Rising revenue spurs rehiring plans
Oil and gas companies are using more sand, more crews and paying higher prices to frack their wells across North America and those trends helped Calfrac Well Services Ltd. report higher revenues during a busy second quarter.
Calgary-based Calfrac shares rose nearly six per cent Thursday to close at $3.55 after the oilfield company announced it would increase capital spending 44 per cent to $65 million for the year, as its revenues and the number of fracking jobs it has completed for clients both doubled.
Despite declines in oil and gas prices in the second quarter, Calfrac’s operations are approaching activity levels reached before the energy downturn began in 2014, company president and CEO Fernando Aguilar said during an earnings call.
“Regardless of short term noise in rig counts or oil inventory reports, hydraulic fracturing is becoming — or has become — more and more critical to our clients production and cash flow growth in North America,” Aguilar said.
Rig counts and oil storage levels have affected oil prices on a weekly basis over concerns the market is still oversupplied, but Aguilar said the impact hasn’t hit fracking providers. Average rig count in Canada stood at 126 in the second quarter, compared to 52 during the same period last year, according to RBC Capital Markets.
Oil prices fell sharply in the second quarter but Calfrac’s revenues were up 116 per cent to $325 million compared with $150 million during the same time a year earlier, as it completed twice as many fracking jobs over the same time period.
Even though the company’s revenues and prices are rising, Calfrac reported a net loss of $20 million in the second quarter, which is better than the $41 million net loss it reported at the same time last year.
Still, Calfrac beat analysts’ projections and has attracted new investment in recent days. Texas billionaires Wilks brothers, through their firm Wilks Brothers LLC, announced last week they had boosted their holdings in the fracking company by 20 per cent.
Raymond James analyst Andrew Bradford said in a note that it was “unprecedented” for Calfrac’s Canadian revenues and adjusted earnings not to decline between the first and second quarter of the year, when a seasonal slowdown called “spring breakup” normally impacts results. “It’s difficult to say which segment impressed more, Canada or the U.S.,” Bradford said, noting that Calfrac had recently rehired one crew of laid off workers in Canada and four crews in the U.S. as a result of demand for hydraulic fracturing.
Aguilar said the firm rehired a third of the 2,500 staff it had laid off during the downturn, and said it plans to rehire more assuming activity levels and the prices for services continue improving.