Precision Drilling (NYSE: PDS) reported Q2 EPS of ($0.16), $0.11 worse than the analyst estimate of ($0.05). Revenue for the quarter came in at $331 million versus the consensus estimate of $308.31 million.

Precision Drilling announces 2018 second quarter financial results:

• Second quarter revenue of $331 million was an increase of 14% over the prior year comparative quarter.
• Second quarter net loss of $47 million ($0.16 per share) compares to a net loss of $36 million ($0.12 per share) in the second quarter of 2017.
• Second quarter earnings before income taxes, loss on repurchase and redemption of unsecured senior notes, finance charges, foreign exchange and depreciation and amortization (adjusted EBITDA see “NON-GAAP MEASURES”) of $62 million was 10% higher than the second quarter of 2017.
• Funds provided by operations (see “NON-GAAP MEASURES”) in the second quarter of $50 million versus funds used in operations of $15 million in the prior year comparative quarter.
• Second quarter ending cash balance was $95 million.
• Second quarter capital expenditures were $37 million.

Precision’s President and CEO Kevin Neveu stated: “Precision’s strong second quarter results were driven by continued growth in North American activity, having achieved our highest U.S. market share to date. Additionally, we captured higher day rates and margins in both markets. We attribute our market share gains and sequential rate increases to customers’ intense focus on capital efficiency which leads them to contract the best performing and most efficient drilling rigs and crews, lowering total well-pad cost.”

“During the quarter, we activated eight rigs in the U.S. and currently have 78 rigs running with visibility for four to six additional activations in the coming weeks. We believe customer focus on efficiency and cost may intensify, presenting additional growth opportunities for Precision. With established positions in all major U.S. shale plays and proven performance of our Super Series rigs we are in a strong position to take advantage of increased activity and customer capital reallocation. A similar trend is evident in Canada where despite flat year-over-year customer spending we already have 60 rigs active, surpassing last year’s third quarter peak. We expect Precision’s year-over-year growth in activity to continue through the third quarter.”

“We continue to demonstrate positive momentum with regard to our key strategic priorities for the year. First and foremost, we have reached the low end of our stated 2018 debt reduction range, reducing debt by $75 million year-to-date. Next, our financial performance has improved year-over-year through increased activity, pricing and margins in North America with particular strength in the U.S. Lastly, as it relates to technology, demand continues to improve for PAC (Process Automation Control), DGS (Directional GuidanceSystem), and Drilling Performance Applications (Apps) with full commercialization expected by year end. We are purchasing ten additional PAC systems that will be deployed on our rigs in the second half of the year bringing us to 31 Super Series rigs in the field with PAC.”

“In the U.S., our High Performance field results are also showing up in our pricing and margins and I am pleased to report both day rates and margins per day increased nearly US$1,200 quarter-over-quarter with no increase in daily operating costs. I expect to see continued increases in our average rates and margins throughout the second half of the year with continued strength in pricing, further value capture from our technology initiatives and continued fixed cost leverage. In Canada, Precision’s activity levels increased 7% year-over-year outperforming the 3% increase in industry drilling days. In addition, day rates excluding shortfall revenue increased approximately $1,400 per day year-over-year largely as a result of improved spot pricing. Since our last earnings announcement Precision signed ten term contracts in the U.S. and two term contracts in Canada, which coupled with our activity increase and improved day rates, is a clear indication of continued customer alignment with our High Performance, High Value service offering.”

“Internationally, we previously announced our newbuild rig contract in Kuwait strengthening our Middle East footprint and increasing our Kuwait active rig count to six rigs by the third quarter of 2019. We are adding this newbuild with no increase in fixed costs, supported by sufficient scale in country. In the Kingdom of Saudi Arabia, three rigs are currently active, two of which roll off contract next month and we fully expect them to be re-contracted. We are actively bidding our four idle rigs in the Middle East and believe the prospects to activate these rigs are improving.”

“Customer adoption of PAC is strengthening and we have completed several analytical field case studies demonstrating the system’s ability to consistently and repeatedly deliver high quality wells while improving safety, performance and efficiency of operations. Our DGS technology is also gaining momentum having now drilled over two million feet to date utilizing the software including over 70 wells in 2018. Additionally, we are deploying revenue generating Apps on several rigs and currently have 12 Apps in varying stages of commercial development showcasing the open platform of our PAC system. Several Apps are customer-built and supported by Precision’s PAC platform with specific hosting agreements in place. We are pleased our technology initiatives are beginning to impact our revenue and margins.”

“Our updated 2018 capital plan is approximately $135 million. The $19 million increase from our previous update includes spending for our newbuild award in Kuwait, completion of a newbuild in the U.S., foreign exchange impact from a weaker Canadian dollar, and a minor increase in upgrade capital spending. With $95 million of cash on the balance sheet coupled with cash flow in the second half of the year I fully expect to fund growth and upgrade opportunities while reserving capacity to retire more of our debt,” concluded Mr. Neveu.

For earnings history and earnings-related data on Precision Drilling (PDS) click here.