CALGARY — Shares in Precision Drilling Corp. closed 8.6 per cent higher on Thursday after it reported a steeper loss and lower revenue in the third quarter but handily beat adjusted earnings expectations.
The Calgary-based company’s shares rose eight cents to $1.01 after it revealed a net loss of $28.5 million on $165 million in revenue in the three months ended Sept. 30, compared with a loss of $3.5 million on revenue of $376 million in the same period last year.
However, its adjusted earnings of $53 million beat consensus estimates of $40 million and an estimate of $43 million by his firm, reported analyst Ian Gillies of Stifle FirstEnergy, with the beat largely due to lower administration expenses and stronger earnings from well-completion activities.
“Here at Precision, we are simply grinding through the toughest downturn in the history of the oil and gas industry,” said CEO Kevin Neveu on a conference call on Thursday.
“And while difficult at the time, I am pleased that the swift and aggressive actions we took to address this downturn have resulted in better-than-expected financial results.”
On the call, Neveu said there are signs that “the worst may be behind us” as customers begin to firm up 2021 drilling plans and rig requirements and oil prices stabilize.
U.S. benchmark West Texas intermediate crude sold for an average of US$40.85 per barrel in the third quarter, up 44 per cent or US$12.48 per barrel from a second quarter that included the first-ever negative WTI close in April.
In July, Precision reported more layoffs and more parked drilling rigs as second quarter revenue fell by 47 per cent compared to the same period of last year.
It said Thursday its third-quarter drilling rig utilization days fell 70 per cent in the U.S., 58 per cent in Canada and 32 per cent internationally compared with the same period in 2019.
It reported restructuring charges of $2 million and income of $8 million from the Canadian government’s Canada Emergency Wage Subsidy program in the quarter.
Neveu said the company still aims to reduce annual fixed costs by 35 per cent, including $30 million in administration expenses.
The Petroleum Services Association of Canada cut its 2020 Canadian drilling forecast for a third time in July to 2,800 wells as North American drilling activity slowed due to low oil prices.
The new forecast for 2020 was 43 per cent lower than the 4,900 wells drilled in 2019.
This report by The Canadian Press was first published Oct. 22, 2020.
Companies in this story: (TSX:PD)
Dan Healing, The Canadian Press