Precision Drilling Q2 loss surges as pandemic weakens demand for oil

CALGARY — A sharp decline in North American oilfield activity in the second quarter meant more layoffs, contract terminations and parked drilling rigs, Precision Drilling Corp. reported Thursday.

The Calgary-based company reported a net loss of $48.9 million, compared with a loss of $13.8 million in the same period last year, as revenue fell by 47 per cent to $190 million amid a plunge in oil prices.

“This has been a very challenging time,” said CEO Kevin Neveu on a conference call.

“For most of March, April and May, all of our customer discussions centred on terminating contracts, idling rigs and working with customers to find ways to minimize their spending.”

It reported adjusted earnings of $58 million, compared with $81 million in the year-earlier period.

The number was bolstered by US$16 million from U.S. customers who didn’t actually use Precision’s rigs — half that amount was under ongoing take-or-pay contracts and the rest came from customers who paid a lump sum penalty to cancel their contracts.

Precision also declared revenue of $9 million under Canada’s wage subsidy program while confirming $6 million in severance and restructuring charges.

Neveu said the demand outlook for drilling services for the rest of the year remains “opaque,” adding he doesn’t expect much increase in Precision’s current working rig totals.

In the second quarter, the company had nine active rigs in Canada, down from 27 in the same period of 2019, and 30 in the U.S., down from 77.

Precision says deeper cost-cutting than was previously announced should lead to an additional $14 million in annualized savings this year.

It said total savings, capital expenditure reductions and the Canadian wage subsidy program will reduce 2020 cash outflows by up to $150 million, surpassing its $100-million previous target.

This report by The Canadian Press was first published July 23, 2020.

Companies in this story: (TSX:PD)

Dan Healing, The Canadian Press

Note to readers: This is a corrected story. An earlier version misstated the number of U.S. rigs in Q2 2019.