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Printed Jul 31, 2024 • 2 minute learn
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CALGARY — Canada’s largest drilling rig contracting firm has seen such stunning development in buyer demand after the opening of the Trans Mountain pipeline growth that its CEO believes a rig scarcity may very well be doable by subsequent 12 months.
Precision Drilling Corp. CEO Kevin Neveu stated on a convention name Wednesday the corporate noticed its Canadian exercise enhance 18 per cent within the second quarter, at the same time as drilling exercise within the U.S. slowed.
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Neveu stated he attributes the expansion to Canadian heavy oil producers feeling extra assured due to the Trans Mountain pipeline growth undertaking, which began up within the spring.
“We’ve been considerably shocked by surging buyer demand in heavy oil following the TMX opening,” Neveu stated, including he underestimated how a lot drilling demand in Western Canada can be unlocked by the brand new pipeline.
“Our Canadian companies — each drilling and properly servicing _ are performing on the highest degree in over a decade.”
The opening of the Trans Mountain pipeline growth has given Canadian oil firms extra export entry to worldwide markets and has helped enhance the value of Western Canadian heavy oil.
Neveu stated a lot of Precision’s prospects are producing the very best returns on their oil that they’ve seen in a few years, and are feeling bullish sufficient to signal long-term rig contracts for brand new drilling packages.
“The Canadian business has been actually cautious over the previous decade. They’ve been by heck and again with commodity costs and pipeline constraints, they usually’re lastly getting a little bit of room to run proper now,” he stated.
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At the moment, Precision Drilling has 74 rigs working in Canada, which is greater than 25 per cent larger than final 12 months at the moment.
Within the second quarter of 2024, the corporate earned income of $429.2 million — up from $425.6 million throughout the identical quarter final 12 months — due to larger exercise ranges and pricing in each Canada and internationally, which helped offset decrease leads to the U.S.
The corporate noticed its U.S. rig rely common 36 drilling rigs within the second quarter in contrast with 51 for the second quarter of 2023. It attributed the decline south of the border to weak pure fuel costs and pending merger and acquisition transactions within the U.S. business.
Waiting for 2025, Neveu stated he expects Canadian drilling exercise to proceed to extend. Canada’s first liquefied pure fuel export terminal — the Shell-led LNG Canada facility at the moment nearing completion in Kitimat, B.C. — is anticipated to start operations subsequent 12 months and Neveu stated that may probably drive a contemporary increase in pure fuel drilling within the Montney area of northeast B.C. and northwest Alberta.
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“We may see our rig exercise development additional upwards in September and thru the autumn as our prospects put together for what appears to be like like a really busy 2025,” he stated.
“It’s conceivable that the market could also be a number of rigs brief. Current buyer contracting exercise, and notably the contract period prospects are looking for, appears to help the notion of a potential rig scarcity.”
Precision Drilling’s earnings for the second quarter declined 23 per cent year-over-year to $20.7 million, down from $26.9 million.
Earnings per diluted share have been $1.44, down from $1.63 final 12 months.
This report by The Canadian Press was first revealed July 31, 2024.
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