Precision Drilling reports Q1 profit and revenue down from year ago

Precision Drilling log. (image: Precision Drilling)

CALGARY — The completion of the Trans Mountain pipeline expansion is leading to a boom in demand for drilling services, said Precision Drilling chief executive Kevin Neveu.

The contract driller is seeing demand exceed its expectations, he said on an earnings call Thursday, as the expansion of the crude oil pipeline to the West Coast approaches a May 1 start of commercial operations.

“Do we see customer interest increasing in anticipation of the Trans Mountain start up? The answer is resoundingly yes.”

The company has 48 rigs currently operating where last year it had 38, and expects demand to continue. It also expects a boost to well servicing contracts.

“We see this momentum continuing throughout the summer and exceeding our prior view on Canadian rig demand,” said Neveu.

The growth is helping offset a retreat in the U.S., where activity is more muted by weak natural gas prices and operator consolidation, he said.

The company reported 38 active drilling rigs in the U.S. for its first quarter compared with 60 for the first quarter of 2023.

In Canada, Precision averaged 73 active drilling rigs for the quarter, compared with 69 a year earlier.

The decline in U.S. activity helped lead its first-quarter profit to come in at $36.5 million, down from $95.8 million a year ago.

The company says the profit amounted to $2.53 per diluted share for the quarter ended March 31, down from $5.57 per diluted share the same time last year.

Revenue totalled $527.8 million, down from $558.6 million in the first quarter of 2023.

The company is focused on cost reductions, paying down debt and returning profits to shareholders, said Neveu.

Precision is also investing in automated rig technology that could mean future rises in demand won't lead as much to booms in employment.

The system has several more months ahead of field hardening before it's commercially ready, but so far it's working better than expected, said Neveu.

“We'll eliminate human work from the red zone on the drill rig floor and in the mast, while ensuring our customers safe, consistent, predictable and highly efficient rig floor performance.”

This report by The Canadian Press was first published April 25, 2024.