In another sign of how falling commodity prices have warped the oil and gas industry, Trinidad Drilling Ltd. says it generated more revenue from standby fees for rigs not in use and cancelling client contracts than what it actually does: drilling.
The Calgary-based company (TSX:TDG) reported revenue of $95 million in the second quarter, slightly less than its revenue for the same period last year.
But the most recent quarter includes almost $50 million paid by clients to either terminate take-or-pay drilling contracts or through standby fees for Trinidad rigs they are not using. That compares to about $15 million in the same quarter in 2015.
The fees, which were about $10 million higher than analysts expected, boosted Trinidad’s adjusted income to $57 million, a 65 per cent increase from the same quarter last year.
Trinidad recorded a net loss of $16 million for the quarter ended June 30, compared with a net loss of $1.5 million in the same quarter of 2015, mainly due to higher depreciation expenses and a loss from its investment in a joint venture.
The company says there were signs in July that drilling activity will gradually improve but oil and gas price volatility remains a concern. Trinidad says only one in five of its 139 rigs, 72 of which are in Canada, are currently working.
The news comes as the western Canadian drilling rig count fell by two rigs to 125 this week, 94 fewer than last year at this time and 254 rigs fewer than the five-year average of 379 rigs, according to a report from RBC Dominion Securities.