Precision Drilling Corporation (PDS) Q2 2024 Earnings Call Transcript
Precision Drilling Corporation held its 2024 second quarter earnings call, highlighting a strong performance with revenue, adjusted EBITDA, earnings, and cash flow exceeding expectations. The company's strategic focus on high-performance, high-value business models, geographic diversification, and organizational emphasis on cash flow and return on capital have contributed to these positive results.
Financial Highlights and Performance
The U.S. drilling rig count has seen a decline over the past year, but Precision Drilling has managed to achieve year-over-year growth in consolidated Q2 revenue. This growth is attributed to substantial growth in international drilling, Canada drilling and completion, and production services. The company's EBITDA of $115 million included a share-based compensation charge, but excluding this, adjusted EBITDA was $125 million. Net earnings for the quarter were $21 million or $1.44 per share, marking the eighth consecutive quarter of positive earnings. Funds provided by operations and cash provided by operations were $112 million and $174 million, respectively.
Geographic Diversification and Outlook
Precision's global presence and operational efficiency have been instrumental in mitigating the impact of the declining U.S. rig count. The company's international drilling activity in Q2 averaged eight rigs, a 61% increase over the previous year, and international average day rates saw a 9% increase due to rig mix. In the C&P segment, adjusted EBITDA was $12.4 million, up 66% compared to the previous year. This growth is attributed to a 44% increase in well service hours, the integration of the CWC acquisition, and improved pricing.
Looking ahead, Precision expects to reduce debt by $150 million to $200 million in 2024, with a plan to utilize 25% to 35% of free cash flow before debt repayments for share buybacks. The company aims to achieve a leverage level of below 1x net debt to EBITDA and increase direct shareholder returns towards 50% over the next few years.
Strategic Positioning and Market Dynamics
The earnings call revealed a positive outlook for the company, with the U.S. segment expected to stabilize and activity in the Lower 48 showing signs of a rebound. Precision's strategic focus on efficiency and technological advancements, such as Alpha Automation and safety performance, positions the company well for growth. The company also anticipates increased demand for drilling services in Canada and internationally, driven by the expected commissioning of LNG Canada and the strategic Manefa oil field in Saudi Arabia.
Investor and Analyst Interactions
Key shareholders and investors raised questions about market trends, customer demand, and contract dynamics. Precision's management provided insights into these topics, highlighting the company's strategic focus on cash flow, debt reduction, and operational efficiency. The company's ability to navigate market challenges and capitalize on growth opportunities was emphasized, indicating a strong long-term outlook for the company.
In conclusion, Precision Drilling Corporation's 2024 second quarter earnings call painted a picture of a company that is well-positioned for growth, with a strategic focus on operational efficiency, geographic diversification, and financial discipline. The company's ability to navigate market challenges and capitalize on growth opportunities is a testament to its strong management and strategic direction. With a clear focus on debt reduction and shareholder returns, Precision Drilling is poised for continued success in the evolving oil and gas industry.