Earnings Call Transcript - PDS Q3 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to the Precision Drilling Corporation 2025 Third Quarter Results Conference Call and Webcast. I would now like to hand the conference over to Lavonne Zdunich, Vice President of Investor Relations. Please go ahead.

Lavonne Zdunich, Vice President of Investor Relations

Good morning, and thank you for joining Precision Drilling's Third Quarter Conference Call and Webcast. Earlier this month, we announced the retirement of Kevin Neveu and the appointment of Carey Ford to President and Chief Executive Officer; Gene Stahl to Chief Operating Officer; and Dustin Honing to Chief Financial Officer. Kevin retires after serving as President and CEO for one of the longest tenures of any oilfield service CEO. We would like to thank Kevin for his many contributions during his time with PD. Before I pass the call over to Carey and Dustin today, I would like to recap some of our Q3 highlights. Precision Drilling activity outperformed industry and our U.S. drilling activity continues to grow. Our operating margins are resilient and within guidance. We increased our 2025 capital budget by $20 million to allow for 5 additional contracted rig upgrades as several of our Canadian and U.S. customers are taking a long-term view of demand for energy. And finally, we are on track to meet our 2025 capital allocation plans, having already achieved our debt reduction target. Please note that some comments today will refer to non-IFRS financial measures and include forward-looking statements, which are subject to a number of risks and uncertainties. For more information on financial measures, forward-looking statements and risk factors, please refer to our news release and other regulatory filings available on SEDAR and EDGAR. With that, I will turn it over to Dustin Honing, our new CFO.

Dustin Honing, CFO

Thank you, Lavonne, and good morning or good afternoon, depending on where you're calling today. Our Q3 results demonstrate Precision's commitment to delivering on our strategic priorities and positioning the business for long-term success. We recorded adjusted EBITDA of $118 million, which equates to $129 million before share-based compensation expense compared with prior year EBITDA of $142 million. In Canada, drilling activity averaged 63 active rigs, a decrease of 9 rigs from Q3 2024, resulting from customer projects being deferred to the upcoming winter season. Our reported Q3 daily operating margins were $13,007 a day compared to $12,877 a day in the third quarter of 2024, well within our prior guidance range. In the U.S., we averaged 36 rigs, an increase of 3 rigs from the previous quarter, primarily due to Precision's strength in gas-weighted basins. In Q3, daily operating margins for the quarter were steady at USD 8,700 a day compared to USD 9,026 a day in the second quarter, also within our prior guidance range. With favorable positioning in the U.S. natural gas market, we continue to add to our U.S. rig count, which has increased from a low of 27 rigs in Q1 to a high of 40 rigs today, a reflection of strong field performance recognized by our customers and the efforts of our sales team. While contract churn continues to challenge activity levels, we are encouraged by the quantity and quality of conversations tied to future opportunities in all basins. Internationally, Precision's drilling activity averaged 7 rigs, down from 8 rigs in prior year Q3. International day rates averaged USD 53,811 a day, an increase of 14% from prior year Q3 due to rigs recertification with non-billable days recognized in 2024. In our C&P segment, adjusted EBITDA was $19.3 million, which compares to $19.7 million from prior year Q3. Our strong presence in Canada's heavy oil and unconventional natural gas markets combined with our favorable positioning in the U.S. has provided us the ability to capitalize on rig upgrade opportunities, underpinned by firm customer contract commitments. During the quarter, we increased our planned 2025 capital expenditures from $240 million to $260 million, comprised of $151 million for sustaining and infrastructure and $109 million for upgrade and expansion. The plan is inclusive of 5 additional contract-backed upgrades added this quarter. Our added contracted backlog in the third quarter far exceeds the increase in our 2025 capital plan, ensuring strong financial returns as we strengthen both the marketability of our rig fleet and customer alignment in key regions. Even with this increase in capital, we remain firmly committed to our strategic priorities. As of September 30, we've met our annual debt reduction target, reducing our debt by $101 million and are well on our way to allocating between 35% and 45% of our free cash flow to share buybacks. We have repurchased $54 million worth of shares during the first 9 months of the year. Moving on to forward guidance. I will begin with our expectations for the fourth quarter. While our outlook for the remainder of the year remains positive, it will continue to be commodity price dependent. In Canada, we are expecting activity for this year's winter drilling season to meet or slightly exceed last year's winter activity. Q4 rig counts should be similar to Q4 2024, which averaged 65 rigs. Keep in mind, this includes the seasonal slowdown for Christmas holidays. Our operating margins in Canada are expected to range between $14,000 and $15,000 per day. In the U.S., we expect to sustain the momentum we have experienced in the last 2 quarters with an average active rig count in Q4 within the upper 30s. For the fourth quarter, we expect our margins to remain stable, ranging between USD 8,000 and USD 9,000 per day. Moving to guidance for the full year. We expect depreciation of approximately $300 million and cash interest expense of approximately $65 million remaining unchanged from prior guidance. Our effective tax rate will be approximately 45% to 50% due to increased deferred income tax expense related to the momentum of our U.S. operations. Cash taxes are expected to remain low in 2025. And looking to 2026, we expect to return to our traditional effective tax range within 25% to 30% with cash taxes, again, remaining low. For 2025, we expect SG&A of approximately $90 million to $95 million before share-based compensation expense. We refined our share-based compensation guidance for the year and now expect to range in between $5 million and $30 million, assuming a share price of $60 to $100. Our long-term target to achieve net debt to adjusted EBITDA of less than 1x remains firmly in place as does our plan to increase our free cash flow allocated directly to shareholders towards 50%. Our net debt to trailing 12-month EBITDA ratio is approximately 1.3x with an average cost of debt of 6.6%, and we have over $400 million in total liquidity today. With that, I will pass it over to Carey.

