Precision Drilling says higher oil prices working to its benefit as business picks up

Rig clouds Source: Precision Drilling

The head of Precision Drilling Corp. says higher oil and gas prices are boosting business, as the company works to reduce debt and climb back into the black after its 11th straight quarter of net losses.

“Customer inquiries and bid activity point to increasing activity in both the U.S. and Canada, reflecting higher commodity prices,'' chief executive Kevin Neveu said Thursday in a release.

A revenue rise of 46 per cent year over year for the quarter stemmed from increased drilling and service rig activity, partially offset by lower average revenue rates in the U.S. and internationally, the company said.

The Calgary-based outfit, which is the largest drilling rig contractor in the country, has 52 rigs active in the United States, a 58 per cent increase from last February and an 18 per cent boost since September.

Precision Drilling runs 66 rigs in Canada at the moment and expects demand to stay high through early March, ahead of “better than expected bookings through spring break-up'' and into the second half of 2022, Neveu told analysts on a conference call.

The company also operates six rigs beyond the continent – three in Kuwait and three in Saudi Arabia – as it bids on rig tenders abroad “which we expect will result in awards later this year,” he added.

The pandemic has posed a periodic obstacle to resources projects in parts of the world.

``It seems like every time they make a projection, about four weeks later a new variant pops up and slows down decision making. So I'm really reluctant to try to predict what's going to happen in Kuwait,'' Neveu said.

Staffing is another issue. Drilling jobs typically pay better overtime, attracting workers. But well servicing amounts to call-up work – “it's day-to-day work and it's been tougher to recruit” – he said, resulting in limited activity.

Drilling rig utilization days jumped 74 per cent in the U.S. and 87 per cent in Canada, the company said. Service rig operating hours rose 21 per cent compared with a year earlier.

Under its recent capital allocation framework, Precision Drilling expects to reach $1 billion of debt reduction and leverage levels below 1.5 times by the end of 2025, building on debt reduction of $665 million since 2018.

It lost $27.3 million in the fourth quarter of 2021, the smallest loss of any period since March 2020. The loss compared with one of $37.5 million a year earlier.

Revenue totalled $295.2 million in the quarter ended Dec. 31, versus $201.7 million in the same period the year before.

The company said the loss last quarter amounted to $2.05 per diluted share compared with a loss of $2.74 per diluted share in the fourth quarter of 2020, beating analyst expectations of losses well above $3 per share, according to financial data firm Refinitiv.

© 2022 The Canadian Press

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