Net loss widens for Calgary-based Precision Drilling

But revenue increased in the fourth quarter as the result of an unexpected rise in demand for rigs

Calgary-based Precision Drilling saw its revenue increase in the fourth quarter of 2018 but the company still registered a net loss.

In reporting its financial results on Thursday, Precision said revenue of $427 million was an increase of 23 per cent over the prior year comparative quarter, but a net loss of $198 million ($0.68 per share) compares to a net loss of $47 million ($0.16 per share) in the fourth quarter of 2017.

“Precision executed on its 2018 business plan and delivered operating and financial results far exceeding our expectations. This execution was clear in all key financial and operating metrics; delivering strong rig and crew operating and safety performance, diligent variable and fixed cost control, growth in U.S. market share and forging the path to commercializing our technology initiatives, all while strictly controlling our capital spending. Precision’s execution in 2018 resulted in better than expected cash flow, allowing us to accelerate our debt repayment plan well beyond our stated target range for the year, retiring $174 million of debt in 2018,” said Precision president and CEO Kevin Neveu in a statement.

Precision Drilling“In the fourth quarter, strong demand for our Super Series rigs and firm pricing in the U.S. combined with aggressive cost management in our Canadian businesses drove better than expected financial results. We enter 2019 with liquidity of over $800 million and remain firmly committed to our deleveraging plan, recently increasing our longer-term debt reduction target range by $100 million to $400 million to $600 million by the end of 2021.

“While customer sentiment has recently improved with firming WTI pricing, the extreme volatility and widened Canadian differentials experienced during the fourth quarter weighed heavily on our customers’ planning as we entered 2019. We see the effects sharply in Canada as winter drilling activity is trending down 30 per cent from last winter. In Canada, currently we have 58 rigs operating and do not expect activity to strengthen until the second half of the year as oil inventories decline and takeaway capacity improves. Canadian differentials have narrowed substantially following the Government of Alberta’s mandatory production curtailment program driving improved cash flows for many of our customers and potentially strengthening the outlook for later in the year. Despite near-term softness, our Canadian business is well positioned to generate strong cash flow through leveraging our scale with unmatched rig fleet quality and Precision’s high performance operations.”

The company said it had 81 rigs operating in the U.S., 16 more than this time last year, representing 25 per cent year-over-year growth.

For 2018, Precision had a net loss of $294.3 million compared with a net loss of $132 million in 2017.

– Mario Toneguzzi for Calgary’s Business

Precision Drilling

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