Carey Ford, CEO

Thank you, Dustin, and good morning and good afternoon. First, I would also like to acknowledge Kevin for his accomplishments and contributions to Precision over his 18 years as CEO. His commitment to high performance and ability to grow the business while navigating industry cycles have certainly left their mark on the company. We wish him well in retirement. Precision is today the leading land driller in Canada, a leader in drilling technology, a high-performance driller in the Middle East, a leading driller in the U.S. and the largest and highest performing well service provider in Canada. The company has a multiyear track record of generating sizable cash flows and now has a strong balance sheet approaching 1x leverage. In short, Precision is well positioned for its next phase of growth. Precision is undoubtedly one of the truly exceptional companies in the energy industry. What sets us apart is our culture, shared passion, commitment to supporting the field, enthusiasm for serving customers, and deep desire to be the best. Precision's culture, core values and people will continue to be the foundation for our success. For our investors, the Precision team will remain excellent stewards of capital and we'll follow through with our commitments, which include our plans for long-term debt reduction and increasing direct returns to shareholders. We will continue to be agile and run lean and we'll be prepared for whatever challenges the commodity market has in store for us. For our customers, we are committed to safety, consistency, reliability and technology that drives performance, reduces costs and delivers the highest quality wellbores. For our employees, Precision will continue to be a fantastic place to work, develop your career and call home. Case in point, Precision just completed a leadership transition in which the company filled 3 key positions, all with internal candidates, and our leadership team will not skip a beat. Gene, Shuja, Veronica, Tom, Darren and I have been working together on the leadership team for nearly a decade, and I look forward to the success this team will accomplish over the next stretch. I'm pleased to welcome Dustin to the executive leadership team as he steps into the Chief Financial Officer role. Some on the call will remember Dustin when he oversaw our investor relations and corporate development efforts over the 2018 to 2020 period. And over the past 5 years, Dustin has been a key driver of our financial performance working hand in hand with the sales and operations teams in both our Contract Drilling and Completion and Production services segments. I'm excited about Dustin's performance-driven mindset and his future contributions to Precision in his new role. I also want to extend my congratulations to Gene Stahl, on his new role as Chief Operating Officer. This is a well-deserved recognition of Gene's excellent leadership of Precision in the field with customers and within the industry. I'm truly honored to have the opportunity to lead such an outstanding team. As we dive into Precision's third quarter performance, I want to make sure for the listener that I link together how our competitive strategy, execution and capital deployment not only support the financial results, which we published, but also position Precision Drilling for future success. Three pillars of our strategy that underpin our performance are leveraging our scale, utilizing technology to drive rig performance and customer focus. I'll start with leveraging our scale. Precision is running 115 drilling rigs and 80 well service rigs today with rigs, support systems and over 5,000 employees serving customers across North America and the Middle East. Our scale enables us to seize opportunities and secure attractive returns for our investors. For instance, during the quarter, we mobilized 2 Super Triple rigs from the U.S. to Canada and performed major upgrades to prepare the rig for the winter drilling programs. One of the rigs is already drilling, and the second rig should leave our Nisku yard next week. These rig mobilizations were part of a larger multiyear customer contract where we repositioned and reactivated 5 rigs in total. The creative contract structure, mobilization of assets and quality and speed of the upgrades could not have been possible without Precision's scale and vertically integrated support functions. We also demonstrated the benefits of scale and geographic positioning in the U.S. market where our strength in gas basins positioned us to capitalize on attractive contracted upgrade opportunities for long-reach drilling applications for customers. These rig upgrades added to our contract book, our customer list and rig capabilities. During the quarter and because of recent rig upgrades and the quality of our crews, we drilled the longest well for a large customer in the Marcellus, and the second longest well for a large customer in the Haynesville, with both wells approaching 30,000 