Precision Drilling Corporation reported net income of $109.03 million (CAD 146.7 million) for the fourth quarter of 2023, compared to $2.6 million (CAD 3.5 million) in the previous year’s quarter.
The company’s adjusted EBITDA for the quarter was $112.38 million (CAD 151.2 million), up 66 percent compared to $67.71 million (CAD 91.1 million) in the comparable period in 2022. The higher figure was primarily the result of lower share-based compensation, partially offset by transaction costs and severance, Precision said.
Adjusted for non-recurring items, Precision posted quarterly earnings of $3.45 per share, beating the Zacks Consensus Estimate of $2.09 per share.
Precision’s revenue of $376.8 million (CAD 507 million) was “largely consistent with 2022 as the strengthening of North America revenue rates and increased well service and international activity were offset by lower North America drilling activity”, the Calgary-based company said in an earnings release Tuesday.
While drilling rig utilization days dropped 25 percent and three percent in the USA and Canada, respectively, international activity increased 26 percent as Precision reactivated rigs in the Middle East, according to the release.
“In the U.S., industry drilling activity in 2023 was impacted by weak natural gas prices, oil price volatility, and merger and acquisition activity, resulting in a 21 percent decline in the active rig count year over year”, Precision President and CEO Kevin Neveu said. “Since mid-2023 Precision’s active rig count has remained steady near the low-40s. We continue to sign contracts with customers and based on recent conversations, we expect activity to begin to increase later in the second quarter”.
“Internationally, we recertified and reactivated four Kuwait rigs in 2023 and now have eight active rigs working in the Kingdom of Saudi Arabia and Kuwait. With these additional rigs, we expect our activity to increase approximately 40 percent year over year and provide predictable future cash flow as the majority of these rigs are under five-year term contracts that extend into 2027 and 2028. We continue to explore opportunities to deploy our remaining idle rigs in the region”, Nevue added.
The company’s full-year 2023 revenue was $1.44 billion (CAD 1.94 billion), up 20 percent year over year. Adjusted EBITDA for the 12 months was $454.12 million (CAD 611 million), compared to $231.9 million (CAD 312 million) in 2022, attributable to increased North America drilling and service revenue rates, higher Canadian drilling and service activity and lower share-based compensation, partially offset by lower U.S. and international drilling activity, according to the release.
“This concluded one of our most profitable years in the past decade and allowed us to exceed our cash flow expectations”, Precision President and CEO Kevin Neveu said. “During the year, we not only met our debt reduction and shareholder capital return targets but also funded two accretive acquisitions”.
“We are pleased with the broad market acceptance of our AlphaTM technologies with 75 percent of our Super Triple drilling days during 2023 including AlphaAutomation and several AlphaApps. Our customers see the benefits of predictable and repeatable drilling performance and the inherent efficiencies this creates on pad drilling projects”, Nevue continued.
“Our EverGreen suite of environmental solutions including Battery Energy Storage Systems (BESS), grid power connections, diesel fuel emission and reduction systems, and low-emission location lighting solutions has also gained widespread adoption, with approximately 65 percent of our Super Triple fleet employing one or more of these solutions. We believe both our Alpha and EverGreen product lines will continue to drive market share gains and deliver strong financial returns for Precision on these investments”, he outlined.
“Looking ahead, we expect sustained free cash flow to be a feature of the business and will continue to assess the best route to drive shareholder returns. We currently believe this will be a function of increasing direct capital returns to shareholders while continuing to strengthen the balance sheet. As a result, we plan to reduce debt another [CAD] 100 million by the end of 2026 and continue to move our direct shareholder capital returns towards 50 percent of free cash flow”, Neveu concluded.
To contact the author, email rocky.teodoro@rigzone.com
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.