Precision Drilling says that Canadian rig activity is down substantially as extreme price volatility and widened differentials weigh heavily on oil and gas producer planning.
Winter drilling activity is trending down 30 percent from last year, Precision said in its fourth quarter results announcement on Thursday. The company currently has 58 rigs operating in Canada, down from 85 in January 2018, 90 in January 2017 and 57 in January 2016.
“[We] do not expect activity to strengthen until the second half of the year as oil inventories decline and takeaway capacity improves,” Precision said in a statement.
“Canadian differentials have narrowed substantially following the Government of Alberta’s mandatory production curtailment program, driving improved cash flows for many of our customers and potentially strengthening the outlook for later in the year.”
Meanwhile, Precision has 81 rigs operating in the U.S. market compared to 65 at this time last year, representing 25 percent year-over-year growth.
“While our U.S. activity is steady, our customers are still cautiously assessing 2019 spending plans,” the company said.
“Precision has signed eight term contracts year-to-date, in addition to 11 in the fourth quarter of 2018, indicative of continued strength in high spec rig demand. Over the last year we have increased our AC Super Triple 1500 rig fleet in the U.S. by five, including two rigs redeployed from Canada and three new builds largely assembled from spare components and vendor credits.”
Precision recorded a net loss of $198 million for Q4/18, compared to a net loss of $47 million for Q4/17.