feet. We also set footage per day records for separate customers in both the Marcellus and Eagle Ford. Higher activity and scale in the U.S. are supporting operating margins as well. Those of you who have listened to previous calls have heard me discuss the strategic rationale for committing to our geographic breadth, in the U.S. market, understanding that we experienced some margin pressure in the short term to cover higher fixed costs. In the past 2 quarters, we have capitalized on several opportunities across the U.S. and are minimizing the fixed cost burden as our rig count has moved from the high 20s earlier this year to 40 rigs active today. As we communicated in our guide for the fourth quarter, our margins are now stabilized. My final point on leveraging our scale addresses the performance of our Completion and Production Services segment. The differentiated size and capabilities of our well service fleet, which we have scaled through consolidation over the past 3 years, combined with our Precision rental fleet, delivered a year-over-year revenue growth in a market that generally saw lower drilling and well service activity. Second pillar I'll discuss is that technology continues to be a key driver of success, not only with our Alpha and EverGreen platforms, but also with real-time monitoring technology further supporting rig performance. We now have 90% of our active Super Triple rigs running Alpha technology and 93% of all active rigs with at least one EverGreen solution, reducing fuel consumption and emissions for our customers. Our automated robotics rig working for a major in the Montney continues to deliver faster tripping and drilling times for our customer and interest in the robotics offering is broadening across our customer base. Our Clarity platform and Digital Twin initiatives delivered real-time monitoring of equipment and well performance, resulting in lower downtime, longer equipment lives, faster drilling speeds and more collaborative and enduring customer relationships. Technology applications are ubiquitous within Precision's operations and are clearly driving results for all our customers. Finally, I cannot overstate how important customer focus is to our business. The success we have had with the upgrade program in 2025 is a direct result of our customer focus. We work hand-in-hand with our customers to deliver rig equipment and technology packages that we mutually agree will deliver the optimal results. This year, we expect to complete 27 major upgrades and these upgrades are backed by customer contracts or upfront payments. Our strategic initiatives clearly supported our financial performance in the third quarter and will continue to drive results for Precision in the future. I'm personally excited about Precision's trajectory as we near the end of 2025 with our demonstrated ability to deliver on our shareholder capital return commitments while gaining market share, completing significant investments across our drilling fleet, building our contract book and sustaining strong field margin. The future for Precision Drilling is promising. That concludes my prepared remarks, and I will now turn the call back to the operator.

Operator, Operator

Our first question comes from Derek Podhaizer with Piper Sandler.

Derek Podhaizer, Analyst

Carey, congratulations to you. And Kevin, great to see you in the seat.

Carey Ford, CEO

Thanks, Derek.

Derek Podhaizer, Analyst

So just maybe a question around some of the comments you made for 2026, the limited visibility in the first part of the year. Obviously, you have some contract term, short-term duration contracts. When can we start seeing those extend a little bit here and get some term back into your contracts? I'm just thinking about the interplay of a lot of the customer-funded upgrades that you've talked about and how that can then lead into extending the terms as we move through 2026?

Carey Ford, CEO

Yes, I was planning to discuss customer contracts in North America. We're noticing an increase in commitment to longer-term contracts in the Montney area, which currently has our longest duration contracts. We're also seeing some longer-term contracts in heavy oil, although not as significantly as in the Montney. In the U.S., there are definitely longer-term contracts in the Marcellus, including a couple of two-year contracts signed this year, along with many one-year contracts and some shorter terms. I believe the shortest contract durations will be in the oil basins due to heightened volatility in that commodity. In the Haynesville, we see both short-term and some slightly longer-term contracts, ranging from one year to 18 months. Additionally, I want to mention that while we currently have one contract starting in 2026, we're having several productive discussions with customers for both oil and gas projects in the U.S. targeting work starting in 2026. However, it remains to be seen how long those contract commitments will ultimately be.

