Precision Drilling Corp ((TSE:PD)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Precision Drilling Corp’s latest earnings call reflects a positive sentiment, highlighting strong operational performance and strategic initiatives. Despite facing challenges in Canadian drilling activity and contract churn, the company’s technological advancements, leadership transition, and financial metrics suggest a robust position for future growth.
Leadership Transition and Strategic Continuity
Precision Drilling announced the retirement of CEO Kevin Neveu and the appointment of Carey Ford as his successor. This leadership transition, involving the promotion of internal candidates, ensures continuity and stability in management, which is crucial for maintaining strategic direction.
Debt Reduction and Capital Allocation
The company successfully achieved its debt reduction target, cutting down $101 million in debt. Precision Drilling is on track to allocate 35% to 45% of its free cash flow to share buybacks, having already repurchased $54 million worth of shares. This demonstrates a commitment to returning value to shareholders.
Operational Growth in U.S.
U.S. drilling activity saw an increase, with an average of 36 rigs, up by 3 rigs from the previous quarter. This growth is attributed to strong performance in gas-weighted basins, indicating a positive trend in the U.S. market.
Capital Budget Increase
The capital budget for 2025 was increased by $20 million, reaching $260 million. This increase allows for five additional contracted rig upgrades, reflecting strong demand projections and the company’s confidence in future growth.
Technological Advancements
Precision’s technology initiatives, such as the Alpha and EverGreen platforms, are yielding positive results. Notably, 90% of active Super Triple rigs are now running on Alpha technology, showcasing the company’s commitment to innovation.
Strong Financial Metrics
The company reported an adjusted EBITDA of $118 million, equating to $129 million before share-based compensation. Daily operating margins remained resilient, staying within prior guidance ranges, underscoring Precision’s strong financial health.
Decline in Canadian Drilling Activity
Canadian drilling activity experienced a decline, averaging 63 active rigs, a decrease of 9 rigs from Q3 2024. This was primarily due to project deferrals, presenting a challenge for the company.
Challenges with Contract Churn
Contract churn continues to pose challenges to activity levels. However, Precision Drilling is exploring future opportunities to mitigate these challenges and enhance activity levels.
International Activity Decrease
International drilling activity saw a slight decrease, averaging 7 rigs, down from 8 in the prior year Q3. This indicates a minor setback in the company’s international operations.
Forward-Looking Guidance
Looking ahead, Precision Drilling expects Canadian activity for the winter drilling season to meet or exceed last year’s levels, while U.S. margins are projected to remain stable. The company maintains a long-term goal of achieving a net debt to adjusted EBITDA ratio of less than 1x, with a current ratio of approximately 1.3x and over $400 million in liquidity. Effective tax rates for 2025 are anticipated to be between 45% and 50%, with cash taxes remaining low, and SG&A expenses are expected to range from $90 million to $95 million.
In summary, Precision Drilling Corp’s earnings call reflects a positive outlook, with strong operational performance and strategic initiatives in place. Despite challenges in Canadian drilling activity and contract churn, the company’s technological advancements, leadership transition, and financial metrics indicate a robust position for future growth.