The completion of the Trans Mountain pipeline expansion is leading to an increase in demand for drilling services, according to Precision Drilling chief executive Kevin Neveu. The company is experiencing higher demand than expected as the expansion of the crude oil pipeline to the West Coast nears its May 1 start of commercial operations. Neveu stated that customer interest is rising in anticipation of the Trans Mountain start-up, and the company currently has 48 rigs operating compared to 38 last year. Precision Drilling expects the momentum to continue throughout the summer and exceed their previous view on Canadian rig demand.
While activity in the U.S. has decreased due to weak natural gas prices and operator consolidation, Precision Drilling reported 38 active drilling rigs in the U.S. for the first quarter, down from 60 in the first quarter of the previous year. In Canada, the company averaged 73 active drilling rigs for the quarter, compared to 69 a year earlier. The decline in U.S. activity contributed to a decrease in first-quarter profit, with the company reporting $36.5 million compared to $95.8 million in the same period last year. Revenue also decreased to $527.8 million from $558.6 million in the first quarter of 2023.
Despite the challenges in the U.S. market, Precision Drilling remains focused on cost reductions, debt repayment, and returning profits to shareholders. The company is also investing in automated rig technology that could potentially reduce the impact of future increases in demand on employment levels. The system is still in the testing phase, with a few more months of field hardening ahead before it is commercially ready. Neveu stated that the technology has been performing better than expected, with the goal of eliminating human work from certain areas of the drill rig floor while ensuring safe, consistent, and highly efficient rig floor performance for customers.
Overall, Precision Drilling is optimistic about the future as the growth in demand for drilling services in Canada is exceeding expectations. The company anticipates continued momentum throughout the summer and a boost in well servicing contracts due to the Trans Mountain pipeline expansion. Despite the challenges in the U.S. market, Precision Drilling is focused on cost-saving measures, debt reduction, and investing in innovative technologies to improve efficiency and safety. With the automated rig technology nearing commercial readiness, the company is hopeful that it will lead to a more sustainable and efficient way of meeting increased demand in the future, ultimately benefitting both the company and its customers.
