Precision Drilling (PDS) Q3 2026 Earnings Call Transcript

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DATE

Wednesday, Oct. 28, 2026

CALL PARTICIPANTS

• Director of Investor Relations - Lavonne Zdunich
• President and Chief Executive Officer - Carey Ford
• Chief Financial Officer - Dustin Honing

TAKEAWAYS

• Revenue -- $532 million, a 15% increase compared with $462 million driven by stronger drilling activity in North America and higher U.S. day rates.
• Adjusted EBITDA -- $125 million, representing a 6.4% increase from $118 million reflecting higher activity levels partially offset by reactivation costs and international expenses.
• Net Earnings -- $21 million, compared with a net loss of $7 million in the prior year period.
• Cash from Operations -- $71 million, versus $76 million in the prior year primarily due to non-cash working capital builds associated with higher activity.
• Capital Expenditures -- $82 million, comprised of $58 million for maintenance and infrastructure and $24 million for fleet upgrades.
• U.S. Active Rigs -- 43 active rigs, an increase of seven rigs compared with the prior year following six reactivations during the quarter.
• Canadian Active Rigs -- 73 active rigs, a 16% increase from the 63 active rigs reported in the same period last year.
• International Active Rigs -- seven active rigs, consistent with the prior year and operating under five-year term contracts.
• U.S. Revenue Per Day -- US$33,270, an increase from US$31,040 driven by higher average day rates and technology revenue.
• Canadian Revenue Per Day -- $33,654, a decrease from $34,193 reflecting a higher proportion of Super Single rigs in the heavy oil market.
• International Revenue Per Day -- US$46,304, a 14% decrease compared with US$53,811 due to changes in rig mix and planned recertifications.
• U.S. Daily Operating Margin -- US$7,653, a decrease from US$8,700 as results were impacted by costs related to reactivating rigs.
• Canadian Daily Operating Margin -- $12,817, compared with $13,007 in the prior year period.
• U.S. Rig Reactivation Costs -- US$2,125 per utilization day, reflecting the expense of preparing six rigs for service in the Lower 48.
• Completion and Production Revenue -- $81 million, an 8.3% increase driven by stronger demand for well services and drilling-related rentals.
• Service Rig Operating Hours -- 67,071 hours, representing a 6% increase due to customers maximizing cash flows in heavy oil regions.
• Debt Reduction -- $75 million, representing the total long-term debt retired during the first nine months of the year.
• Share Repurchases -- $31 million, for 269,331 shares repurchased during the quarter at an average price near $115.
• 2026 Capital Expenditure Guidance -- $275 million to $285 million, an increase from the previous $265 million budget to support long-lead deliveries and upgrade opportunities.
• 2026 SG&A Guidance -- $100 million, excluding share-based compensation and inclusive of one-time restructuring costs.
• 2026 Depreciation Guidance -- $325 million, reflecting a change in useful life estimates for drill pipe effective Jan. 1.
• 2026 Interest Expense Guidance -- $45 million, representing the total cash interest expected from debt obligations.
• Q4 U.S. Margin Guidance -- US$9,500 to US$10,500, representing a sequential increase as reactivation activity slows.
• Q4 Canadian Margin Guidance -- $13,500 to $14,500, consistent with performance in the fourth quarter of 2025.
• 2026 Rig Upgrades -- 25 rigs, representing the total number of North American upgrades planned for completion during the year.

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RISKS

• Carey Ford noted that international rig margins were unfavorably impacted by elevated operating expenses in the Middle East due to regional geopolitical tensions.
• Dustin Honing noted that the company is formally objecting to a Canada Revenue Agency reassessment that carries a maximum potential tax liability of approximately $155 million.

SUMMARY

Precision Drilling Corporation (NYSE:PDS) reported Q3 2026 revenue of $532 million, a 15% increase compared with the prior year driven by expanded drilling activity in the Permian Basin and Western Canada. Management reported that the company reactivated six rigs in the U.S. during the quarter to meet heightened demand, though these investments temporarily lowered regional operating margins. The company maintained its full-year debt reduction target of $100 million and increased its capital expenditure guidance to support long-lead equipment purchases for customer programs extending through 2029. CFO Dustin Honing noted that the company expects a sequential expansion in U.S. margins during the fourth quarter as the pace of rig reactivations slows and cost absorption improves.

