Precision Drilling says it has reached its highest US market share to date and is reporting 14 per cent higher activity in the second quarter of this year compared to the same period in 2017. Company photo.
Precision Drilling cites strong North American growth for results
In its second quarter unaudited financial results, Precision Drilling reported 14 per cent higher activity in this quarter compared to Q2 2017, mostly due to the Calgary-based firm’s increased US contract drilling business.
Precision’s President and CEO Kevin Neveu said “Precision’s strong second quarter results were driven by continued growth in North American activity, having achieved our highest U.S. market share to date”.
“We captured higher day rates and margins in both markets,” said Neveu.
Q2 revenue was $331 million, up by 14 per cent over the second quarter last year. The company attributes rising US contract drilling activity business for the increase. Compared to 2017 Q2, drilling rig utilization days rose by 24 per cent in the US and 7 per cent in Canada and remained consistent internationally.
“We attribute our market share gains and sequential rate increases to customers’ intense focus on capital efficiency which leads them to contract the best performing and most efficient drilling rigs and crews, lowering total well-pad cost,” said Neveu.
In the US, Precision activated eight rigs, and the company currently has 78 rigs running with visibility for four to six additional activations in the coming weeks.
Meanwhile in Canada, despite flat year-over-year customer spending, Precision has 60 rigs active, surpassing last year’s third quarter peak. “We expect Precision’s year-over-year growth in activity to continue through the third quarter,” added Neveu.
Revenue from contract drilling services rose over Q2 2017 by 16 per cent, and revenue in completion and production services dropped by 6 per cent.
This quarter, operating loss was $26 million compared to an operating loss of $39 million in Q2 2017, mostly due to rising US contract drilling and lower depreciation expenses.
As well in the second quarter, Precision Drilling redeemed US$50 million, and repurchased and cancelled US$8 million of the company’s previously outstanding unsecured senior notes incurring a loss of $1 million.
Moving forward, the company says its strategic priorities for 2018 include reducing debt, offering competitive advantages and enhancing financial performance.
In the first half of 2018, Precision generated $154 million in funds provided by operations, an $84 million increase over the prior year comparative period.
In the second quarter, the company cut its debt by $75 million through a partial redemption of its 2021 unsecured senior notes and open market debt repurchases of the company’s 2021 and 2024 notes.
“We communicated a firm goal to reduce debt by $75 to $125 million in 2018 and have successfully achieved the low end of that range in the first half of this year. In addition, we ended the second quarter with $95 million of cash on the balance sheet”, the company said in a press release.
The company says its competitive advantage was boosted by deploying process automation controls (PAC), directional guidance systems (DGS) and drilling performance apps. Directional guidance systems have cut the number of crew members needed to complete a job.
“Customer adoption of PAC is strengthening and we have completed several analytical field case studies demonstrating the system’s ability to consistently and repeatedly deliver high quality wells while improving safety, performance and efficiency of operations,” said Neveu.
Precision says it will be running a total of 31 systems by year end and will continue with full scale deployment and commercialization.
As well, in the first half of this year, overall utilization days are 13 per cent higher than in Q2 2017 and average operating margins in the contract drilling business are up by 32 per cent in the US, 12 per cent internationally and 4 per cent in Canada.
“Our updated 2018 capital plan is approximately $135 million”, said Neveu.
He added that “With $95 million of cash on the balance sheet coupled with cash flow in the second half of the year I fully expect to fund growth and upgrade opportunities while reserving capacity to retire more of our debt”.