PRECISION DRILLING CORPORATION

First Quarter Report for the three months ended March 31, 2026 and 2025

This report contains “forward-looking information and statements” within the meaning of applicable securities laws. For a full disclosure of the forward-looking information and statements and the risks to which they are subject, see the “Cautionary Statement Regarding Forward-Looking Information and Statements” later in this report. This report contains references to certain Financial Measures and Ratios, including Adjusted EBITDA (earnings before income taxes, (gain) loss on investments and other assets, finance charges, foreign exchange, gain on asset disposals and depreciation and amortization), Net Capital Spending, Working Capital and Total Long-Term Financial Liabilities. These terms do not have standardized meanings prescribed under International Financial Reporting Standards (IFRS) Accounting Standards and may not be comparable to similar measures used by other companies. See “Financial Measures and Ratios” later in this report.

Precision Drilling Corporation ("Precision" or the "Company") (TSX:PD; NYSE:PDS) announces its 2026 first quarter results, reflecting higher utilization in both Canadian and U.S. drilling and well service operations year over year.

Financial Highlights

Operational Highlights

SELECT FINANCIAL AND OPERATING INFORMATION

Financial Highlights 

Operating Highlights

Drilling Activity

Financial Position

Summary for the three months ended March 31, 2026:

STRATEGY

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 that we establish at the beginning of every year.

Precision’s 2026 strategic priorities and the progress made during the first quarter are summarized below.

OUTLOOK

Ongoing geopolitical tensions in the Middle East have increased global supply risks, contributing to higher oil prices and a renewed focus on energy supply security. This environment continues to support steady upstream investment and near-term activity in politically stable jurisdictions. Customers continue to prioritize capital discipline and returns, resulting in measured but sustained drilling rather than reacting to short-term price movements. However, if the oil price outlook remains constructive, we expect activity levels to increase over the course of the year.

In Canada, demand for our Super Series rigs remains robust, driving one of our most active winter drilling seasons. Improving commodity prices for heavy oil and condensate, plus additional takeaway capacity for both oil and natural gas continue to support Canadian activity levels. As we move into spring break up with more pad-capable Super Triple and Super Single rigs and an improved oil price environment, we expect our second quarter activity to be well above the prior year's level.

In the U.S., the natural gas rig count increased approximately 20% in 2025 as customers became more constructive on LNG off-take and rising AI-related power demand. We capitalized on this trend by increasing activity in key natural gas basins such as the Haynesville and Marcellus, resulting in a 24% increase in U.S. drilling rig utilization days in the first quarter of 2026 compared with 2025. Oil directed drilling activity remained subdued through 2025 and into 2026; however, with a more favorable pricing environment, we are experiencing a notable increase in inquiries from both oil and natural gas customers regarding rig availability and expect further rig additions and pricing increases in the second half of the year.

Internationally, despite minor disruptions and increased costs due to the tension in the Middle East, our crews are safely delivering results for our international customers. We have seven active rigs, including four in Kuwait and three in the Kingdom of Saudi Arabia. These rigs are under five-year term contracts that extend into 2027 and 2028. We currently expect seven active rigs for the remainder of the year. We continue to seek opportunities for our two idle international rigs.

As the premier well service provider in Canada, the long-term outlook for this business is positive, driven by increased takeaway capacity from the Trans Mountain pipeline expansion and LNG Canada, and our High Performance, High Value service offering. We expect customer demand and pricing to remain strong in the foreseeable future, assuming no significant change in market conditions.

Overall, our outlook for the remainder of the year is optimistic, with potential upside driven by sustained higher oil prices amid ongoing geopolitical tensions in the Middle East. In Canada, we expect second quarter operating margins to average between $12,000 and $13,000 per utilization day, driven by a higher proportion of Super Singles working through spring break up compared with the prior year. In the U.S., revenue per utilization day is expected to remain stable, while operating margins are anticipated to range between US$7,500 and US$8,500 per utilization day due to additional rig reactivation expenses.

Contracts

The following chart outlines the average number of drilling rigs under term contract by quarter as of April 29, 2026. For the quarter ending after March 31, 2026, this chart represents the minimum number of term contracts from which we will earn revenue. We expect the actual number of contracted rigs to vary in future periods as we sign additional term contracts.

In Canada, because of the seasonal nature of well site access, term contracted rigs normally generate 250-300 utilization days per rig year. Accordingly, our anticipated Canadian rigs under term contract may fluctuate as customers complete their commitments earlier than projected. In most regions in the U.S. and internationally, term contracts normally generate 365 utilization days per year. In accordance with the seasonality of our business and varying levels of rig count, we generally experience builds of working capital in the first and third quarters and releases of working capital in the second and fourth quarters.