• Carey Ford stated, "Where we are currently running 16 rigs compared to 8 rigs 1 year ago," highlighting the expansion of the company's presence in the Permian Basin.
• Management reported that the Alpha and Evergreen business lines are on track to achieve their highest annual revenue and contribution margins.
• The company opened a remote operations center in Calgary that has hosted over 100 customer representatives to demonstrate AI-driven drilling optimization capabilities.
• Carey Ford noted, "The positive news flow from the Canadian energy industry has been head spinning," citing infrastructure developments like the TMX Expansion and LNG Canada Phase 2.
• Management stated that the company expects to reach its long-term target of a net debt to adjusted EBITDA ratio below 1.0 times by the end of 2026 or early 2027.

INDUSTRY GLOSSARY

• AECO: The benchmark price for natural gas in Alberta, Canada.
• AlphaAutomation: Precision's digital platform that automates drilling processes to enhance efficiency and safety.
• Evergreen: A suite of technology solutions designed to reduce rig emissions and diesel consumption.
• Montney: A major unconventional natural gas and condensate formation in Western Canada.
• Super Single: A specialized drilling rig designed for efficient movement and drilling in heavy oil regions.
• Super Triple: A high-performance rig capable of drilling long-lateral unconventional wells.
• TMX Expansion: The Trans Mountain Expansion pipeline project intended to increase crude oil export capacity from Alberta to the Pacific coast.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome To the Precision Drilling Corporation's 2026 Third Quarter Results Conference Call. I would now like to turn the conference over to Lavonne Zdunich, Director of Investor Relations. Please go ahead.

Lavonne Zdunich: Welcome, everyone, to Precision's third Quarter Earnings Conference Call and Webcast. Today, I am joined by Carey Ford, our President and CEO and Dustin Honing, CFO. Yesterday, Precision reported solid third quarter results, which Dustin will review. Followed by operational and outlook commentary from Carey. Once we have finished our prepared comments, we will open the call to questions. Some of our comments today will refer to non-IFRS financial measures and will include forward-looking statements, which are subject to a number of risks and uncertainties. Please see our news release and other regulatory filings for more information on financial measures, forward-looking statements, and risk factors. As a reminder, we express our financial results in Canadian dollars unless otherwise indicated.

With that, I will pass it over to Carey to begin.

Carey Thomas Ford: Thank you, Lavonne. Good morning, and good afternoon, everyone. Before I hand the call over to Dustin, I would like to briefly frame the quarter for our listeners and highlight our progress against our 2026 priorities. Precision delivered differentiated North American revenue growth across the drilling and C&P service lines and continued to make strategic investments in our fleet, while meeting our capital return commitments. In short, it was what we said we would do. In our press release, we guided to 2025 North American rig upgrades this year. Contracted upgrades remain the best opportunity to deploy capital and create short and long term shareholder value.

Upgrades have attractive contracted returns, improved fleet capabilities, and align our service delivery with longer term customer programs. These fleet investments and service delivery by precision crews supported by technology and a growing contract book position our business for continued growth in Q4 and create an improved platform for customer service delivery, and cash flow generation in 2027. With that, I will turn it over to Dustin.

Dustin Honing: Thank you, Carey. Good morning and good afternoon for those calling in different locations. For third quarter of 2026, revenues increased 15% from prior year to $532 million driven by stronger drilling activity levels in North America and higher average US day rates, partially offset by lower international results. Our operating expenses were impacted by reactivation of 6 U.S. rigs during the quarter in response to growing oil driven demand in the Lower 48. Q3 results also included higher international operating costs from ongoing regional tensions in the Middle East. Q3 adjusted EBITDA was $125 million, which equates to $133 million before share based compensation expense.

Compared to prior year EBITDA of $118 million or $129 million before share based compensation expense. Net earnings were $21 million compared to a net loss of $7 million in the third quarter of 2025. Precision generated $71 million of cash from operations compared with $76 million in the third quarter of 2025. As previously communicated, cash flow was impacted by large noncash working capital build associated with growing activity levels in Canada and the U.S., in combination with our semiannual interest payment. Capital expenditures were $82 million comprised of $58 million for maintenance and infrastructure and $24 million for upgrades.

