Good day, ladies and gentlemen, and welcome to the Precision Drilling Corporation twenty eighteen AGM Webcast. At this time, participants are in a listen only mode. I would now like to turn the call over to Mr. Steve Please go ahead.
Thank you. Good morning. I'm Steve Crablin. And on behalf of myself and the other directors of Precision, I want to welcome you and thank you for attending the Annual General Meeting of Shareholders. I declare that the meeting will now come to order and I will act as Chairman of this meeting.
After the formal business of the meeting and its adjournment, you're invited to stay for a brief presentation by Kevin Nevew, President and CEO of Precision. And I ask that you please hold any general questions that you may have until that time. For this meeting, we will receive and consider the corporation's audited consolidated financial statements for the year ended December 3137. We'll elect the corporation's directors, appoint KPMG as the corporation's auditors and authorize the directors to set their fees, and have an advisory say on pay vote regarding the corporation's approach to executive compensation. Sitting with me at the head table, Kevin Nevew, President and Chief Executive Officer Veronica Foley, Senior Vice President, General Counsel and Corporate Secretary, and she will act as Secretary of this meeting and Carrie Ford, Senior Vice President and Chief Financial Officer.
Marilyn Painter and Jennifer Villarreal are scrutineers for the meeting and as representatives of Computershare Trust Company of Canada. Canada. I'd also like to take a moment to introduce our directors and senior officers who are present today. The directors standing for election will please stand as I call their name to be recognized, Michael Culbert, William Donovan, Brian Gibson, Alan Hagerman, Susan McKenzie, Kevin Myers, as well as Kevin and myself. Catherine Hughes and Steve Letwin will both be retiring from the Board of Directors upon conclusion of today's meeting, and the Board wishes to recognize both of them for their guidance and direction during the tenure on Precision's Board.
Catherine and Steve, yes, right there. Thank you both for your service to us. Senior officers in attendance, Darren Ruhr, Senior Vice President of Corporate Services and Gene Stahl, President of Drilling Operations. I also welcome attendance of Shane Doig, who is our partner with KPMG, and he'll be available for any appropriate questions after the presentation as well. Now turning to the formal part of the meeting.
I have proof of filing and proof of mailing of the notice of the meeting, the instrument of proxy, the financial statements and the management information circular and accompanying documents, all of which were sent to shareholders. The secretary will keep a copy of these documents and the scrutineers' report, which reflects the shareholders in attendance and their holdings with the records of this meeting. I've been advised that a quorum is present, and I declare that the meeting is regularly called and properly constituted for the transaction of business. Regarding the voting procedure, we're going to conduct all the votes by ballot. All registered shareholders and duly appointed proxy holders entitled to vote at this meeting are entitled to vote at this meeting.
If you wish to change your vote or if you have not previously voted, you should have been offered a ballot when you entered the meeting. But if you have not received that or want to change your vote, please let us know. Does anybody here need a ballot? Good. That makes everything go nice and smoothly.
We can now proceed with the business of the meeting. Certain shareholders have previously been selected to make and second the motion in order to facilitate the process. The first item is the presentation of the audited consolidated financial statements of the corporation for December 3137, and the reading of the auditor's report. As copies of these have been mailed to every shareholder who requested them, we can dispense with the reading and accept them as presented. Approval of the financial statements is not required, but if you have any questions regarding them, may please raise your questions at the end of the presentation that Kevin will make and we'll try to answer any of them.
The next item of business is the election of directors. Shareholders have been given the ability to vote for or to withhold their vote for each of the individual director nominees. May I have a motion for the directors, please?
Mr. Chairman, my name is Christopher Ames, and I nominate that each of the eight current directors who are currently standing for reelection as described in the information management information circular for election as directors until the next Annual Shareholder Meeting.
Mr. Chairman, my name is Ashley Connolly, and I second the motion.