Capital Spending and Free Cash Flow Allocation

Capital spending in 2026 is expected to be $265 million, an increase of $20 million from our previously announced plan, driven by two contracted Canadian Super Triple drilling rig upgrades and higher expected activity in Canada and the U.S. Capital spending by spend category⁽¹⁾ is expected to include $168 million for maintenance, infrastructure, and intangibles, and $97 million for expansion and upgrades. We expect to spend $238 million in the Contract Drilling Services segment, $21 million in the Completion and Production Services segment and $6 million in the Corporate and Other segment. At March 31, 2026, Precision had capital commitments of $170 million with payments expected through 2028.

We remain committed to our debt reduction plans in 2026 and expect to reduce debt by $100 million, positioning us near our long-term target of reducing debt by $700 million between 2022 and 2027 and achieving a sustained Net Debt to Adjusted EBITDA ratio⁽¹⁾ of below 1.0 times. In 2026, we intend to allocate up to 50% of free cash flow before debt repayments to share repurchases.

Commodity Prices

First quarter average West Texas Intermediate and Western Canadian select oil prices remained largely consistent with the same period in 2025, while the average Henry Hub natural gas price decreased by 10% and AECO decreased by 6%.

Source: Sproule Escalated Price Forecast as of March 31, 2026.

SEGMENTED FINANCIAL RESULTS

Precision’s operations are reported in two segments: Contract Drilling Services, which includes our drilling rigs, procurement and distribution of oilfield supplies, and the manufacture, sale and repair of drilling equipment; and Completion and Production Services, which includes our service rigs, oilfield equipment rental, and camp services.

SEGMENT REVIEW OF CONTRACT DRILLING SERVICES

Revenue from Contract Drilling Services was $449 million compared to $419 million in the first quarter of 2025, due to increased drilling rig activity in the U.S. and Canada, offset in part by lower international drilling activity. Precision's U.S. and Canadian drilling rig utilization days increased by 24% and 7%, respectively. Our international revenue decreased by 11% due to lower drilling activity following the expiration of a drilling contract in Kuwait, while partially offset by higher mobilization revenue.

Adjusted EBITDA was $133 million for the quarter and represented 30% of revenue compared to 32% in 2025. The percentage decrease was mainly driven by our international rig mix and higher international rig reactivation costs.

In Canada, 26% of our utilization days were generated from rigs under term contract in the first quarter of 2026 compared to 33% in 2025. In the U.S., 34% of utilization days were generated from rigs under term contract in the first quarter of 2026 compared to 55% in 2025.

SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES

Completion and Production Services revenue in the first quarter of 2026 was largely consistent with 2025. Adjusted EBITDA of $18 million was consistent with the same period in the prior year.

SEGMENT REVIEW OF CORPORATE AND OTHER

Our Corporate and Other segment provides support functions to our operating segments. The Corporate and Other segment had negative Adjusted EBITDA of $27 million for the first quarter versus a negative Adjusted EBITDA of $16 million in the same period last year primarily due to higher share-based compensation expense.

OTHER ITEMS

Share-based Incentive Compensation Plans

We have several cash and equity-settled share-based incentive plans for non-management directors, officers, and other eligible employees. Our accounting policies for each share-based incentive plan can be found in our 2025 Annual Report.

A summary of expense amounts under these plans during the reporting periods are as follows:

Our cash settled share-based compensation expense increased $16 million compared with 2025 due to our share price appreciating 39% during the first quarter of 2026.

During the first quarters of 2025 and 2026, we issued Executive Restricted Share Units (Executive RSUs) to certain senior executives that were aligned with our annual compensation framework. These issuances resulted in an equity-settled share-based compensation expense of $3 million for the quarter.

As of March 31, 2026, the majority of our share-based compensation plans were classified as cash-settled and will be impacted by changes in our share price. Although accounted for as cash-settled, Precision retains the ability to settle certain vested units in common shares at its discretion.

Depreciation

In 2025, we completed a detailed review of our drilling rig equipment and revised the estimated useful life of drill pipe as more complex drilling programs have reduced the useful life of this asset class. This revision resulted in additional depreciation expense of $11 million in the first quarter of 2026.

LIQUIDITY AND CAPITAL RESOURCES

The oilfield services business is inherently cyclical in nature. To manage this, we focus on maintaining a strong balance sheet in order to have the financial flexibility to manage our growth and cash flow regardless of where we are in the business cycle. We maintain a variable operating cost structure so we can be responsive to changes in demand.

Our maintenance capital expenditures are tightly governed and highly responsive to activity levels with additional cost savings leverage provided through our internal manufacturing and supply divisions. Term contracts on upgrade or expansion capital projects provide more certainty of future revenues and return on our capital investments.