These investments were made in step with our shareholder returns program as we allocated $31 million towards share repurchases during the quarter. Moving on to our operating segments. In Canada, Q3 drilling activity averaged 73 active rigs. An increase of 10 rigs from the third quarter of 2025. Our reported Q3 daily operating margins of $12.8 thousand compared with $13 thousand in the third quarter of 2025. Both activity and margins were in line with prior guidance. During the quarter, robust heavy oil activity led to increased utilization of our super single fleet by 18% resulting in a higher proportion of days from this rig class.

Our sustained year over year activity growth throughout 2026 continues to demonstrate the value of our differentiated positioning in both Canada heavy oil and unconventional natural gas and condensate basins. In The US, we averaged 43 active rigs, an increase of 7 rigs from the third quarter of 2025. Our daily operating margins were US$7.65 thousand compared to US$8.7 thousand in the third quarter of 2025. Also within our prior guidance range. Although revenue per day increased, margins were notably impacted by reactivating 6 rigs in the quarter at a cost of US$2.13 thousand per utilization day. Looking ahead, our focus remains on demonstrating notable margin expansion in Q4 and into 2027.

Internationally, Precision averaged 7 active rigs in line with prior year Q3 activity levels. International day rates averaged US$46.3 thousand a decrease of 14% from prior year Q3. During the quarter, rig margins were unfavorably impacted by elevated operating expenses in the Middle East. And rig mix with 1 of our higher performing rigs in Kuwait being idled this year. Now, that rig is expected to return to work in mid-2027 under a 5 year contract. In our 10% to $21 million Strong fundamentals in the Canadian market again drove increased well servicing demand primarily in the heavy oil regions. Our growing rentals business is also delivering incremental year over year revenue and EBITDA.

While strengthening our differentiated full service offering to our customers. Moving on to forward guidance, I will begin with our expectations for the fourth quarter. Starting in Canada, we continue to see robust demand for our Super Series rigs and expect our super triple and super single fleets to operate at near full utilization through the winter drilling season. For the fourth quarter, we expect average active rig count to be in the low-70s. Which compares to 66 average rigs working in the prior year Q4. Keep in mind that Canadian Q4 activity levels are impacted by temporary shutdowns over the Christmas season.

Daily operating margins are expected to range between $13.5 thousand and $14.5 thousand consistent with fourth quarter of 2025. In The US, our fourth quarter average rig count is expected to be in the low- to mid-40s. Margin expansion remains a critical deliverable for the business following the completed reactivations in the second and third quarters. For Q4, we expect daily operating margins to climb between U.S. $9.5 thousand and U.S. $10.5 thousand a meaningful increase sequentially from Q3. Internationally, we expect to continue operating 7 rigs through Q4 with elevated operating costs in the quarter. Our C&P business continues to generate strong free cash flow driven by our well servicing and surface rental business lines.

For Q4, we expect EBITDA to remain in line with prior year levels. Moving to guidance for the full year 2026. Our capital expenditures budget increased to a range between $275 million and $285 million Our increase towards the lower end of the range supports committed long-lead purchases for projects to be completed next year. The higher end of the range provides for a pending upgrade opportunity, which would have multiple rigs contracted to 2029 for a large Canadian producer. Full year depreciation is expected to be $325 million and cash interest expense from debt is expected to be $45 million. Our effective tax rate is expected to be approximately 25% to 30%.

Precision expects business cash taxes to remain low in 2026 with cash taxes slightly increasing in Canada in 2027. There are no updates regarding the CRA dispute, we are submitting our formal objection in Q4. For 2026, we expect SG&A to be $100 million before share based compensation expense. Inclusive of onetime restructuring costs incurred this year. Share based compensation guidance for the year ranges between $25 million and $50 million assuming a share price between $100 and $150 and a 1x multiplier. The multiplier can range between 0 and 2x which can either reduce or increase our guidance range.

We entered the fourth quarter with over $460 million in total liquidity, and are closing in on our long term target of net debt to adjusted EBITDA ratio below 1x. For the first 9 months of 2026, we have reduced debt by $75 million and repurchased $47 million worth of shares. Despite the higher working capital build that is expected this year, we remain committed to reaching our $100 million debt reduction target for 2026 while continuing to repurchase shares in the fourth quarter. With that, I will pass it over to Carey.

