Precision Drilling : 2023 Annual Report

PRECISION DRILLING

Throughout this Annual Report, the terms, we, us, our, Corporation, Company, Precision and Precision Drilling mean Precision Drilling Corporation and our subsidiaries and include any partnerships of which we are a part.

Information in the Annual Report is as at March 4, 2024, unless specified otherwise. All amounts are in Canadian dollars unless specified otherwise.

TABLE OF CONTENTS

i	Corporate Information
i	Board of Directors
i	Officers

1. Corporate Offices
2. 2023 Share Trading Summary

1 About Precision

1	Corporate Responsibility

1. Our Vision and Delivering on our 2023 Strategic Priorities
2. Management's Discussion and Analysis

1. Our Strategy
2. Business Segments

1. Strategic Priorities
2. Understanding Our Business Drivers

7 Energy Industry Overview

9 Competitive Operating Model

1. Outlook
2. 2023 Results
3. 2023 Compared with 2022
4. 2022 Compared with 2021
5. Segmented Results

17	Quarterly Financial Results
19	Financial Condition

19 Liquidity

1. Capital Management
2. Sources and Uses of Cash
3. Capital Structure

24 Accounting Policies and Estimates

1. Critical Accounting Estimates and Judgements
2. Risks in Our Business

1. Evaluation of Controls and Procedures
2. Advisories

1. Cautionary Statement About Forward-Looking Information and Statements
2. Financial Measures and Ratios

1. Management's Report to the Shareholders
2. Reports of Independent Registered Public Accounting Firm

1. Consolidated Financial Statements and Notes

1. Consolidated Statements of Financial Position
2. Consolidated Statements of Net Earnings (Loss)

1. Consolidated Statements of Comprehensive Income (Loss)
2. Consolidated Statements of Cash Flows
3. Consolidated Statements of Changes in Equity
4. Notes to Consolidated Financial Statements

77 Supplemental Information

77 Shareholder Information

CORPORATE INFORMATION

BOARD OF DIRECTORS

Michael R. Culbert	Susan M. MacKenzie
Calgary, Alberta, Canada	Calgary, Alberta, Canada
▪	Audit Committee	▪ Corporate Governance, Nominating and Risk Committee (Chair)
▪ Human Resources and Compensation Committee	▪ Human Resources and Compensation Committee
William T. Donovan	Kevin O. Meyers
North Palm Beach, Florida, USA	Anchorage, Alaska, USA
▪	Audit Committee (Chair)	▪ Human Resources and Compensation Committee (Chair)
▪ Corporate Governance, Nominating and Risk Committee	▪ Corporate Governance, Nominating and Risk Committee
Lori A. Lancaster	Kevin A. Neveu
New York, New York, USA	Houston, Texas, USA
▪	Audit Committee	▪ President and Chief Executive Officer

• Corporate Governance, Nominating and Risk Committee

Steven W. Krablin	David W. Williams
Houston, Texas, USA	Spring, Texas, USA
▪	Chairman of Board of Directors	▪	Audit Committee
▪	Audit Committee	▪	Human Resources and Compensation Committee

• Corporate Governance, Nominating and Risk Committee
• Human Resources and Compensation Committee

OFFICERS

Kevin A. Neveu	Shuja U. Goraya
President and Chief Executive Officer	Chief Technology Officer
Carey T. Ford	Darren J. Ruhr
Chief Financial Officer	Chief Administrative Officer
Veronica H. Foley	Gene C. Stahl
Chief Legal and Compliance Officer	President, North America Drilling

CORPORATE OFFICES

CALGARY HEAD OFFICE	HOUSTON OFFICE
Suite 800, 525 - 8th Avenue SW Calgary	10350 Richmond Avenue, Suite 700, Houston,
Alberta, T2P 1G1	Texas, 77042
Canada	USA
Telephone: [phone]	Telephone: [phone]
Email: [e-mail]	Email: [e-mail]
www.precisiondrilling.com	www.precisiondrilling.com

Corporate Information

i

2023 SHARE TRADING SUMMARY

Toronto (TSX-PD)
High: $114.50 Low: $57.16	Close on December 31, 2023: $71.96	Volume Traded: 23,637,894

New York (NYSE-PDS) (US$)
High: $85.50	Low: $42.07	Close on December 31, 2023: $54.29	Volume Traded: 17,875,535

ii	Corporate Information

ABOUT PRECISION

Precision is a leading provider of safe and environmentally responsible High Performance, High Value services to the energy industry, offering customers access to an extensive fleet of Super Series drilling rigs. Precision has commercialized an industry- leading digital technology portfolio known as AlphaTM technologies that utilizes advanced automation software and analytics to generate efficient, predictable, and repeatable results for energy customers. Additionally, Precision offers well service rigs, camps and rental equipment all backed by a comprehensive mix of technical support services and skilled, experienced personnel. Our drilling services are enhanced by our EverGreenTM suite of environmental solutions, which bolsters our commitment to reducing the environmental impact on our operations.