Derek Podhaizer, Analyst

Okay. That's helpful color. And then just on the rig upgrades, obviously, you've done a lot here in 2025. I think the number is almost 30. We start thinking about 2026 and then as you start thinking about your budget around for CapEx and what that means for free cash flow, how much more rig upgrades do you expect to do? I guess what's the population that you have of your rigs that are available to be upgraded? Just want to start contextually thinking about what rig upgrades can look like for next year, what it means for CapEx?

Carey Ford, CEO

Yes, I would like to begin by discussing the capital commitments we have made to investors regarding debt paydown and share repurchases. We will start with commitments at similar levels next year and hopefully increase them to provide better returns to shareholders. Maintenance will continue at around $150 million per year at this activity level. Beyond that, I genuinely hope we can achieve many upgrades, as this presents a significant opportunity for financial returns for our customers, being the best return opportunity among all our options. We have an advantage in completing these upgrades thanks to our 40-acre tech center in Nisku and our 20-acre tech center in Houston, both fully staffed with experts. This gives us a cost advantage, and these upgrades almost always come with contracts that secure the returns. I anticipate that as we observe longer reach horizontals in the U.S., customer demand for upgrades will increase. We also expect more pad configuration upgrades in Canada's heavy oil sector. While I can't guarantee we will match the level of upgrades we accomplished this year, I am confident that the requests for upgrades will continue.

Operator, Operator

Our next question comes from Keith MacKey with RBC Capital Markets.

Keith MacKey, Analyst

Certainly echo Derek's comments on congrats to you, Carey, Dustin and Gene. I think maybe, Carey, if we could just kind of start out with, and you did discuss it in your prepared remarks. But I'm not, at this point, expecting wholesale strategy change from Precision, but certainly some tweaks from how you might see the business to how Kevin might have seen it. Can you just talk about some of those factors and sort of how your priorities will stand going forward as you take on the CEO role?

Carey Ford, CEO

Yes, sure. I think that's a fair question, Keith. And certainly early days, but I have been with the company for 15 years. I would say that the strategy that we've been working with over my tenure as CFO for the past 10 years. I was heavily involved in developing it, particularly around cost control, capital allocation, return to shareholders and kind of hand-in-hand on how we look at operating the business and dealing with customers. Where I think the initial focus will be on supporting field operations, the best we can, and proving to our field that we're delivering the best support we can. And then also with customers doing, I would say, a more thorough job of proving to customers that we are delivering the best performance in the industry. And we've got lots of new tools to do that and a commitment by our sales and operations and technology teams to follow through on that. And beyond that, I would just say that there's a lot of things that are working for Precision right now. So I'm not looking to change the things that are working. You look at kind of the laundry list that I closed my comments with about our contract book and market share and I think we had a revenue decline of 3% year-over-year this quarter, which I think you would be hard-pressed to find a service provider with a similar geographic footprint to us that had a similar resiliency in revenue. So there are a lot of things that are working. But I think there's a few areas where we can sharpen our focus.

Keith MacKey, Analyst

Okay. I appreciate the comments. And just one on the margin per day guidance, specifically speaking to any mobilization or activation costs. It looks like in the U.S., you had about $502 a day of impact in Q3. Can you just talk about what that might look like in Canada and the U.S. for Q4, please?

Dustin Honing, CFO

So Keith, this is Dustin here. In Canada, we'll have a little bit tied to the rigs we've mobilized up, but I wouldn't view it as substantial as one of those rigs has already been delivered. And then when you look in the U.S., we've kind of seen a little bit of a constant run rate with some of the reactivation following the momentum of staging all of these incremental rigs from Q1 into Q3. So I think that's a reasonable run rate you can expect kind of with the contract term that we've been absorbing so far in the short term.

Operator, Operator

Our next question comes from Aaron MacNeil with TD Cowen.

Aaron MacNeil, Analyst

Congrats to everyone. I would certainly echo that and looking forward to seeing where you guys take things. Maybe I'll build on Keith's question, Carey. I was just hoping you could comment on a few specific items like performance-based contracts, your comfort with the operating regions or business lines and your approach to M&A? And if those sort of factors differ from your predecessor?