Carey Thomas Ford: Thank you, Dustin. My prepared remarks, I will cover 3 areas. First, the early results of our US market strategy. Second, the improving outlook for Precision in the Canadian market, and third, how our technology offering is critical to delivering for our customers. Before I get to those topics, I want to acknowledge our field crews and leadership in the Middle East who are working in a dynamic environment and keeping people safe. They are delivering for our customers in the region, and for the families of all Precision employees. Thank you. Moving on to the U.S. where Precision's strategic approach to strengthening the business is producing results.

With an average of 43 active rigs during the quarter, compared to 35 active in Q2, our team has led field performance with well trained crews supported by our Alpha and Clarity platforms, delivering critical customer key performance indicators across the fleet. Precision's field performance and successful reactivations have solidified customer relationships resulting in steadier activity and an increasing number of customers with multiple precision rigs. In no basin is this more apparent than the Permian. Where we are currently running 16 rigs compared to 8 rigs 1 year ago. Our team has delivered this increase by building on a high performance track record onboarding new customers, upgrading rigs with customer contracts, and deepening customer relationships.

I am thrilled with the reputation in business Precision is building in West Texas. Through the relentless efforts of our sales, operations, technology, and operations support teams, and I am excited for the future growth in this important region. As discussed last quarter, we have experienced some softness in the Northeast, but multiple rigs are firing up in that region over the next few months, which will drive activity growth. Expect our rig count to range for the U.S. in the low to mid forties for the remainder of the year and are experiencing an elevated number of requests for rig start ups early next year. Supporting an improved activity outlook for 2027.

As we have projected on previous conference calls, rig reactivations have slowed, rig costs fixed cost absorption has improved, and we now expect Q4 margins to reach the highest level in the past 2 years. Providing a foundation for steadier and potentially growing profitability in The US. next year. Second, I would like to discuss the outlook in the Canadian market. The positive news flow from the Canadian energy industry has been head spinning. And despite continued wet conditions in the summer, and into late October, as well as higher crude differentials and weaker AECO gas prices. Precision activity remains at multiyear highs across both the drilling and completion and production service businesses.

Our Montney activity can be characterized as steady year over year while our super single rigs servicing the heavy oil markets had Q3 utilization up 18% year over year. Reflecting the high performance of this RIT class and our customers' favorable economics. For those listeners who do not follow the Canadian market closely, I will recap several of the recent market developments. For years, the challenge for Canadian producers has been unlocking Landlocked Resources And Gaining Greater access to the global market. Today, that picture Is Changing. Following the completion Of The TMX Expansion, And LNG Canada Phase 1 projects, the Pacific Link pipeline project has been designated a project of national interest.

Which means it will be reviewed and potentially approved by the federal government within 1 year. This pipeline could provide access to Tidewater for an additional 1 million barrels of oil per day. Additionally, Shell recently reached the final investment decision on LNG Canada Phase 2, and the recent election of the British Columbia-- a recent election in British Columbia has brought growing political support for LNG development. There are numerous other pipeline proposals with western, eastern, and southern routes as well as discussions on ports and additional infrastructure projects to support the growth of Canadian energy industry.

And at the same time, there are emerging sources of domestic demand, including the proposed green light data center, in Alberta, combined with more supportive federal framework for advancing major projects. And a federal mega tax deduction for infrastructure investments creating a more constructive backdrop for Canadian energy investment. We believe these developments have the potential to unlock significant investment and support sustained drilling activity for both oil and gas across Western Canada. Another market trend is customer consolidation. Which continues in the Montney, Duvernay, and heavy oil regions. These larger consolidated entities often have longer term development programs, which come with increased expectations for efficiency, field support, and a greater desire to utilize technology.

To meet these evolving customer needs, Precision continues to invest in our fleet, people, and technology. This alignment is evident in our growing Canadian contract book with 28 rigs under contract in the third quarter, up from 16 just 1 year ago. We are seeing and meeting the same evolving customer needs in our well service division where Precision's ability to deliver safe and consistent operations with well trained and well supported crews is an increasingly important differentiator and has resulted in improved financial performance year over year. The final area I would like to cover is technology. Which is core to supporting our crews in all our North American drilling operations.

