Precision Drilling Corp. is boosting its 2022 capital spending in anticipation of a continued strong run for the oilfield rig provider amid higher demand and surging prices for oil and natural gas.
The Calgary-based company said it will spend $125 million as the current market momentum is expected to continue in anticipation of higher activity and additional contracted rig upgrades.
Precision Drilling had said in February it anticipated spending $98 million this year.
The company said its first-quarter revenue increased nearly 50 per cent to $351.3 million, up from $236.5 million a year ago. U.S. and Canadian drilling activity increased by 56 and 48 per cent, respectively, and well service activity gained 10 per cent.
“Customer demand for our services in both the U.S. and Canada continues to grow with U.S. activity up 10 per cent sequentially and Canadian winter activity matching 2018 levels,” stated president and CEO Kevin Neveu in a news release.
“All indications point to the current market momentum continuing through 2022, driven by strong energy supply-demand fundamentals that have taken shape in the early post-pandemic recovery.”
A return of global energy demand is coming following years of upstream oil and natural gas underinvestment and sanctions imposed on Russian oil exports that have pushed up commodity prices.
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“At current commodity price levels, we anticipate higher demand for our services and improved fleet utilization as customers seek to maintain production levels and replenish inventories, as drilled but uncompleted wells have been depleted over the past several years,” Precision said.
The expected rise in North American industry activity this year is expected to drive higher day rates and necessitate customer funded rig upgrades.
Precision said it has 55 active rigs running in the U.S., while in Canada its active rigs peaked at 72 in the first quarter and it now has 33 active rigs compared with 20 this time last year.
“And we expect third quarter activity to exceed first quarter activity as our customers take advantage of strong commodity fundamentals.”
It also received five-year extensions on three rigs in Saudi Arabia and is participating in tenders to reactivate three idle rigs in Kuwait.
Despite the higher revenues, its net loss for the quarter ended March 31 also grew. It lost $43.8 million or $3.25 per diluted share compared with a loss of $36.1 million or $2.70 per diluted share in the first quarter of 2021.
The company said the elevated net loss comes amid an increase in share-based compensation expense.
Waqar Syed of ATB Capital Markets the results will be review positively after Precision’s shares have pulled back from recent highs over market concerns about margins.
“Moreover, we see a very strong outlook for the land drilling sector, which should help this premier driller,” he wrote in a report to clients.
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