Precision Drilling reports higher net earnings, boosts revenues
Canadian dollar coins, or Loonies, are shown in Ottawa on Friday Oct. 10, 2008. (Sean Kilpatrick / THE CANADIAN PRESS)
Lauren Krugel, The Canadian Press
Published Monday, April 28, 2014 9:06AM EDT
Last Updated Monday, April 28, 2014 12:55PM EDT
CALGARY -- Precision Drilling Corp. is bumping up this year's capital spending by nearly a third in response to strong customer demand for its high-tech drilling equipment.
The Calgary-based oil and gas service firm (TSX:PD) said Monday its budget this year will be $833 million, up from its previous forecast of $634 million.
The additional spending will go toward four additional new rigs to be delivered in the United States in the second half of 2014 and five more to be delivered in early 2015.
In total, Precision Drilling plans to deliver 16 new rigs to customers this year.
Since 2009, Precision has been turning a greater focus to providing equipment that's geared toward tapping technically challenging reservoirs. Its so-called "Super Series" fleet consists of "highly efficient, highly mobile" rigs that are designed to drill wells horizontally.
"Over the past five years, we have transformed our fleet and today we have Super Series rigs operating in virtually every unconventional basin in North America. With today's announcement of an additional nine new-build rigs, eight of which have firm customer commitments, we expect to have 222 Super Series rigs operating by early 2015 and an increased capacity to deliver two new-build rigs per month to start 2015," said CEO Kevin Neveu in a release.
"The cornerstone to Precision's build program remains our strict fiscal discipline insuring we achieve contracts from customers that meet our targets before a rig is completed for delivery."
BMO Capital Markets analyst Michael Mazar said the new builds send a positive signal.
"These guys just don't build rigs willy nilly. They only will build to the extent that there's customer demand," he said.
"It's non-speculative building, so they are building into an already established customer that is saying 'please go build me a rig.' The reason that distinction is important is because the mere fact that they're building them indicates that demand is strong."
Also Monday, Precision posted first-quarter net earnings of $102 million, up from $93 million a year earlier.
The profits amounted to 35 cents per share, a penny shy of the average analyst estimate compiled by Thomson Reuters, but two cents higher than a year ago.
The company said revenue was 13 per cent higher at $672 million, mainly due to higher pricing and drilling activity in Canada, the United States and internationally.
Precision Drilling said Canada has been experiencing an increase in drilling for natural gas and gas liquids in northwestern Alberta and northeastern British Columbia -- resources that could potentially be exported to energy-hungry Asian countries through multibillion-dollar liquefied natural gas terminals on the West Coast.
"In Canada, our drilling activity during the first quarter was slightly higher than last year, and was supported by growing customer demand throughout the winter drilling season," said Neveu.
"While challenges must still be overcome to fully realize the Canadian LNG development potential, we remain very encouraged by the continued support demonstrated by the key stakeholders in this very important Canadian resource. We believe additional new-build and upgrade opportunities will continue to emerge as these projects gather momentum."
Precision shares were up nine cents to $13.93 in afternoon trading on the Toronto Stock Exchange. They stock shot up about three per cent earlier in the day.