Thank you. As no other nominations were properly submitted in compliance with our bylaws, I declare the nominations closed. I have been advised by the scrutineers that based on the proxies received, each of the eight current directors who are standing for reelection have been duly elected by the requisite majority as directors of the corporation to hold office until the next Annual Shareholders' Meeting. I therefore declare the resolution carried. Details of this vote and of every vote that will be held today can be obtained from the secretary after the meeting and will also be publicly filed.
The next item of business is the appointment of auditors, and I would ask for a motion to approve that KPMG be appointed as auditors of the corporation for the ensuing year and that the directors are authorized to set KPMG's fees.
Mr. Chairman, my name is Rachel Goulson, and I so move.
Thank you.
Mr. Chairman, my name is Christina Bowman, and I second the motion.
Thank you. Based on the proxies received, the resolution has passed. The last item of business is to consider an advisory resolution commonly known as say on pay regarding the corporation's approach to executive compensation. As this is an advisory vote, the results are not binding on the Board. However, in considering our approach to executive compensation in the future, the Board will take into account the results of the vote together with any other feedback that we received.
I now ask for a motion that the shareholders accept the approach to executive compensation disclosed in Precision's management information circular. Mr. Chairman, my name is Brad Lindeman and I so move. Thank you.
Mr. Chairman, my name is Jonathan Covington, and I second the motion.
Thank you. Again, I've been advised by the scrutineers that the resolution has passed by the requisite majority, and I therefore declare the resolution carried. As there is no other business to be brought before the meeting, may I have a motion to terminate this meeting?
Mr. Chairman, my name is Janine Maynard, and I move to terminate the meeting.
Thank you.
Mr. Chairman, my name is Deborah Reske and I second the motion.
Thank you. Is there any discussion? Would all those shareholders entitled to vote at the meeting today please raise their hand in favor of terminating the meeting? Any opposed? Thank you very much.
The motion is carried and I clear that the meeting is terminated. Kevin will now provide a brief presentation and I want to thank everybody for attending the meeting. Thank you.
Well, morning and thank you for attending our Annual General Meeting. And what I'll do is do a walkthrough on our typical investor presentation for those of you who are investors or otherwise. And I don't mind having questions mid presentation. So if something pops up with your mind along the way, raise the hands, I'll stop and I'll answer the question. And certainly at the end of the presentation, I'll be open for questions.
On that note, I'll begin. So again, most of the comments I'll make involve our views on the future and our forward looking statements. And I caution you to always view that with the uncertainty that goes with trying to predict the future. So at Precision, we are intensely focused on creating shareholder value. And we think it's really important that we explain and are very direct in how we do that.
So the first slide of our presentation covers offline the three elements we think generate shareholder value. That's number one, our high performance rig fleet and the people who staff those rigs and run those rigs. We'll spend a few more minutes talking about that in the presentation. In this market today, we are focused on using those high performance rigs and driving market share gains in all of our markets. And I'll speak about that in a few minutes.
We believe that our high quality rigs, quality people and the systems and services we provide deserve premium pricing and we're focused on driving premium pricing and that through market share and pricing, we believe that's going to provide enhanced financial performance for Precision relative to our peers. We're going to use that enhanced financial performance as free cash flow. And our primary use of free cash flow is focused on reducing total debt for the company right now. And we'll continue to make investments in the business that are high quality investments and have high returns. I'll speak a bit more about that throughout the presentation.
But there's no question that we're creating shareholder value through high quality rigs staffed by high quality, well trained people. We're going to be pushing hard to generate the best returns we can on those assets through strong utilization, stronger day rates and then using that cash flow to convert our capital structure to have less debt and more equity value for our shareholders. And we think that has immediate and lasting effects for shareholder value. So that leads us into how we manage our business and decisions we make day to day in this company and they're focused on the top three priorities for the company. I'll start at the bottom.