Carey Ford, CEO

With respect to M&A, there is no change. I have been involved in every kind of M&A discussion we've had over the last 15 years, and I don't see anything strategic on the M&A front. While there are some transactions we could consider if the pricing is right, none of them appear strategic enough to justify a higher investment. Additionally, this year has shown that we can grow our business organically without resorting to M&A. We're achieving this through better asset utilization, improved pricing, rig upgrades, and technology enhancements. I believe there is still room for growth in this area. Regarding performance-based contracts, my view is somewhat similar but with slight differences. There are good opportunities for these contracts, and they are becoming more common in the industry than they were a few years ago. We are noticing more unique opportunities to include performance clauses in our contracts in both Canada and the U.S. We are open to these contracts; we currently have several, and they are effectively delivering financial returns and enhancing rig performance. While I don't expect a major shift in our approach to performance-based contracts, I would be surprised if we didn't see an increase in them going forward.

Aaron MacNeil, Analyst

Okay. And just to conclude the first question, are you comfortable with the operating regions and business lines you are currently engaged in?

Carey Ford, CEO

Correct. I think we're not looking to add any service lines onto our current business lines. And when we look at expanding internationally, we've said it before, and I agree with it today that the markets that we're in, Kuwait and Saudi Arabia are very good markets in the Middle East. It has been difficult to grow outside of those markets because the return profile of deploying new capital has been unattractive. And if we can make that change or find opportunities where that does change, we could grow in that region in the Middle East. And maybe there's another region or 2 that we grow in the future, but nothing to report or telegraph at this point.

Aaron MacNeil, Analyst

Okay. And then for the follow-up, I'm sure you guys gave this a lot of thought before moving additional rigs to Canada. But how do you sort of wrap your head around the downside mitigation in terms of adding supply to the market that's generally been pretty good for the last couple of years? And you also mentioned a unique customer contract structure in the prepared remarks. Can you elaborate on what you mean by that?

Carey Ford, CEO

Yes, this was a contract involving five rigs for a major customer in Canada, during which we relocated two rigs from the U.S. market to Canada. Additionally, we secured long-term contracts for three other rigs in the Canadian market. We evaluated the contract package along with the capital and contract term involved, as well as the returns generated by all these rigs. Overall, the package was very appealing for us, and we were in a unique position to seize this opportunity, which allowed us to shift two rigs to Canada. Regarding your question about increasing rig supply in the market, I want to clarify our expectations stated in both our press release and Dustin's comments. We anticipate achieving 100% utilization on our Super Triples during this winter drilling season. We are responding to the growing demand for Precision Drilling Super Triples. I'm not sure what this means for the broader market regarding triples in Canada, but for our specific rig class, we expect full utilization.

Operator, Operator

Our next question comes from John Daniel with Daniel Energy Partners.

John Daniel, Analyst

Congrats to everyone. This question is for Gene. I know it's too early to determine how many rig upgrades you'll be doing next year, but could you share your insights on the demand for more upgrades in the upcoming year?

Gene Stahl, COO

Thank you, John. We are working closely with our customers in the U.S. to understand their rig requirements and drilling programs. We have three classes of Super Triples: our standard 1,500, the 1,500 EER, and the ST-2000. Depending on their drilling programs, if they have a steady operation and we can provide an upgrade at a reasonable cost, we will look to move forward with that upgrade.

John Daniel, Analyst

Okay. When I look at the five rigs you're planning for Canada, can you explain how that opportunity developed? How long did the discussions take? Could you potentially be surprised next year by having five to ten more upgrades? I’m trying to understand what the opportunity might entail.

Gene Stahl, COO

Yes. So it's a blend of heavy oil rigs and a blend of Triples. Obviously, Carey just spoke to the Triples viewpoint. And heavy oil with Super Single rigs, we have 48 of them. As the Clearwater starts to evolve and they expand their well design, they're looking for year-round operations. Typically, that can mean 100 more days of utilization for us as a drilling contractor. And so converting those single-mode rigs to pad rigs is something that's of interest to our customers and to ourselves and that's where the growth would come from.

John Daniel, Analyst

Got it. Apologies for what's going to be a drilling 101 question here. But you did the 27 rig upgrades this year or you'll do them. Can you remind me what a potential rig upgrade cycle could be? When do you have to bring those 27 back in?