Our Alpha and Evergreen businesses are on track to have their highest revenue and contribution margin ever. This makes sense. Given our. That our customers continue to seek higher efficiency operations and solutions that reduce emissions and diesel consumption. Our clarity platform and digital twin offerings are adding another layer to what we can offer customers. On our Q2 call, I mentioned that we would be opening our Calgary remote ops center in August. Since then, we have had over 100 customer representatives from 12 different customers visit our center to observe our alpha technology capabilities and interact with our optimization team.

We have had in-depth discussions with customers about our optimization team's work directly with our crews using real time data and AI driven insights to continuously improve operating practices, equipment performance, and safe drilling results. Are not just monitoring operations and providing data driven insights and solutions, but are actively working with our crews to optimize performance. Although we have certainly opened up some eyes as to what is possible with our technology platform, and that is exciting. I am more excited about the ongoing customer performance dialogue and Precision's enhanced ability to strengthen long term partnerships with our technology platform.

These developments will continue to be an important part of the Precision story, and we will certainly have more to report in the future. In closing, I would like to thank our crews, field leadership, and all Precision employees for their commitment to safety, customer service, and operational excellence. Their work is the reason customers continue to choose Precision, and what drives the success of our company. With that, I will hand the call back to the operator for questions.

Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press 1-1 on your telephone. If your question has been answered or you wish to remove yourself from the queue. Our first comes from Aaron MacNeil with TD Cowen. Your line is open.

Aaron MacNeil: Hey, everyone. Thanks for taking my questions. You have highlighted the potential for more rig upgrades next year. I assume that is mostly capital rather than operating costs. But how should we think about the Canada versus U. S. Split Would any U. S. Upgrades also bring reactivation costs? I think you are running call it, 45 rigs today versus roughly 50, I think, that could go back to work without a reactivation spend. So there is some wiggle room there. But at the end of the day, how should we think about the sustainability of that Q4 U.S. margin guide into 2027 from the purely from the cost side?

Carey Thomas Ford: Aaron, so I think touching on the margin guidance first. So we will give margin guidance for Q1 on our February call, but I can kind of I can tell you that we think we are hitting a more sustainable margin and Q4 is going to reflect that. And that comes from 2 points. 1 is we have reactivated a large number of rigs this year. And we reactivated 6 in Q3. We might have some reactivations next year, but it will be a much smaller number and it will be on a much higher base of activity.

So if we enter the year next year, say, we are running mid forties rig count, 1 reactivation-- 1 reactivation is going to have a much smaller impact on our overall fleet margins than it did this year. And I think the number of reactivations we would consider next year would be in the single digits. If we continue to see increased demand for rigs. So I think it is yes, it might continue, but it is gonna be a much smaller amount than this year. Anything to add, Dustin?

Dustin Honing: And then just to build on that, Aaron, to your. What was mentioned, we have just over 50 rigs that are warm, ready to go right now. We are actually reactivating 1 rig in Q4. And it just demonstrates with that pace that Carrie's talking that we have confidence in holding our margins.

Carey Thomas Ford: Yeah. And I did guide to a lot of customer inquiries for rigs. Starting early next year. Which should provide some potential for growth and activity from the Q4 levels.

Aaron MacNeil: Makes sense. Thanks. Maybe, Dustin, 1 for you. It will not be the CRA 1. I promise. So with the $100 million of debt nearly met? Was that target nearly met and only sort of only $90 million left on the $700 million long-term goal. It looks like 2027 is when free cash flow can shift meaningfully towards buybacks. You have bought back $47 million of stock so far this year, and you are sort of up to 50% of free cash flow framework.

Once debt repayment is no longer competing for cash, how much could that share of free cash flow after call it, after capital spending go to the buyback in 2027 and is it reasonable to think that there will be a ramp next year? And could you look at an SIB or other ways to accelerate repurchases?

Dustin Honing: Yeah, Aaron, I would say we are really excited about the flexibility we built in the company. We are nearly there on the debt reduction journey. We have got a little bit more to go. We will chip at the $25 million here, going. We will give formal guidance as we always do next year. Rest assured, our strategic priorities will have a formal target on what we return-- intend to return to shareholders. But certainly see share buybacks as a primary avenue that we can enhance value for our shareholders.

