Precision Drilling Hits Debt Target, Signals Solid 2026 Cash Flow And Earnings Outlook
Precision Drilling Corporation ("Precision" or the "Company") (TSX:PD, NYSE:PDS) is pleased to announce a series of positive updates reflecting the strength of its financial performance and disciplined capital allocation strategy, including: 1) the achievement of its 2025 debt reduction target and year end liquidity update; 2) commitment to its capital allocation framework; and 3) a financial and operational update.
2025 Debt Repayment and Year End Liquidity Update
Precision reduced debt by $101 million in 2025, achieving its annual debt reduction goal. As at December 31, 2025, Precision's outstanding debt obligations included:
- US$400 million – 6.875% unsecured senior notes due January 15, 2029
- US$100 million drawn on the Senior Credit Facility
The Company ended 2025 with a cash balance of approximately $85 million and total available liquidity of approximately $447 million.
Capital Allocation Framework Update
Precision remains firmly committed to its long-term debt reduction target of repaying $700 million between 2022 and 2027 and reaching a sustained Net Debt to Adjusted EBITDA leverage ratio1 of below 1.0 times. Over the past four years, we have reduced our debt by $535 million and notably lowered our Net Debt to Adjusted EBITDA leverage ratio, which we expect to be approximately 1.2 times as at December 31, 2025.
During 2025, Precision returned $76 million to shareholders through share repurchases under its Normal Course Issuer Bid, meeting its annual target of allocating between 35% and 45% of free cash flow before debt repayments to share repurchases. As at December 31, 2025, the Company had 12,932,399 shares outstanding, compared to 13,779,502 as at December 31, 2024, representing a decrease of 6%.
For the past decade, Precision has prioritized its capital allocation plans, allocating $1.7 billion of its free cash flow to debt repayments and share buybacks, while investing over $1.5 billion in its fleet and completing two acquisitions. As at December 31, 2025, our annual run rate interest expense is approximately US$34 million compared to US$104 million in 2016.
With a robust free cash flow outlook in 2026, we plan to further reduce our debt while increasing our share buyback allocation. In February, we will provide specific capital allocation plans and targets for 2026.
- Net Debt to Adjusted EBITDA leverage ratio is a Non-GAAP measure. Please refer to page 41 of Precision's Annual Report for the year ended December 31, 2024 for more information.
Financial and Operational Update
Financial Results
Precision intends to release its 2025 fourth quarter results after markets close on Wednesday, February 11, 2026. Fourth quarter drilling field margins in Canada and the U.S. are expected to align with previous guidance. With a closing share price of $98.49 on December 31, 2025, share-based compensation expense for the fourth quarter and full year is expected to be approximately $6 million and $24 million, respectively, which also aligns with previous guidance. As demand for drilling rigs continues to primarily focus on Super Series rigs, we decommissioned 31 of 215 marketable rigs across our global fleet in the fourth quarter and expect to recognize a non-cash asset charge of approximately $67 million in 2025. In the fourth quarter, we also expect a non-cash charge of approximately $17 million related to drill pipe as more complex drilling programs are reducing the useful life of this asset.
Operational Activity
In Canada, Precision continues to experience elevated customer demand for our drilling services, driven by Super Series rigs equipped with AlphaTM technologies and EverGreenTM environmental solutions. While some customers deferred fourth quarter drilling plans to January, our average active rig count remained robust at 66. We currently have 86 rigs active and expect our rig count to peak at 87 this winter drilling season, with our 32 Super Triples and 47 available Super Single rigs fully utilized.
In the U.S., we averaged 37 rigs in the fourth quarter, reaching a peak of 40 active rigs. While oil rig activity continues to be challenged, the industry's natural gas rig count increased 21% in 2025 as producers are becoming more constructive on LNG off-take and domestic power demand. We have 37 rigs operating today and continue to have encouraging customer conversations that are expected to support modest activity increases in both oil and natural gas basins during the first quarter.
Internationally, Precision expects seven active rigs throughout 2026, with three operating in the Kingdom of Saudi Arabia and four in Kuwait. Our international operations provide a stable foundation for earnings and cash flow, supported by long-term contracts extending into 2027 and 2028. We continue to evaluate international growth opportunities that meet our disciplined capital return thresholds, including potentially reactivating idle rigs.
As we enter 2026, we expect continued high activity levels for our Well Service business with more than 115 service crews anticipated to be active in early January, and additional crews expected to be deployed as market conditions warrant.