Carey Ford, CEO

Oh, you mean the time it takes to complete an upgrade? Yes, I'm sorry for such a basic question, but I'm a bit slow today. For what we're doing, some of the rig upgrades might be in-basin upgrades where, during a rig move, we're installing new equipment. A longer-term upgrade might involve changing a pad configuration for Super Single, which would take about 3 to 4 months. The rigs we've moved up, the Super Triples, required approximately 2 to 3 months to prepare. So we are not expecting any 6 to 9-month upgrades. Most of them will be fairly quick, taking anywhere from a week to 3 or 4 months.

Gene Stahl, COO

And it speaks to our rig design and our capability to use our inventories and upgrade to our spec. So I think a differentiator for Precision, certainly.

Operator, Operator

Our next question comes from Tim Monachello with ATB Capital Markets.

Tim Monachello, Analyst

Hello everyone, it's been a while since I last called in. Congratulations to Carey, Dustin, and Gene on their well-deserved promotions, and Kevin on an impressive career. My first question is about Canada. It's interesting to see a few rigs moving from the U.S. to the Canadian Super Triple market. Given that you mentioned being fully utilized or expecting to be fully utilized for the winter drilling season, do you believe there are additional opportunities to transfer rigs from the U.S. to Canada?

Carey Ford, CEO

I think for this winter drilling season, no. And we don't currently have deep discussions with customers about moving more rigs. But over time, over the next couple of years, I mean, LNG Canada Phase 2, other LNG opportunities, there could be more demand for Super Triple rigs. And certainly, the rigs that we have in Canada are delivering good performance for our customers. So there may be opportunities in the future, but I would say it would be for next winter drilling season.

Tim Monachello, Analyst

Okay. That makes sense. And then the U.S., obviously, the oil basins, the outlook is a little bit circumspective, I would think. In the gas basins, you've seen almost 20% rig activity growth in gas in the U.S. year-to-date. And you have a unique footprint in the gas basins with a pre-fragmented customer base. So I expect you have a decent view from a lot of customers on what their expectations are going forward for activity. Could you talk a little bit about your expectations for U.S. gas drilling activity over the next, I don't know, 6 to 12 months?

Carey Ford, CEO

Yes, we have a reasonable perspective on the future activity in gas. I would characterize the Marcellus as experiencing steady to low growth. There has been some high-grading in the basin, and while we've added more rigs, there have been instances where some rigs were taken out, which means our additions haven’t necessarily translated to growth in the basin. Regarding the Haynesville, many view it as a swing producer for LNG exports and natural gas production overall. Therefore, we might see increased activity in the Haynesville over the next year if gas prices remain favorable. However, as we mentioned in our press release, we don’t have a clear outlook on that demand past early 2026.

Tim Monachello, Analyst

What's the motivating factor behind, I guess, higher activity levels this year considering gas prices have been fairly uneconomic in the U.S.? Is it just LNG export and building supply? Is that what you're seeing?

Carey Ford, CEO

Yes, I think most people are experiencing a surge in demand for both natural gas-fired generation for data servers and the electrification of the economy, along with LNG exports. Some customers are looking past any short-term fluctuations in gas prices and focusing on the long-term demand outlook.

Tim Monachello, Analyst

Okay. That's helpful. And then could you just provide a quick overview of what the geographies, the 27 upgrades you're going to?

Dustin Honing, CFO

So it's really a mix, Tim. But think of it, we obviously commented on the 2 Montney rigs that we're going to bring up from the U.S. into Canada. Heavy oil is really a key area we've invested a lot. So this would be our Clearwater Basin and then more into the unconventional plays in SAGD. One comment on that, we've seen a lot of enthusiasm with our customers on these upgrades where we have recognized a lot of upfront payments throughout the year to help support these upgrades as well. And then when you look down to the U.S., it's primarily weighted to the Haynesville and the Marcellus. But we have had some upgrade opportunities with high torque equipment in the Rockies and even in the Permian.

Carey Ford, CEO

And I would just add to that, Tim, I believe we said this in the press release, but the vast majority of the upgrades are going to areas in North America where we expect to have year-over-year increases in activity. So it's a little bit out of stuff with kind of the broader market, but in the Haynesville, in the Marcellus heavy oil, and in the Montney, we expect that higher year-over-year activity, and that's what was driving these upgrades.

Operator, Operator

And I'm not showing any further questions at this time. I'd like to turn the call back over to Lavonne for any further remarks.

Lavonne Zdunich, Vice President of Investor Relations

Thank you for taking the time to learn more about Precision Drilling today. And with that, we will sign off. Everyone, enjoy your day. Thank you.

Operator, Operator

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