Carey Thomas Ford: Yeah. And I would just add to that. I think at the end of this year, we pay down $100 million, we will have, I think, $60 or $65 million left on the on the debt repayment. And, you know, we were talking about trying to get to a 1x multiple of leverage, and we should be there at the end of this year a very beginning of next year. And as Dustin said, it does give us a lot more flexibility on how we deploy capital to shareholders.

Aaron MacNeil: that is right. Thanks, guys. I will turn it back.

Operator: Thanks, Our next question comes from Keith MacKey with RBC Capital Markets. Your line is open.

Keith MacKey: Hey, good morning, and thanks for taking my questions. Can we just talk a little bit more about the potential upgrade opportunity, Carey? I know you took some time to detail out the rationale for doing such upgrades. Maybe just talk about how many how many rigs that could potentially be? What types of upgrades you might be putting on there? Is there any robotics inclusion, for example? And would that potentially be the 2026 portion of the total spend, or would that just be the total spend of this potential opportunity? As far as CapEx goes?

Carey Thomas Ford: Okay. So I think from. That there is a few questions in there. So the last 1 I will answer first. So the 2026 potential spend would be for an. A customer in Canada, and that would be all the technically, all the spend for the customer. For the 1 we referenced in our press release. In terms of upgrades in 2027 in Canada, it will be similar. We probably have opportunity to do 2 or 3 kind of ERD upgrades where we have completed 2 this year. Or completed 1. We have 1 for delivery here soon. So be those types of upgrades in the Montney and then continued pad upgrades for super singles. In the heavy oil regions.

I think that is probably also low single digits, you know, maybe 1, 2, or 3 of those types of rigs. In The US, it is gonna be reactivating and upgrading Super Triple 15 hundreds likely for the Permian, but we do have some opportunities for the Haynesville as well. And I think as I mentioned on the last question, that is gonna be single digit numbers of opportunities. Know, probably, I would say, low to mid single digit types of opportunities in The US. So we are not I am not with that comment. I am really trying to capture the benefit of the upgrades.

We have completed and the fact that those opportunities are finite, And when we have them and it lines up with a good contract and a good capital return, we wanna execute on it. But there is not an unlimited number of those opportunities.

Keith MacKey: Perfect. Under. Understood. Can you maybe just detail a little bit more about what you are seeing in the Canadian market There certainly outlined some positive trends as far as the macro backdrop and policy backdrop. Do you think that those changes might ultimately lead to the industry requiring more rigs or we kind of in a. Gonna be in a market where it is just we might get the same number of rigs running for more quarters during the year? Like, normally, we have the Q1 peak and then it kinda comes back closer to that in Q3 and 4.

Like, you see that changing, or are we actually going to need more rigs in total to service some of these some of these new aspirations, do you think?

Carey Thomas Ford: Yeah. I think we will see. there is the way you described it with more of a level load throughout the year, is certainly giving us more drilling days throughout the year. Sometimes with the same number of rigs. I mean, we. We have commented on previous conference calls when we do a pad upgrade to a super single typically add 100 drilling days throughout the year. So if we have 27 Super Single rigs that do not have pad configurations yet, If we did all of those, we would actually add 9 more rigs to our fleet or the capability of 9 more rigs.

And we also have the opportunity to move Super Triple 12 hundreds from The US market to Canada. So if there is more demand, we think we can meet it. And if there is more drilling days throughout the year, we are gonna benefit from that. But we certainly have not had customers point to the need to add significantly more rigs to the Canadian fleet. But we will see how this thing develops.

Keith MacKey: Understood. Appreciate the color. Okay. Thanks, Keith.

Operator: Our next question comes from Sean Mitchell with Daniel Energy Partners. Your line is open.

Sean Mitchell: Good morning. Thanks for taking the questions. Carey, maybe just talk a little bit about where you are seeing inflation? How is that impacting the global operation And what are you guys doing today to manage it? I think the industry at large obviously, there is lots to talk about higher diesel cost, but just are you seeing it most within labor, parts, logistics? Any color on that on inflation?

