In the first quarter of 2024, the Precision Drilling revenue declined to $528 million from $559 million due to reduced U.S. drilling activity, while adjusted EBITDA also fell to $143 million from $203 million, impacted by higher share-based compensation charges.
Operational improvements were noted in Canadian and international markets, with increased rig activity and higher day rates, alongside significant cash flow improvements. The company plans to reduce debt significantly, return a substantial portion of free cash flow to shareholders, and capitalize on upcoming major projects like the Trans Mountain pipeline and LNG Canada to bolster future growth.
U.S. drilling Activity
U.S. drilling activity for Precision Drillingdecreased significantly in the first quarter of 2024 compared to the same period last year. Specifically, the average number of active drilling rigs dropped from 60 to 38. This decline in activity was attributed to weak natural gas prices and ongoing merger and acquisition activity in the sector. Despite the lower activity levels, the company remained focused on achieving profitable returns, and the average revenue per utilization day for U.S. operations saw a slight decrease from US$34,963 to US$32,867.
Natural Gas Prices
U.S. drilling activity to weak natural gas prices, among other factors such as merger and acquisition activity. It suggests that these lower natural gas prices are influencing the strategic decisions in the U.S. drilling sector, leading to a decrease in the number of active drilling rigs. However, the outlook remains somewhat positive with the expectation of improvement later in 2024, driven by strong oil prices and upcoming Gulf Coast LNG facilities, which could stimulate further natural gas drilling.
What About Canada
Drilling Activity: There was an increase for Precision Drilling in the number of active drilling rigs, from 69 in the first quarter of 2023 to 73 in the same period of 2024, representing a 6% growth. This increase comes despite a 6% decrease in industry activity overall.
Revenue Per Utilization Day: The revenue per utilization day for Canadian operations rose to $35,596 from $32,304 the previous year, indicating higher day rates and improved operational performance.
Future Projects and Demand: The article discusses the expected start-up of major projects like the Trans Mountain pipeline expansion and LNG Canada, which are anticipated to significantly boost demand for drilling services.
Outlook for Well Services: With the acquisition of CWC Energy Services, Canada’s position as a leading provider of high-quality well services was solidified, with expectations for increased activity and strong pricing due to regulatory spending requirements and the expansion projects mentioned above.
Overall, the outlook for Canada is very positive, with anticipated increases in drilling activity and service demand driven by significant infrastructural projects and regulatory developments.