In the bottom of the list here we show reducing debt using free cash flow. And for the first time, we've given hard targets both on short term debt reduction targets and long term debt reduction targets. In the near term, for the course of this year, we look to reduce total debt by 75,000,000 to $125,000,000 And that's part of the longer term plan, a three to four year plan to reduce total debt by up to $500,000,000 And we think that capital structure would be more appropriate for this company longer term. There's no question that will shift value from the debt side of the capital structure to the equity value of the capital structure for our investors. We're taking action in the current period, current year for that.
So I talked earlier on the first page about driving utilization and driving financial performance. So clearly that's a priority in the organization throughout the company in all business units, all sections, driving strong rates and higher utilization pushing both forward on both fronts. And I think the one piece that I didn't cover off in the shareholder value piece that we're working on hard because we do believe it creates significant long term shareholder value is using advanced technologies as a differentiator and competitive advantage. So I'll speak more to that. But in 2017, we used that as our beta test year.
We're using 2018 as our technology deployment year. So we'll be deploying technology for the course of this year, and for that matter, to the next several years on our rigs and also in our back office to improve our efficiency, improve the efficiency of the rigs, consistency, repeatability and generate better customer value, which we think leads to higher day rates. So I'll speak more to that. So first of all, for precision drilling at a glance, probably fair to say that we're the only drilling contractor that has a meaningful footprint in every unconventional horizontal drilling play in North America, every single play from the Montney and Duvernay to the Marcellus, Utica, down to the Eagle Ford, the Permian and every play. In fact, in a number of those plays, like five or six plays, we are the leading market share provider in those plays, probably leading in more of the plays than any other driller.
Certainly, as we look at our footprint in Canada, blanket Canada, both the unconventional plays and the conventional plays, but in The U. S, we're in all the key U. S. Plays, particularly the Permian, the SCOOPSTACK, the Niobrara and the Utica and the Marcellus. I'll certainly speak to that in more detail through the presentation.
Our service rig business is primarily focused on Canada, but we do have a small footprint into North Dakota that we leverage out of our Saskatchewan operations quite effectively. And I shouldn't forget to mention Saudi Arabia and Kuwait. So we do believe that our international operations, which are focused on the lowest cost oil in the world is the place to be. Very stable opportunity for us, maybe some nominal growth we talked about on some of our conference calls. I'll come back to that in a few moments.
Very stable, long term customers that think about things in the long term. They sign long term contracts and they also reward high performance, high value in an equivalent way to North America. So now how we compete. This is critical in a business which is very, very competitive. We compete through our scale.
On this slide, we're referring to our systems. So whether it's our back office systems here in Calgary and Houston or our facilities in Nisku in Houston where we support the rigs or our infrastructure of field superintendents and rig managers that run those rigs, Scale is a huge enabler for the land drilling business. These are large expensive assets that require a lot of people leveraging that scale is critical. So I'll speak a bit more about that in a moment. Training and developing the crews to have the preeminent cruise industry is also a competitive advantage component.
I'll speak more about that. And of course, the rig quality itself is important. But we think all three together create a unique combination of value that will help us drive those strong day rates and stronger returns I mentioned earlier. So on systems and scale, we've just tried to put together a slide to give you some sense or some perspective on how we generate that value. But certainly having a IT platform, which is now leading edge.
We've just implemented and started a brand new IT platform company wide. It's a cloud based system. It's SAP based, allows us to transmit data from the rigs on a real time basis, improve our decision making, improve our cost management and drive down cost. We started that project a year ago, went live on April 2 and it's running. There have been no shutdowns, no breakages in service.
Every paycheck was issued and a little running joke in the company is I was paid last to make sure we paid everybody else first. I think the reverse happened at the federal government level. But I got paid, so I'm really happy with that because everybody else got paid and paid accurately. And we're tracking rig activity accurately and better than ever before. So really happy with the new IT infrastructure and we've got some of our team members here that helped us put that together.
Just want to recognize them and thank them for their work. I commented quickly about our technical support centers in Houston and Nisku. Those are multi capable facilities, but one of the most important elements of those centers are the training ability, which I'll speak to in a few more minutes. But we do all of our own asset maintenance. We strip down and rebuild Caterpillar engines, strip down, rebuild mud pumps, top drives to factory spec.