Carey Thomas Ford: Sure. I. I have got a couple areas I would point to, but maybe I will point it to Dustin because he is really in the day to day on how it is impacting our operating costs.

Dustin Honing: Yeah. Hey, Sean. it is, certainly a primary focus for any oilfield service provider, but I would say today, we have managed it very well. We have the benefit of a vertically integrated business model. We have internal manufacturing. Our tech centers, we can do our upgrades and our maintenance projects in house, and we even have our supply stores. So it is helped us mitigate some of the cost escalation, but if I were to pick a few primary areas that were constantly managing every day, I would say, 1, access and retention of high end field labor. that is certainly paramount. No. 2 would be, steel intensive purchases, and I point specifically to drill pipe.

And that is further compounded by accelerated wear that we are seeing in some basins that we are operating. And then just as you mentioned, higher diesel prices, and that really affects several areas of our supply chain. If I put that into a regional perspective, I would say the 2 parts of our business most exposed to inflation is certainly international drilling would be 1. That should not surprise anyone with the logistical challenges we are dealing with. But certainly, CMP, our business here in Canada with well servicing, that segment, I would say staffing and retaining high end talent remains an industry wide challenge. And it is the only business where we directly absorb the cost of fuel.

For our rigs, whereas in drilling, it is more of a pass through charge. So we have had to work really closely with our customers to help manage both of those challenges. Although we do not really procure fuel directly in the drilling business, it is been a platform for our Evergreen offering, and I would say there is certainly been an uptick of interest, from our customers there.

Carey Thomas Ford: Yeah. that is, you know, we have. The Evergreen offering is a. it is an emissions reduction offering, but it is also a diesel reduction offering. We have had opportunities to, put batteries on rigs, bi fuel systems, hydrogen injection on our super single rigs. All with the aim of helping our customers reduce their diesel cost. So that is been, 1 of the big drivers of the success of that service line this year. The other point that Dustin kind of alluded to on retaining crews, you know, we had a field wide labor wage increase in Canada I guess, probably a couple months ago. And then about a month ago, we had a similar, increase in The US.

And so that is largely due to our crews or our need to retain crews in an increase in activity environments and just a lot of growth in infrastructure projects on both sides of the border. So those would be the big areas there, diesel and labor.

Sean Mitchell: Got it. Thanks for the color. Maybe I will squeeze 1 more in. Just around contract duration, are U. S. Operators kind of where are their heads today on willingness to sign contracts or multiyear? Has that shifted with the rig count increasing? Are they looking for longer term You know, are there any of these guys looking to lock in longer term rigs before the market potentially could tighten further? Are those conversations starting to happen? Any color on that front?

Carey Thomas Ford: Sure. I think that is a that is a really good question, Sean. The first part of this year, I think we were in a zero or call it spot to 6 month type market. With the occasional 1 year contract. And then throughout the middle of this year, it is kind of gone into 6 month to 1 year contract, and now we are having more conversations in the 1 to 2 year range. it is certainly not where the broad market is. I think the broad market is really kind of in a 6 month to 1 year type range. But we are having more conversations in that 18 month, 2 year range with customers.

So we are we are certainly seeing it move.

Sean Mitchell: that is helpful. Thank you. Turn it back.

Operator: Thank you. Again, ladies and gentlemen, if you have a question or a comment at this time, please press 1-1 on your telephone. Our next question comes from Tim Monachello with ATB Capital Markets. Your line is open.

Analyst: Most of my questions have been answered, but I am curious about Canadian pricing outlook here. It seems like the Q1 activity profile is for full utilization. it is been strong for a couple quarters here. Are you seeing any willingness to move pricing higher across the industry?

Carey Thomas Ford: Yeah, there is certainly support for it, with utilization and you know, kind of increasing performance requirements for the rigs. And we have moved pricing up a bit throughout the year. I would not call it a step change in pricing per reclass. And we really will not have an opportunity to broadly reprice rigs until spring breakup. But we are having lots of conversations with customers about adding features to the rigs that will drive pricing higher than what we are seeing today. Okay. Got it. And then I guess, in The US market, you were guiding to getting close to 50 rigs by the end of the year previously. Now it is sort of mid forties.

