Strong demand in U.S. drilling markets helped Precision Drilling Corp. post third-quarter revenue gains on Thursday despite a much slower recovery in Canadian activity.
Drilling rig utilization days in the quarter compared with a year ago increased 25 per cent in the U.S. and seven per cent in Canada, the Calgary-based company reported.
Competitive conditions in a key Alberta-B.C. border oilfield improved in the quarter in part because some of those rigs have been moved to better markets in the U.S., said Precision CEO Kevin Neveu on a conference call.
“The excess rig supply in the Deep Basin has diminished as we estimate that the industry has mobilized approximately 20 rigs from Canada to the United States, including one Canadian Super Triple we redeployed to Pennsylvania,” he said.
Precision said it expects demand for rigs in Canada this winter to be similar to the muted demand of last winter despite pipeline constraints that have been blamed for increased price discounts for Canadian light and heavy crude oil and natural gas versus American benchmarks.
“Early indications suggest a sharp ramp-up in early January and while final budgets may not be set, we expect Q1 activities should mirror last winter,” Neveu said.
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Meanwhile, in the United States, Precision currently has 80 rigs working, “including seven rigs that have not worked since 2015,” Neveu reported, adding it’s Precision’s highest U.S. utilization number since the 2014 oilpatch downturn began.
In a report, analysts with Tudor Pickering Holt & Co. said Precision’s adjusted earnings missed their expectations but they were encouraged by its announcement that it expects to achieve the upper end of debt reduction targets this year.
The company reported revenue in the third quarter of $382 million, up 21.6 per cent from $314 million, primarily due to higher activity and higher average day rates in its U.S. contract drilling business.
Precision reported a loss of $31 million or 10 cents per share in the third quarter compared with a loss of $26 million or nine cents in the year-earlier period.
Earlier this month, Precision Drilling announced a friendly deal to acquire Trinidad Drilling Ltd. that it valued at roughly $1 billion, including the assumption of about $477 million in debt.
Precision’s shares closed at $3.25, down 13 cents or 3.85 per cent in Thursday trading on the Toronto Stock Exchange.
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