Precision Drilling is exiting Mexico with the sale of five idle drilling rigs and ancillary equipment for US$48 million (C$64 million).
The sale gives the company headway on its 2019 debt reduction target, GMP FirstEnergy analyst Ian Gillies noted on Monday.
The company had net debt of $1.616 billion at end of Q4/2019.
“In January 2019, Precision announced a 2019 debt reduction range of $100 million to $150 million, and increased its total debt reduction guidance to $400-$600 million by 2021. Following the receipt and subsequent redemption of the full $64 million of debt, Precision has $36 million to 86 million remaining on its debt reduction plan for 2019,” Gillies wrote in a research note.
“Recall, Precision has put 22 Canadian and U.S. rigs up for sale, which we estimate could garner proceeds of $53 million. Furthermore, our current forecasts have Precision generating $113 million of free cash flow in 2019. Therefore, Precision should easily achieve its 2019 debt reduction guidance or accelerate it if a rig sale occurs.”
With the completion of its new-build rig program and upgrades of existing rigs, Precision’s fleet consisted of 236 Super Series rigs and 22 rigs identified and held for sale as at December 31, 2018.