Precision Drilling (NYSE: PDS) reported Q2 EPS of ($0.18), $0.13 worse than the analyst estimate of ($0.05). Revenue for the quarter came in at $190 million versus the consensus estimate of $308.31 million.

Precision Drilling announces 2020 second quarter financial results:

• Revenue of $190 million was a decrease of 47% compared with the second quarter of 2019.
• Net loss of $49 million or negative $0.18 per diluted share compared with a net loss of $14 million or negative $0.05 per diluted share in 2019.
• Earnings before income taxes, gain on repurchase of unsecured senior notes, finance charges, foreign exchange, impairment reversal, gain on asset disposals and depreciation and amortization (Adjusted EBITDA, see “NON-GAAP MEASURES”) of $58 million as compared with $81 million in the second quarter of 2019.
• Generated cash and funds provided by operations (see “NON-GAAP MEASURES”) of $104 million and $27 million, respectively.
• Second quarter ending cash balance was $175 million, an increase of $78 million from March 31, 2020.
• Second quarter capital expenditures were $24 million.
• Reduced our unsecured senior notes balance by $5 million and drew $5 million under our Senior Credit Facility.
• In U.S., recognized US$8 million of idle but contracted rig revenue and US$8 million of contract cancellation fees of which US$2 million pertained to second quarter contracted days.
• Recognized restructuring charges of $6 million and Government of Canada wage subsidies of $9 million.
• To secure our liquidity position, on April 9, 2020, we amended our Senior Credit Facility to provide temporary covenant relief through March 31, 2022.

Precision’s President and CEO Kevin Neveu stated:

“The immediate and decisive steps the Precision team has executed during this pandemic and economic crisis have delivered very strong financial and operational results. Our actions have further strengthened and positioned the company both financially and competitively for an eventual industry recovery. During the second quarter we generated $58 million in Adjusted EBITDA and cash from operations of $104 million with our results further supported by field performance and operational excellence in all parts of our business. Also during the quarter, we improved our liquidity position by increasing our cash balance to $175 million bringing our total liquidity available to nearly $900 million, which supports our ability to persevere through a prolonged market downturn and capture value in a market recovery.”

“During the quarter, we executed structural cost reductions beyond those previously announced, which we expect will lead to an additional $14 million in annualized savings. We now expect our total annualized fixed cost reductions to be 35%, an increase from our previous target of 30% and our normalized general and administrative expense savings to exceed $30 million. We expect these cash preservation measures, combined with capital expenditure reductions and Canadian wage subsidy program, will reduce total 2020 cash outflows by up to $150 million, an increase from our previously communicated target of over $100 million. We will continue to explore every avenue to reduce our costs and spending and conserve cash to keep Precision on track to meet long-term debt reduction goals and support our High Performance, High Value competitive strategy.”

“Second quarter U.S. operating results reflected improved field margins delivered with tightly managed expenses and strong contract book performance, both critical in this challenged environment. While industry activity appears to be flattening, visibility remains limited for the second half of the year. In Canada, Precision achieved 36% market share during the second quarter driven by our Super Triple rig fleet, which is well-positioned for pad style development drilling activity in the Montney and Duvernay. We expect the third quarter seasonal rebound in Canada to remain muted with limited visibility into long-term customer demand. While global international rig activity is contracting sharply, we expect Precision’s six rigs under long-term contract in Kuwait and the Kingdom of Saudi Arabia to remain stable sources of revenue. Additional rig deployment and re-contracting opportunities will be delayed until the customers in these regions fully return to work.”

“Precision’s Alpha technologies continue to demonstrate exceptional field results, driving strong customer interest and field adoption of our broad portfolio of digital solutions. During the second quarter, we commercialized two additional drilling apps for a total of six commercial apps this year and we have 12 more under development. This year we have utilized AlphaApps on over 110 wells throughout North America, generating 890 AlphaApp days. Additionally, we are utilizing AlphaAnalytics for an integrated oil company in the Delaware basin and reduced drilling time on a 28-day horizontal well by 4.1 days, setting a new efficiency benchmark. In the Haynesville basin, we applied AlphaAnalytics to a separate customer’s full fleet of rigs and delivered an 8% improvement in drilling times compared to results achieved in the first quarter. AlphaAnalytics, AlphaApps and the AlphaAutomation platform are functioning on over half of our active North American fleet today and the drilling performance enhancements are inarguable. We believe the Alpha digital enablement of the drilling rig process to be the single most important technology transformation our customers can leverage to reduce their well construction costs and we believe this may be the ideal market to capitalize on these initiatives.”

“We will remain focused on the continued execution of our strategic priorities, including our 2020 deleveraging targets while preserving our strong liquidity position. We will concentrate on maximizing cash flow, stringently managing costs, leveraging our high-quality fleet and collaborating with our customers to utilize our Alpha portfolio to maximize efficiencies and deliver predictable, repeatable results” concluded Mr. Neveu.

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