So it's all vertically integrated, lowering our cost, controlling our quality and controlling our ability to deploy rigs quickly and aggressively anywhere we need to. And then we move on to things like our supply chain management, how we supply the rigs through our own supply stores. We don't rely on the typical oilfield infrastructure of remote supply stores. We have central bases in Nisku or Edmonton and Houston that supply all of our rigs, both internationally and domestically, lowering our cost, managing our quality and particularly leveraging our scale across the business. So now moving on to the people portion and it's interesting.
If you listen to the oil services sector in Calgary, in Houston, in Oklahoma City or Tulsa or in Midland, the number one most common complaint is how hard it is to find good people or how hard it is to staff. Except you'll never hear Precision say that. We've decided to make staffing, training and development a core competency. And we just throw some numbers up here, give some sense of the scope and scale that we operate under. But in 2017, our HR team processed 36,000 job applications.
I'm pretty certain that's GE level type numbers for a well service for a small drilling contractor relative to GE. 36,000 job applications, we sorted through those and interviewed either by telephone or in person about 17,000 people. We actually brought in the door and ran through our orientation program about 4,000 people and we retained about 2,000 of those. And we staffed up a rig count in mid-twenty sixteen of about 28 to 30 rigs running in Precision globally at spring breakup, all the way to 150 rigs running the following winter without a single operational hiccup. So I really view that our ability to staff and support our rigs with field staff is a core competency of precision, something we're best in class at.
But it goes beyond just recruiting. It goes beyond once we get them into our system, managing the training, their development and their careers. And we manage them at the rig level until they become rig managers and they manage the corporate level. Their career path can flow them right straight through the Senior VP of Operations if they have the skill set and the work ethic and the values that Precision cherishes. But through our training, through our development, through our competency programs, we manage that employee workforce today of about 6,500 people for their careers through Precision.
And we'd like to say that every rig manager on a Precision rig was trained as a driller on Precision. Every driller was trained as a forehand. And for that matter, every senior VP of Operations is trained as a driller. So that our key operating people have come through our system from day one through to ultimate career positions. And then finally, the quality of the rigs themselves.
So there's no question that we think we have an excellent rig. We've designed the rig to be highly mobile, to be highly expandable, highly convertible. The rigs are designed so we can add on software and just plug it in and play. We can slide in a third pump with a fourth generator. We can do those kinds of upgrades that are needed today for long range horizontal drilling because we've built 120 new rigs over the last five or six years.
We built them with a mine to expansion and we built them to be easy to upgrade. So we have extremely young fleet relative to the all of the other global drillers, particularly North American drillers, half of our fleet less than six years old. And the balance of the fleet upgraded and reconfigured to meet that leading edge spec. There's a chart on the right on this slide, Slide nine if you're on the webcast, that shows a number of bars, dark green bar and a bunch of light gray bars. Those are twenty eighteen activity levels, utilization levels or activity levels relative to twenty fourteen peaks.
So we're showing there the precision is 72% of its 2014 peak. On the far right, we're showing the industry is about 48%. So right before the industry, one other U. S. Driller is matching us on recovery against the 2014 peak.
But for a company which is the number four driller in The U. S. To be tied for number one in market share growth going forward, we think that demonstrates or is a good indication of the value of our fleet, our people and our scale in The U. S. Validation.
So I did talk about the rig technology. Won't spend too much time. Most of the technology we've been dealing with for the past half dozen years have been around making the rig bigger, stronger, faster. So bigger adding more mud pumps on, stronger increasing the racking capacity to handle more pipe. So we can drill longer reach horizontal wells and faster adding on pad walking systems.
I think this is a good slide because it shows you I've lost my presentation. There we go. Very good. On this drawing in the middle, you can see the mast and the drilling module on the right hand side of the slide, can see the drilling support complex. In between, you can see a little green chain of components.
