The completion of the Trans Mountain pipeline expansion is leading to a surge in demand for drilling services, according to Precision Drilling chief executive Kevin Neveu. As the crude oil pipeline nears a May 1 start of commercial operations, the company is experiencing customer interest that exceeds its expectations. Currently, Precision has 48 rigs in operation, up from 38 last year, and anticipates continued growth in demand as well as an increase in well servicing contracts. This positive momentum is expected to persist throughout the summer and surpass previous expectations for Canadian rig demand.
While activity in the U.S. market has declined due to weak natural gas prices and operator consolidation, Precision has seen strong performance in Canada. The company reported 73 active drilling rigs in Canada for the first quarter, compared to 69 a year earlier. However, the decrease in U.S. activity impacted the company’s first-quarter profit, which fell to $36.5 million from $95.8 million in the previous year. Earnings per diluted share also decreased from $5.57 to $2.53 for the quarter ended March 31, 2024.
Despite the decline in profit, Precision Drilling remains focused on cost reductions, debt repayment, and returning profits to shareholders. The company is also investing in automated rig technology that could potentially reduce the impact of future increases in demand on employment levels. Although the system is still undergoing field testing and refinement, Neveu stated that it is performing better than expected. The technology aims to eliminate human work from the drill rig floor and mast, ensuring safe, consistent, predictable, and highly efficient rig floor performance for customers.
In terms of financial performance, Precision Drilling’s revenue totaled $527.8 million for the first quarter of 2024, a slight decrease from $558.6 million in the same period last year. Despite this, the company’s strategic focus on efficiency and innovation is expected to support future growth and profitability. Neveu emphasized the importance of ongoing efforts to streamline operations and improve productivity, positioning the company for continued success in a dynamic market environment.
Overall, the completion of the Trans Mountain pipeline expansion has generated increased demand for drilling services, benefiting Precision Drilling with a boost in activity and revenue. While challenges persist in the U.S. market, the company’s strong performance in Canada, coupled with strategic initiatives to enhance efficiency and technology capabilities, bode well for its future prospects. With a commitment to operational excellence and financial discipline, Precision Drilling is well-positioned to capitalize on emerging opportunities in the energy sector and deliver value to its stakeholders in the coming years.
