​Precision Drilling boosts capital budget by 14 per cent on positive Q2 results

Precision Drilling is boosting its planned capital spending to $138 million this year, up from $119 million reported previously. The company says this is based on North American activity strength and higher day rates in its international drilling division.

Precision’s total revenue in the second quarter jumped 68 per cent to $276 million from $164 million a year ago.

The new budget includes $13 million in expansion capital, $71 million in sustaining and infrastructure spending and $54 million to upgrade existing rigs.

Part of that 2017 capital program will upgrade the company’s enterprise resource planning system in order to increase operating efficiency, improving fixed-cost leverage and to better handle increased data flow.

"Precision continued to experience strengthening customer demand during the second quarter despite the increased uncertainty and volatility in commodity prices. Demand for our Pad Walking Super Triple rigs remains strong in all of our North American markets," said Kevin Neveu, Precision’s chief executive, in a statement.

In Canada, Precision reported a 120 per cent jump in its Q2 drilling rig utilization days while, in the United States, the increase was 143 per cent.

Internationally Precision’s rates rose 14 per cent, compared to last year’s period. The company is actively bidding on work for its four idle rigs in the two core markets of Kuwait and Saudi Arabia, as well as select new operating areas.

"Our international operations continue to perform well, with eight active rigs in the Middle East and no contract rollovers in 2017,” Neveu said.

Revenue in Precision’s contract drilling business and in its completion and production services unit rose 67 and 76 per cent, respectively, over comparable 2016 levels, the company said.

Precision noted stronger Canadian natural gas and liquids drilling tied to Deep Basin activity in northwestern Alberta and northeastern British Columbia.

In the U.S., the trend towards oil-focused drilling continues.

To date, about 53 per cent of the Canadian industry’s active rigs are targeting oil, while 80 per cent of the U.S. industry’s active rigs are targeting oil. This compares to 45 per cent in Canada and 80 per cent in the U.S. targeting oil in last year’s quarter, according to Precision.

Despite the improved results, Precision incurred a second quarter net loss of $36 million ($0.12 per share), compared to a net loss of $58 million ($0.20 per share) in the same quarter last year.

“We remain focused on our three strategic objectives for 2017, centered on free cash flow generation and debt reduction, fixed cost leverage and the commercialization of rig automation and efficiency driven technologies,” Neveu said.

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