CALGARY - Precision Drilling Corp. is anticipating a significant increase in activity this winter, thanks to the most positive backdrop the company has experienced for its business in “more than a decade,'' according to chief executive Kevin Neveu.
The Calgary-based company, which is the largest drilling rig contractor in the country, laid out its bullish projections for 2022 during its third quarter earnings call Tuesday. Precision - which said it lost $38 million in its latest quarter as drilling ramped up and revenue rose more than 50 per cent compared with a year ago - said that at current commodity prices it expects higher demand for its services and improved fleet utilization going forward as customers look to maintain and replenish production levels.
“Looking at our core U.S. and Canadian markets, the cash-generating capabilities of the oil and gas producers will continue to be strong - much stronger than was expected even just a few months ago,'' Neveu told analysts.
Precision said on average it had 51 active drilling rigs in Canada in the third quarter of 2021, nearly three times what it had in the same period the year before and the highest third-quarter utilization since 2018.
Neveu said that's also 21 per cent higher than the company's rig count in the first quarter of this year - surprising, given that the first quarter is typically Precision's busiest time in Canada.
As of this week, Neveu said Precision has 61 active rigs in Canada, and that's leading to high expectations heading into this winter's drilling season.
“We expect Q1 activity for the industry could exceed 2019 levels, suggesting peak industry demand in the 200 to 250 to 300 rig range,'' Neveu said. “I would not be surprised to see even higher demand if operators front-load 2021 spending during the winter season.''
However, Neveu acknowledged that labour shortages are a serious issue affecting the drilling and services sector right now that could actually limit the number of rigs available to customers.
“Generally in every previous rebound that has been this sharp or even sharper, the drillers have been successful staffing rigs,'' Neveu said. “But boy, I'll tell you, it's a big challenge right now.''
Neveu added Precision has been implementing everything from referral bonuses to incentives for its recruiting team tied to activity levels for the industry in order to address staffing challenges.
In the U.S., Precision had on average 41 active drilling rigs in the third quarter, up from 21 a year earlier. Its international drilling business averaged six rigs, the same as a year ago.
The company said its revenue during the quarter totalled $253.8 million in the company's third quarter, up from $164.8 million a year earlier.
It attributed its net loss - which amounted to $2.86 per diluted share for the year ended Sept. 30, compared with a loss of $28.5 million or $2.08 per diluted share in the same quarter last year - due to increased share-based compensation charges and lower program assistance from the Canada Emergency Wage Subsidy.
Revenue per rig utilization day also declined in both the U.S. and Canada, which Precision attributed to industry wage increases, higher repairs and maintenance, and rig startup costs.
Precision Drilling shares closed at $56.17 on Thursday, down $4.33 or 7.16 per cent.