Is that just a customer scheduling phenomena, or is there something else we should be thinking about? And do you do you sorry. Go ahead. I was going to say that the guidance on the last conference call said that we would be low forties in Q3, and that we would likely touch the high forties at some point during the quarter. Think we were at 46 rigs last week, so we are not quite at high forties, but maybe call it 1 or 2 rigs short. But I do not remember ever giving formal guidance formal guidance for 50 rigs. Okay. Maybe I just made that up.

But do you so no change to the outlook in The US, and you think you will see some tailwinds in 2027 versus where you exit in 2026. Yeah. And, Tim, I mean, we are. I think 50 rigs is in you know, it is on the horizon, and I do not I do not know when that happens. You know, it is possible that it could happen this year. it is probable to happen sometime in the first part of next year. And as Dustin said, we have got, we will have 52 hot rigs at the end of this quarter, which we should be able to hit that number without sustaining any major reactivation cost. Okay.

And then maybe just an update on international opportunities. Maybe you can talk a little bit about what you are seeing from that Argentina Partnership. And any opportunities to reactivate rigs in the Middle East? Yeah. I think we have got the 1 reactivation scheduled in Kuwait in the middle of next year, and I outside of that, we do not have anything in the works. In terms of Argentina, it certainly is an exciting market, and there is a lot of demand there for US high spec rigs to get upgraded and move down to the market. We have had conversations with every single major operator in Argentina about it.

And so it is not a it is not a matter of the demand and us being able to deliver what the deliver to meet the demand it is just a matter of contract terms and what we are looking for in terms of litigating some financial risk in a contract in the market we have not been able to meet in the middle. Yet, but we are we are still working on it. And if we-- if we do, it will be a good contract, and we will be able to deliver. Okay. Great. I appreciate it, and, congrats on the nice quarter. Yeah. Thanks, Tim. Thanks, Tim.

Operator: Our next question comes from Derek Podhaizer with Piper Sandler. Your line is open.

Derek Podhaizer: Hey. Just want to ask about your comments around the elevated number of requests for start ups for some rigs in the beginning part of the year. Maybe you can help us understand a little more if that is public versus private, basin specific, Obviously, you have the 52 hot stack rigs, and I think it sounds like that is your longer term ambition. But maybe just expand more on those comments as far as who is requesting the rigs and where are those requests coming from?

Carey Thomas Ford: So it is a mix of publics and privates. I would say that the publics in the past few months have gotten more active in with rig increases. And towards, you know, the first half of last year, was largely the. Or first half of this year was largely the private customers. And then the basins where we are seeing it, largely in the Permian, but a handful in the Haynesville as well. And the Rockies, I would say. The 1. The rig adds that we have guided to in the Northeast are kind of already in the bag, and we have got contracts signed. So I would say that the comment on the Q1 inquiries are really Permian.

With a few in the Haynesville and a few in the Rockies.

Derek Podhaizer: Okay. That makes sense. And then the Permian, you said you are up to 16 rigs. I think you are 8 last year. So a huge, huge improvement there. When we think of Precision, we think really just primarily the Northeast and the Haynesville, but obviously, you are clear Permian player making a lot of strides there. Any other regions you think the market's underestimating you guys that it kinda targets for growth as you look into next year just over time? That we should really think about?

Carey Thomas Ford: Well, the. Those are the 4 main regions for us today. It would be it would be the Rockies, the Permian, the Haynesville, the Marcellus. Have couple rigs working in the Eagle Ford, and that kinda blends into the Haynesville. So we might have-- see a little bit more activity there. But, currently, we do not have any rigs running in Oklahoma or North Dakota, which would be other 2 big markets.

And I would say too that in some of these inquiries, the robotics discussion has heated up a bit, and we are having more customers in both The US and Canada talking to us a bit deeper about our robotics offering, and so we are excited about those potential opportunities.

Derek Podhaizer: Great. Thank you very much. Turn it back.

Carey Thomas Ford: Okay. Thank you, Derek.

Operator: And I am not showing any further questions at this time. I would like to turn the call back over to Lavonne for any further remarks.

Lavonne Zdunich: Thank you to everyone for joining us today. If there is any follow-up you can reach out to myself and the Investor Relations team. Thank you. We are signing off.

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

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