Liquidity

In the first quarter of 2026, we reduced long-term debt by $25 million, by repaying Canadian dollar denominated borrowings under our Senior Credit Facility. As of March 31, 2026, we had a total of $671 million outstanding under our Senior Credit Facility and unsecured senior notes as compared with $687 million at December 31, 2025. The current blended cash interest cost of our debt is approximately 6.6%.

Senior Credit Facility

Our Senior Credit Facility requires that we comply with certain covenants including a leverage ratio of consolidated senior debt to consolidated Covenant EBITDA of less than 2.5:1. For purposes of calculating the leverage ratio, consolidated senior debt only includes secured indebtedness. The Senior Credit Facility limits the redemption and repurchase of junior debt subject to a pro forma senior net leverage covenant test of less than or equal to 1.75:1.

Unsecured Senior Notes

The unsecured senior notes require that we comply with certain restrictive and financial covenants, including an incurrence based consolidated interest coverage ratio test of consolidated cash flow, as defined in the senior note agreements, to consolidated interest expense of greater than 2.0:1 for the most recent four consecutive fiscal quarters. In the event our consolidated interest coverage ratio is less than 2.0:1 for the most recent four consecutive fiscal quarters, the unsecured senior notes restrict our ability to incur additional indebtedness.

Covenants

As at March 31, 2026, we were in compliance with the covenants of our Senior Credit Facility.

Impact of foreign exchange rates

The following table summarizes the average and closing Canada-U.S. foreign exchanges rates.

Hedge of investments in foreign operations

We utilize foreign currency long-term debt to hedge our exposure to changes in the carrying value of our net investment in certain foreign operations as a result of changes in foreign exchange rates.

We have designated our U.S. dollar-denominated long-term debt as a net investment hedge in our U.S. operations and other foreign operations that have a U.S. dollar functional currency. To be accounted for as a hedge, the foreign currency denominated long-term debt must be designated and documented as such and must be effective at inception and on an ongoing basis. We recognize the effective amount of this hedge (net of tax) in other comprehensive income. We recognize ineffective amounts (if any) in net earnings.

Shareholders Capital

QUARTERLY FINANCIAL SUMMARY

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

Because of the nature of our business, we are required to make judgements and estimates in preparing our Condensed Consolidated Interim Financial Statements that could materially affect the amounts recognized. Our judgements and estimates are based on our past experiences and assumptions we believe are reasonable in the circumstances. The critical judgements and estimates used in preparing the Condensed Consolidated Interim Financial Statements are described in our 2025 Annual Report.

CHANGE IN ACCOUNTING POLICY

Effective January 1, 2026, Precision has prospectively adopted Amendments to the Classification and Measurement of Financial Instruments, as issued May 2024. The amendments relate to IFRS 7 Financial Instruments: Disclosures and IFRS 9 Financial Instruments. The amendments clarify the timing of recognition and derecognition of financial assets and liabilities. The amendments require opening balances of financial assets, financial liabilities, and retained earnings be adjusted to recognize the effect of the initial application if retrospective application is not selected. The initial application did not result in a material impact to the financial statements.

EVALUATION OF CONTROLS AND PROCEDURES

Based on their evaluation as at December 31, 2025, Precision’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended (the Exchange Act)), were effective to ensure that information required to be disclosed by the Corporation in reports that are filed or submitted to Canadian and U.S. securities authorities is recorded, processed, summarized and reported within the time periods specified in Canadian and U.S. securities laws. In addition, as of March 31, 2026, there were no changes in the internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting. Management will continue to periodically evaluate the Corporation’s disclosure controls and procedures and internal control over financial reporting and will make any modifications from time to time as deemed necessary.

Based on their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements, and even those controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

FINANCIAL MEASURES AND RATIOS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements contained in this report, including statements that contain words such as "could", "should", "can", "anticipate", "estimate", "intend", "plan", "expect", "believe", "will", "may", "continue", "project", "potential" and similar expressions and statements relating to matters that are not historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking information and statements").

In particular, forward-looking information and statements include, but are not limited to, the following:

These forward-looking information and statements are based on certain assumptions and analysis made by Precision in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. These include, among other things:

Undue reliance should not be placed on forward-looking information and statements. Whether actual results, performance or achievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from our expectations. Such risks and uncertainties include, but are not limited to:

Readers are cautioned that the forgoing list of risk factors is not exhaustive. Additional information on these and other factors that could affect our business, operations or financial results are included in reports on file with applicable securities regulatory authorities, including but not limited to Precision’s Annual Information Form for the year ended December 31, 2025, which may be accessed on Precision’s SEDAR+ profile at www.sedarplus.ca or under Precision’s EDGAR profile at www.sec.gov. The forward-looking information and statements contained in this report are made as of the date hereof and Precision undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by law.

14