That's the utility corridor where you can think about it like an extension cord between this utility complex, the drilling module. That all of our rigs are designed with that feature. So you can just add in the extension cord, utility corridor and make the rig become a pad walking rig. And that's very low cost to convert the rig to pad walking. If you look at this drilling module, if you look closely in the corners on the bottom, you can see little yellow kind of orangey little attachments.
Look here, there and there. Each of those, there's four per drilling module. Those are the walking feet that allow the rig to walk around location. This makes the rig faster. On a pad application, we can walk this rig with all the drill pipe at the mast in less than forty five minutes well to well.
So we can complete a well, complete the well drilling, pull out of the well, put the pipe back, leave the pipe in the derrick, move to the next well and be back drilling within forty five minutes. Remarkable mobility speed. We can then take that rig and move it from that pad to the next pad with trucks in less than four days for a larger rig, less than two days for a smaller rig. So amazing speed and mobility. And most of our upgrades over the past few years have been driven around making the rig bigger, stronger, faster.
So now we're moving into the next stage and that's automated. So if you've been to a rig, you'll know there's a driller's cabin. You'll know that in the driller's cabin, it's a glass room with a driller. He's got anywhere from four to eight screens in front. He's got joysticks and controls.
He's controlling three mud pumps. He's controlling a top drive of draw works. He's controlling charge pumps for the mud pumps. He's controlling the position of the bit. He's controlling about 30 different functions simultaneously.
And when he's drilling ahead, he's doing all of this while trying to watch over his crew. Now, the fact of matter is most of what he does is completely repetitive. And the analogy you can drive to is like parallel parking a car. And I'll take this analogy kind of down the trail a little ways. Parallel parking of cars are fairly complex function.
You've got to control the gas pedal, the brake, you've got control the steering wheel, got to be looking all around all the time. You'll be shifting into reverse, back in the car and watching the curves. It's a complex operation. You had to parallel park a car 300 times a day, it would make more sense to have a software button you push and the car just parallel parks. You can watch what's going on.
It does create value, puts the car in a safe place. But the fact is, it's not a very smart operation. So what we're doing with the driller is kind of the same thing, taking all those repetitive things he does that as a group create value for each one of the steps, ramping up the mud pumps or ramping down the mud pumps where you're trying to watch the crew in itself isn't a very smart operation. If we can automate that and put that in a sequence of steps, so the driller can sit back and watch the operation, he can create more value by ensuring that the crew are doing the right things, the process is working the way it's supposed to work and the rig can become more consistent, more predictable, more repeatable and we can lower the cost. We started this in 2016.
We ran beta testing through most of 2017 and moving into full commercialization this year. We have 23 rigs equipped, including both of our training rigs in NISQ and in Houston trained equipped with the software. It's really cool. We bring out a stainless steel box with some switches inside, put it in the doghouse, we plug it in to the rig and we configure it. And within twelve hours, that rig becomes an automated rig.
In fact, the crew training and the driller training to get the system running is less than a couple of days. So really pleased with this technology. It's creating real value. We're finding customer high customer interest and good customer adoption. Now we do know that customers adopt technology as industry at a very careful measured pace.
So we expect this to grow this year hopefully 10 rigs and next year 10 to 20 rigs and kind of forward growth in the next several years at the same pace. But this platform gives us more power. On this platform, we can add in additional capabilities. We could add in a customer specific energy program for measuring energy on a bit. We can add in programs to measure the life of a wireline.
We can add in programs to optimize generator fuel consumption. And we're developing those applications right now. We have several applications very close to field ready and we'll be charging revenue for those applications. We think that besides the efficiency gains, we can begin adding on more capabilities to the system and we can see very simply a world where there could be anywhere from two to eight applications running on a given rig in just a few years. So again, creating new revenue streams for us and building out our competitive advantage.