From our founding as a private drilling contractor in 1951, Precision has grown to become one of the most active drillers in North America. Our High Performance, High Value competitive advantage is underpinned by four distinguishing features:

• a high-quality land drilling rig fleet, with AC Super Triple rigs enabled with our AlphaTM technologies and supported by our EverGreenTM suite of environmental solutions to deliver consistent, repeatable, high-quality wellbores while improving safety, performance, operational efficiency and reducing environmental impact
• size and scale of our vertically integrated operations that provide higher margins and better service capabilities
• a diverse culture focused on operational excellence, which includes corporate responsibility, safety and field performance, and
• a capital structure that provides long-term stability, flexibility and liquidity, allowing us to take advantage of business cycle opportunities.

CORPORATE RESPONSIBILITY

Corporate Responsibility is a fundamental element of Precision's High Performance, High Value strategy and critical to our long- term success. Our foundation was shaped by a commitment to operate with the highest ethical standards, prioritize the health, safety, and diversity of our workforce, and the protection of the environment and the communities where we operate. Our employees, investors and customers reward our commitment to Corporate Responsibility and recognize that it provides us the ability to attract talent, capital, and a premium for our services.

To learn more about Precision's commitment to Corporate Responsibility, we invite you to review our interactive web page, which serves as the primary platform that highlights the Company's progress in Environmental, Social and Governance (ESG) efforts, and provides recurring updates on our ESG efforts and performance. The information on our website represents not just a single snapshot of the year, but portrays a frequently updated view of our continuing ESG efforts.

OUR VISION AND DELIVERING ON OUR 2023 STRATEGIC PRIORITIES

Precision's vision is to be globally recognized as the High Performance, High Value provider of land drilling services. We work toward this vision by defining and measuring our results against strategic priorities established at the beginning of each year.

In 2023, Precision focused on three strategic priorities:

• Delivering High Performance, High Value service through operational excellence;
• Maximizing free cash flow by increasing Adjusted EBITDA(1) margins, revenue efficiency and growing revenue from AlphaTM technologies and EverGreenTM suite of environmental solutions; and
• Reducing debt by at least $150 million and allocating 10% to 20% of free cash flow before debt repayments for shareholder returns. We also increased our long-term debt reduction target to $500 million between 2022 and 2025 and sustained Net Debt to Adjusted EBITDA ratio(1) of below 1.0 times by the end of 2025.
  (1) See Financial Measures and Ratios on page 40 of this report.

We successfully delivered on each of these priorities in 2023, reported one of our most profitable years in the past decade and exceeded our cash flow expectations. During the year, we not only met our debt reduction and shareholder capital return targets, but also funded two accretive acquisitions. Our High Performance, High Value strategy along with our Super Series rigs, AlphaTM technologies, and EverGreenTM suite of environmental solutions continue to differentiate our services.

In Canada, we increased our drilling utilization days and well servicing rig operating hours over 2022 levels, maintaining our position as the leading Canadian service provider of oilfield services. In the fourth quarter of 2023, we acquired CWC Energy Services Corp. (CWC), which increased our marketed service rig count by 36% year over year and enhanced our North America drilling operations. Internationally, we recertified and reactivated four rigs, exiting 2023 with eight active rigs under five-year term contracts that extend into 2027 and 2028. We also completed integrating our 2022 acquisition of High Arctic Energy Services Inc.'s (High Arctic) assets, which helped contribute to increase our year over year Completion and Productions Services' Adjusted EBITDA by 34%.

We generated cash provided by operations of $501 million, a 111% increase over 2022 due to the higher activity in Canada and improved North America day rates and daily operating margins. We continued to scale our AlphaTM technologies and EverGreenTM suite of environmental solutions across our Super Triple rig fleet, increasing revenue from these offerings year over year. Approximately 75% of our Super Triple fleet is equipped with AlphaTM and the majority of the fleet has at least one EverGreenTM product.

