PRECISION DRILLING ANNOUNCES COVID-19 RESPONSE, REDUCTIONS IN CAPITAL EXPENDITURE PLAN AND FIXED COSTS, AND UPDATES ITS LIQUIDITY POSITION AND STRATEGIC PRIORITIES - Seite 2

Capital Expenditure Plan Reduction

In response to the expected reduction in demand as customers reduce spending due to lower than anticipated commodity prices, Precision is reducing its 2020 capital expenditure plan to $48 million, down approximately 50% from its previously set plan of $95 million. Further adjustments may be considered depending on activity levels realized as the year progresses.

Fixed Cost Reductions

Precision is taking measures to enhance free cash flow by reducing fixed operating overhead and G&A costs throughout the organization, including:

• CEO salary reduction of 20%
• Board of Director compensation reductions of 20%
• Executive officer salary reductions of 10%
• Staff headcount and salary reductions
• Elimination of all non-essential travel, entertaining and other discretionary spending

We expect these fixed cost reduction measures will reduce annualized fixed costs by over 30%, including up to a $30 million reduction in G&A expense. 

Liquidity Update

Preserving Precision’s strong liquidity profile will remain a key financial priority in 2020. At 2019 year-end, Precision reported a cash balance of $75 million and the completion of a one-year extension of its US$500 million revolving credit facility, maturing November 2023. Excluding letters of credit, the Company’s revolving credit facility remains undrawn, and with the year-end cash balance, Precision reported access to over $700 million in liquidity.

In addition, the Company has materially reduced share repurchase activity under its Normal Course Issuer Bid program to maintain liquidity. 

During the second quarter of this year, Precision is estimating receipt of an additional $80 million to $100 million of cash from released working capital as a result of seasonal and commodity price driven activity declines in North America. The Company remains well in line with its covenants and will continue to ensure full access to its credit facility.

Strategic Priorities

Considering the new macro environment with highly volatile commodity prices, Precision reaffirms its strategic priorities for 2020:

1. Generate strong free cash flow and utilize $100 million to $150 million to reduce debt in 2020. 
   
   Precision reaffirms its 2020 debt reduction targeted range. As a component of this priority, in the near term, the Company will focus on maximizing free cash flow by reducing capital spending by 50% and fixed costs by over 30%. As of today, the Company has redeemed $41 million of its debt in 2020 and will continue prioritizing its 2021 senior notes during the year.