And where this really comes to play is that there's 120 new build rigs, 186 of those are AC high spec rigs, same platform, same hardware, same software. So it means that as we bring out automation, the standardization fits, everything connects and we don't have to go through any field debugging or any field troubleshooting to make this work. It'll be a plug and play application for us down the road. I'm sure that a experienced driller can probably beat the system if he just focuses on speed. There's no question.
I'm also sure that a really good driver can beat an automated driving system if you just focus on speed. But if your entire day, twelve hours a day for twenty days on is focused on speed, it means you're not focusing on the rest of the operation. So I don't think this is just about being faster than a good driller. It's about allowing that driller to be overseeing a process rather than being focused on speed. I think it's about providing consistent, predictable, repeatable results that are as good in the range of the best drillers possible.
And we're proving that right now. We're proving that on a number of rigs. Our customers are seeing that the value is being created. We have no doubt this is going to deliver real value and no doubt that we'll get revenue for this for our customers. So moving on to our second priority around financial performance, I've talked about our competitive advantage and how we create value.
Obviously getting paid for it is critically important. And I'll speak about our three markets first of all. So in The U. S, a comment that we are absolutely focused on market share growth and cash flow generation. We're investing upgrade capital in The U.
S. We're to be upgrading more of our rigs in The U. S. With time to continue to grow our market share in The U. S.
While we're at 72% of 2014, I'd love to be at 100% of 2014. And in a $70 to $75 WTI world, if the back end of the oil curve comes up, I think we have a shot of getting close to that range in 2018, 2019. So I do see potential for growth in The U. S. We are clearly viewed in every basin we play as play in as a leading provider of high performance services and a technology leader.
It's a little hard to be quite as bullish on Canada. And before the AGM started, talked to a couple of the local business reporters and asked me about pipeline progress today. And my understanding is the federal government's agreed to provide indemnification to the owners of the Trans Mountain pipeline or whoever should own it. So I think that's helpful. I think getting a pipeline built is important.
Certainly, there's a bottleneck in Canada both on gas and oil. And getting that bottleneck reduced, getting the differentials narrowed, so we're not taking a discount to WTI is really important for our customers. But until that happens, the growth opportunities for us in Canada will be limited. We enjoy very strong market shares in core markets right now like the Montney, the Duvernay heavy oil where we have strong leading positions. In fact, can tell you that our customers really don't want to see us have much stronger market shares.
They just there's a strong view that you need a strong player like Precision, but you also need competition to benchmark. So the opportunity to grow in Canada right now in this environment for us is quite limited. I think technology is going to help. And I think as the Montney and Duvernay and heavy oil continue to get exploited, our technology pieces on the rig probably do gain us some market share. But the answer is we're not focused on trying to grow market share in what currently is a flat market.
What we are focused on is generating free cash flow. And over the last couple of years, 20 if you look at 2017, if you look at analyst estimates in 2018, we're in the range of about $100,000,000 a year of free cash flow for Precision in Canada in a market that most people think is not worth investing in. So we're focusing on generating that free cash flow. We don't need to invest anything to get that Maintenance capital on the rigs, keep the rigs running, keep our people well trained, continue to keep our competitive advantage alive and we'll generate free cash flow. And that will allow us to do things like pay down debt and look at other markets.
Our international markets are a little bit similar in that they are very stable. Our market share position is nowhere near as large, but we have a meaningful position to Kuwait in a small but relevant position in Saudi Arabia and believe that we can potentially grow our position in Saudi Arabia with existing assets by redeploying some of our idle rigs in Kurdistan and in Saudi back to operation in Saudi Arabia. And there's a potential for new build opportunities in Kuwait. We've been aggressively bidding opportunities in Kuwait over the past couple of years. We expect probably one of those comes to fruition later this year.
And we think there's a chance to increase our footprint in Kuwait by probably one rig going from five to six rigs. It's a very, very good business for us. We operate five rigs that have all the same spec, all the same hardware, same software. Four of those are 3,000 horsepower rigs, one is a 1,500 horsepower rig. But from a hardware software standpoint, they're identical.