Precision Drilling Corporation 2023 Annual Report

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With robust cash flow in 2023, we reduced debt by $152 million and increased direct returns to shareholders, allocating 15% of our free cash flow before debt repayments to share repurchases. In 2024, we plan to increase this allocation to 25% to 35% and reduce debt by another $150 million to $200 million. This positions us to achieve our sustained Net Debt to Adjusted EBITDA ratio of below 1.0 times by the end of 2025 and meet our long-term debt reduction target of $500 million between 2022 and 2025. In 2026, we plan to reduce debt by another $100 million and move our direct shareholder capital returns towards 50% of free cash flow.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis (MD&A) contains information to help you understand our business and financial performance. Information is as at March 4, 2024, unless otherwise stated. This MD&A focuses on our Consolidated Financial Statements and Notes and includes a discussion of known risks and uncertainties relating to our business and the oilfield services sector.

You should read this MD&A with the accompanying audited Consolidated Financial Statements and Notes, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and with information contained in the Cautionary Statement About Forward-LookingInformation and Statements on page 39. In this MD&A, we reference certain Non-Generally Accepted Accounting Principles (Non-GAAP) financial measures and ratios that are not defined terms under IFRS to assess our performance as we believe they provide useful supplemental information to investors. Our Non-GAAP financial measures and ratios are defined on page 40.

The terms we, us, our, Corporation, Company, Precision and Precision Drilling mean Precision Drilling Corporation and our subsidiaries and include any partnerships of which we are a part.

All amounts are in Canadian dollars unless otherwise stated.

OUR STRATEGY

Our High Performance, High Value competitive advantage is underpinned by four distinguishing features:

• a high-quality land drilling rig fleet, with AC Super Triple rigs enabled with our AlphaTM technologies and supported by our EverGreenTM suite of environmental solutions to deliver consistent, repeatable, high-quality wellbores while improving safety, performance, operational efficiency and reducing environmental impact;
• size and scale of our vertically integrated operations that provide higher margins and better service capabilities;
• a diverse culture focused on operational excellence, which includes corporate responsibility, safety and field performance; and
• a capital structure that provides long-term stability, flexibility and liquidity, allowing us to take advantage of business cycle opportunities.

2	Management's Discussion and Analysis

BUSINESS SEGMENTS

We have two business segments, Contract Drilling Services and Completion and Production Services, which share business support systems and corporate and administrative services.

Precision Drilling Corporation 2023 Annual Report

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Contract Drilling Services

We provide onshore drilling services to exploration and production companies in the oil and natural gas and geothermal industries, operating in Canada, the U.S., and internationally. In Canada, we are the largest onshore drilling company, marketing approximately 25% of the industry's land rig fleet. In the U.S., our fleet is the fifth largest and accounts for approximately 9% of the country's Super-Spec land drilling rigs. We also have an international presence with operations in the Middle East.

We offer customers access to an extensive fleet of high-efficiencySuper Series drilling rigs ideally suited for development drilling. Our rigs are strategically deployed across the most active drilling regions in North America, including all major unconventional oil and natural gas basins.

At December 31, 2023, our Contract Drilling Services segment consisted of 214 land drilling rigs, including 97 in Canada, 104 in the U.S. and 13 in the Middle East.

During the year, our acquisition of CWC added seven Canadian and 11 U.S. drilling rigs to our fleet. In addition, we decommissioned 20 and seven legacy drilling rigs in Canada and the U.S., respectively.

Our Super Series drilling rigs are further enhanced by our AlphaTM technologies and EverGreenTM suite of environmental solutions. Our AlphaTM technologies drive performance by integrating data insights, human ingenuity, automation consistency and smart algorithms, increasing drilling performance and cost efficiencies for our customers. Our EverGreenTM suite of environmental solutions bolsters our commitment to reduce the environmental impact of oilfield operations and offers customers products and applications to measure and reduce their Greenhouse Gas (GHG) emissions during drilling operations. Precision exited the year with 75 AC Super Triple rigs equipped with AlphaTM and the majority equipped with at least one EverGreenTM product.

The below graphs summarize our revenue and utilization days for the last five financial years.

4	Management's Discussion and Analysis