. Thanks guys. Appreciate it. Thank you. Thanks Sean.

Next question comes from Keith Mackey with RBC Capital Markets. Your line is open.

Hey, good morning, good afternoon. Just wanted to start on The U. S. Business. I know the market has been flat to down for a while and certainly with your rig mix being a little bit more gas weighted, you've kind of felt a bit more of a brunt of that. But can you just talk a little bit more about what you're thinking on the tuck in front know certainly there's been challenges historically to getting deals done with looking at value per rig and things like that and there being a wide bid ask spread there. But has anything changed on that front as far as how you might think about how to evaluate tuck in or the rig I guess the market share mix of some of these private companies as it does feel like some of the public companies have been saying, here's our rig rate, you can take it or leave it. They've been going to the private companies who have been taking it. And so can we just talk a little bit more about how you're thinking around that end of the market? Yes, Keith, I would say that the market for consolidation is still there.

There are a number of potential targets that have been either softly marketed or formally marketed over the past few years. We think that most of those targets believe in the benefits of consolidation. And I think the highlight here from Kevin's prepared comments are are really that our capital structure and balance sheet is in shape right now to where We can pursue a few more growth opportunities. We think we're in a pretty good position to to affect one of those transactions. But the challenge does remain the valuation. And I think we are hypersensitive on on price. If we were going to pursue consolidation, it has to be at the right price. That's been, I think, the biggest impediment for some of the smaller drillers combining with the large drillers. But we do think that that would benefit the industry because as Kevin said that scale continues to be an important competitive advantage for the larger drivers.

Yes, got it. And just on the $30,000,000 of upgrade CapEx that you're contemplating this year, roughly how many rigs would that cover? And would you expect [indiscernible] go to work in 2025? Or is this on a we'll spend it as needed basis?

For sure, we'll spend it as needed and we'll make sure we have direct line of sight to customer contracts like we always do Depending on the scope of the upgrades, it's probably somewhere in the six to 10 rig range.

Looking at long resource haul, four mile laterals and the foot load capacity for that and the mudroom capacity for that. Keith, I'll expand a little bit though. I will say that when we built out our fleet of Super Triple rigs, We've built these rigs with extended capabilities in mind for us.

Equipping a rig to go from call it, 750,000 pound book load to 1,000,000 pound book load is a modification to the rig It's not a replacement of a mast. And we think that's a real spending advantage and capital advantage when it comes to increased capacity. On the mud pumps, going to a larger capacity mud pump, is slide the old mud pump out, put the new mud pump and drive system in. Everything else the rig stays as is.

The modular style of our rigs allows us to make these upgrades.

Without affecting the entire rig, just to effectively bolt on the change and move forward.

Perfect. Thanks very much. [indiscernible] Our next question comes from Makar Saad with ATB Capital Markets.

Line is open.

Thanks for taking my question. Kevin, on the international side, you have eight rigs working I think contract on one of the rigs expires in the second half. Is that a rig in Saudi or Kuwait? Could you enlighten that? And then what I know that you mentioned that you expect flattish eight rigs working through the year. But what's your conference level that it stays at that eight level.

Yes, I'm pretty confident it stays at eight level.

We'll seek an extension, which is pretty common And in the absence of extension, there are active bids right now that will be bid into. I'm quite confident that that high technology rig stays operating at a similar return in U. K. Okay. And then closer to home in U. S, you typically see some seasonality in rigs come down in the Rockies during the winter months. Have you seen that this year as well? And if so, how many rigs have been affected? And when do you expect them to come back up again? Yes, we've kind of run between three and five rigs in the Northern Rockies and Wyoming.

That came into Precision through the CWC acquisition primarily.

And those are quite seasonal rigs and despite the fact that winterized, the operators only grow seasonally So I expect some of those rigs come back in the spring once we get past the winter season. So right now, just to clarify, are those three rigs to five rigs all down or they are still some of them are working?

Yes, two are down right now. And those two likely come up. When we get into spring.

Okay, great. And then is there a way to quantify the impact of FX change or inflation on your CapEx budget versus everything else in terms of more work?

So, Ukhart, I think this year it was about $8,000,000 was the difference between kind of if you look at the maintenance capital year over year a big cause of the increase has been weaker Canadian dollar.

Okay, great. Well, thank you very much. That's all I have. Thanks, Vikar. And I'm not showing any further questions at this time. I'd like to turn the call back over to Lavan.

Thanks everyone for attending Precision conference call and webcast today. If you have further questions, you can reach out to myself in the Investor Relations department. Thank you very much.

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