Precision Drilling boosts capital spending as higher rig demand expected to continue

Precision Drilling Corp. is boosting its 2022 capital spending in anticipation of a continued strong run for the oilfield rig provider amid higher demand and surging prices for oil and natural gas.

The Calgary-based company said it will spend $125 million as the current market momentum is expected to continue in anticipation of higher activity and additional contracted rig upgrades.

Precision Drilling had said in February it anticipated spending $98 million this year.

The company said its firstquarter revenue increased nearly 50 per cent to $351.3 million, up from $236.5 million a year ago. U.S. and Canadian drilling activity increased by 56 and 48 per cent, respectively, and well service activity gained 10 per cent.

“Customer demand for our services in both the U.S. and Canada continues to grow with U.S. activity up 10 per cent sequentially and Canadian winter activity matching 2018 levels,” stated president and CEO Kevin Neveu in a news release.

“All indications point to the current market momentum continuing through 2022, driven by strong energy supplydemand fundamentals that have taken shape in the early post-pandemic recovery.”

A return of global energy demand is coming following years of upstream oil and natural gas underinvestment and sanctions imposed on Russian oil exports that have pushed up commodity prices.

“At current commodity price levels, we anticipate higher demand for our services and improved fleet utilization as customers seek to maintain production levels and replenish inventories, as drilled but uncompleted wells have been depleted over the past several years,” Precision said.

The expected rise in North American industry activity this year is expected to drive higher day rates and necessitate customer funded rig upgrades.