Strong growth in U.S. oil field activity made up for declines on the Canadian side of the border as Precision Drilling Corp. beat analyst expectations with first-quarter results posted Thursday.
The Calgary-based driller reported a 23-per-cent increase in activity in the United States compared with the same period of 2018, while its Canadian operations declined by 33 per cent, a trend that it said is continuing in the current quarter.
“Of note in the quarter, only 36 per cent of our company’s revenue was generated in Canada,” chief financial officer Carey Ford said on a conference call.
“This is the lowest percentage in the history of Precision, reflecting both the success of our investments outside of the Canadian market and the particularly weak industry activity experienced in Canada.”
The oil field services industry has been hit by lower producer spending plans this year, blamed on a shortage of investment capital, delays in building new pipelines and the current Alberta government production curtailments.
The industry relocated 16 Canadian rigs to the United States in 2018, up from six in 2017, and is continuing to send rigs south of the border this year. Two of the relocations have been Precision rigs.
Precision said Thursday it decided to save money this year by not paying to register 75 of its Canadian service rigs with industry associations because they were unlikely to be deployed. (Service rigs are smaller than drilling rigs and are used to complete, maintain and retire oil and gas wells after they are drilled.)
Precision said its current active U.S. drilling rig count of 80 rigs has remained steady from the end of 2018, despite slightly declining industry activity levels.
On the call, chief executive Kevin Neveu said he’s noticed improvements in Canadian customers’ mood since the United Conservative Party defeated the NDP government in the provincial election last week and that could result in an upswing in activity.
The new government, to be sworn in next week, has promised to lower corporate taxes, cancel the provincial carbon tax and remove the NDP’s cap on oil sands emissions.
“I think there is going to be a little better tone from our client base today than there might have been even just three weeks ago,” he said, adding better realized oil prices in the first quarter are also driving a more confident mood.
Precision reported net earnings of $25-million, or eight cents per diluted share, for the quarter ended March 31, compared with a loss of $18-million, or six cents, in the same quarter a year ago.
Revenue for the three-month period increased to $434-million, compared with $401-million.
Analysts on average had expected a loss of five cents a share and revenue of $409-million for the quarter, according to Thomson Reuters Eikon.
Precision’s earnings beat and its plan to retire $84-million in debt by the end of May were both impressive feats, Tudor Pickering Holt & Co. analysts said in a report.
During the quarter, Precision sold its five Mexico-based drilling rigs for US$48-million – excluding that sale and restructuring charges, it would have earned about $1-million, it said.