Precision Drilling rehires 1,000 as oilpatch brightens

ACTIVITY DOUBLES

GEOFFREY MORGAN CA L G A RY • Precision Drilling Corp., one of Canada’s largest drilling companies, has brought back 1,000 employees and begun increasing the price it charges customers for its specialized rigs in a sign that oilfield activity levels are beginning to recover after a prolonged downturn.

President and CEO Kevin Neveu said during an earnings call Friday the company was in “the early stages of this rebound” and had re- activated 53 rigs in North America and re-hired 1,000 employees. He said the majority of those oilfield workers had previously been employed by Precision.

“We’re encouraged by the significant improvement in sentiment of our customers and the resulting increase in activity and market share that we’ve achieved,” Neveu said.

Calgary-based Precision said it would hike prices for its larger, deeper-reaching rigs — called “super triples” — as demand is increasing.

Oilfield activity has slowed dramatically and tens of thousands of people have lost their jobs in Al- berta since crude prices began their dramatic fall more than two years ago, with very few signs of a rebound.

But Neveu said Precision had now more than doubled its activity levels since the trough, which he defined as the second quarter of this year.

“With 37 rigs operating in the U.S. today, our activity is up 70 per cent from second quarter lows, while the industry increase is approximately 35 per cent,” the company said in a statement. “We believe our market share increase and contract additions reflect both the desirability of Pre- cision’s high performance Super Triple rigs and our customers’ improving outlook.”

AltaCorp Capital analyst Aaron MacNeil said the Canadian drilling industry is bifurcated between large and small rigs. He added that Precision is well-positioned in the market for the larger, more automated rigs and has been able to book new contracts and better prices for those rigs next year.

“Those are starting to see pricing traction now, which means that they’re starting to come up against the available supply. Even though they’re maintaining their market share, they should relatively outperform Canada,” MacNeil said.

Neveu cautioned that while oilfield activity levels have improved and were approaching 2015 levels, “our third quarter results demonstrate how very tough — how brutal and unforgiving — this business can be.”

Precision posted a $47 million net loss in the third quarter, less than the $86.7 million net loss it posted in the same period a year ago. The loss amounted to 16 cents per share compared with 30 cents a year ago.

The company’s revenues also declined 44 per cent to $201.8 million in the third quarter, compared with in $364 million period in 2015.

Simmons and Co. senior research analyst John Daniel said in a note that Precision missed earnings estimates for the quarter because the company earned less money than analysts had expected for every day its rigs worked.

MacNeil said he expects oilfield activity levels to recover slightly this winter drilling season, with more rigs working this year than last year. He said he believes the second quarter of 2016 should mark the cyclical low point of the current downturn in the oilfield.

Precision increased its capital budget for the tail end of 2016 by $20 million. The driller now plans to spend $222 million total over the course of this year. in the same