Precision Drilling’s 2017 start shows sharp difference from 2016

By Luke Geiver | April 26, 2017

Precision Drilling Corp.'s rig activity levels have tripled from a year ago. The Canadian-based company is currently running 60 rigs in the U.S. and roughly 90 in Canada. In the first quarter, Precision activated 17 rigs in the U.S. “With three consecutive quarters of increased activity, all signs point to a strengthening recovery,” said Kevin Neveu, president and CEO. The company has been able to rehire more than 2,000 personnel in the past year.

The company’s ability to rehire is linked to the segment of the industry it is in, the company told investors when asked if stories of hiring difficulties have been overblown. Land drillers are typically the best at restaffing, Precision executives said, due to their ability to provide multiple months’ worth of work. Recruiting new hires is a function performed by everyone at Precision and represents the company’s largest volume of work.

Although Precision has activated more than 100 rigs in the past year, the company has seen lower day-rates for rigs operating in both Canada and the U.S. In the U.S., the daily rate for a Precision drilling rig averaged $19,972 for the first quarter. The cost to operate a U.S. rig in Q1 was roughly $14,682 daily. Directional drilling activity in Canada and the U.S. generated Precision roughly $13 million in Q1 compared to $8 million in Q1 2016.

In the Permian, Precision is running 27 rigs. In the SCOOP/STACK, Precision has 7 rigs with another 8 in the Eagle Ford. Throughout the Marcellus and the Bakken, there are two rigs running. And, in the Niobrara, Precision has 10 rigs in the field.

There are still 42 rigs remaining in the company’s fleet, many of which have not been used in the past two years and would require recertification and upgrades before going back into the field, which despite the cost of doing so, could be done quickly, Neveu said.

“There is no question the customer sentiment is substantially more constructive than at any point of the last 30 months,” Neveu said. Operators have Neveu’s team confident about the next few quarters despite a volatile oil price due to hedging. Many operators have hedged production to ensure cashflows.

Although the company doesn’t expect to begin building any new drilling rigs, it has set aside nearly $55 million for 2017 to perform upgrades to existing rigs. In May, Precision intends to hold a drilling rig demo for investors and customers. The demo will highlight the company’s efforts to integrate several new technology options on its best rigs. The company will showcase new directional drilling software, rig automation software and high-speed data links connecting downhole operations to the surface