Our team has done a great job driving our costs down, getting our mechanical uptime where it needs to be and really helping our operations there. All of this leads to very good cash flow visibility, very stable revenue generation going forward, contract book, which is beginning to grow finally. It's growing number one because customers want to lock in the best rigs. And number two, because customers are rid of a price inflation right now. So if we can find that sweet spot getting a day rate for the rig that's substantially above our cost of capital and a customer wants to lock in for a year or two, we're happy to lock those rigs in and lock in hedge our cash flows.
Certainly, we've seen that accelerate through late twenty seventeen into the 2018. Our well service business, as I mentioned earlier, is primarily a Canadian business. Most of you will know we made some management changes early this year. We've renewed focus on that business. Our intent here is to make sure that we've got an absolutely efficient organization with a real focus on customers and trying to return that sector to at least a stronger cash flow position that's been running in the last few years.
We do know it's oversupplied. We do know it's a highly fractured business. But we also know that Precision does a very good job and has excellent assets and really good people. And being paid appropriately for that is very important. Our team has worked hard to work with customers to increase rates back to a level of sustainability, getting cash flows above depreciation, which is essential.
The industry has not been operating there for the last several years. We think we're getting there now. We think our customers understand the risks of running rigs that are being underinvested in. So we think Precision has a strong competitive position as we will invest in our rigs to keep them safe, secure and meeting standards. Couple of comments here, know, It's interesting.
Oil service investors often doubt the cash flows of these businesses through the cycle. For precision drilling, our margins never got below 24%. Our cash EBITDA margins never got below 24% through the trough of the cycle. Part of that covered by long term contracts, but also covered by a variable cost operating model and aggressive cost cutting at a downturn. And now we're seeing margins trend upwards.
If you look at Q1 twenty eighteen versus Q1 twenty seventeen, Q1 twenty seventeen had more of the legacy contracts and yet we're still trending margins higher. Every rig we repriced during the first quarter in The U. S. Was repriced at a higher day within the previous contract. Whether that was a one month contract or a one year contract, the prices were moving upwards, not downwards.
This business has excellent fixed cost leverage. We talked a lot about our reductions in G and A and a lot of people in Precision that are here in the are bearing some of that on their shoulders right now. But I'll tell you we're committed to keep those reductions in place. We're committed to leverage this company up to maybe 150 operating rigs from today's count of around 100 rigs without any increases to G and A. We demonstrated that through the first quarter and through part of last year, we'll demonstrate that going forward.
So finally, going back to our focus on reducing debt. With very tight guidelines on capital spending. Majority of our capital is going to maintenance on the active rigs. If activity goes up, capital spending will go up. But if activity goes up, our EBITDA goes up.
If activity were to come down, maintenance spending comes down with that activity and the spending would go down. That's the left hand side that includes our upgrade to our ERP. On the right hand side, the $45,000,000 is our upgrade and expansion capital. We'll spend that money if we have a contract. The customer signs a contract and that contract covers the investment, we'll spend that money.
If we don't get the contract, we won't spend the money. So very self governing system, but we think that spending roughly flat with last year along with the stable contracts we have in The U. S. And international does allow us free cash flow. We're starting with a very strong liquidity position, but we're targeting our '20 21 maturities over the next three years to pay those down and have those debt maturity paid off well before it becomes due.
So I'll just circle back to the waste recreates or older value and that's through a high performance rig fleet staffed by well trained, excellent, well measured crews, focused on market share growth and margin growth, driving financial performance, using that financial performance to pay down debt and invest very carefully in the right investments. On that note, I'll open it for questions. Pretty quiet room. All right, we're hearing no questions. We'll close the presentation out.
I'll be lingering around the room if somebody wants to come up and ask me questions on a one on one basis. But thank you very much. And I guess we could end the webcast.
Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect. Everyone have a great day. Good