Precision Drilling's Q4 2024: Contradictions in U.S. Market Outlook, International Plans, and Canadian Margins

These are the key contradictions discussed in Precision Drilling Corporation's latest 2024Q4 earnings call, specifically including: U.S. rig market expectations, international rig activation plans, U.S. rig count and activity expectations, and Canadian margin progression:



Financial Performance and Debt Reduction:
- Precision Drilling reported revenue of $1.9 billion for 2024, slightly flat year-over-year, with adjusted EBITDA of $521 million, down 15% year-over-year. The company also reduced net debt by $176 million.
- The decrease in adjusted EBITDA was largely due to lower industry activity in certain core markets and full synergies in the CWC acquisition. Debt reduction was part of their strategic priorities to enhance shareholder returns.

U.S. Drilling Segment Challenges:
- In the U.S. drilling segment, Precision averaged 34 rigs in Q4, with daily operating margins of USD 9,165, which was below the guidance of USD 9,500.
- The lower margins were due to slightly lower day rates and higher overhead costs spread over fewer activity days compared to Q4. The U.S. land market has been in malaise for the past 24 months due to gas-directed activity declining and drilling efficiencies impacting oil-directed activity.

Canadian Drilling Activity and Market Outlook:
- Canadian drilling activity for Precision averaged 55 rigs in Q4 2024, with daily operating margins at $14,559, exceeding guidance. The company expects activity to remain consistent in Q1 2025.
- The positive outlook is supported by a strong heavy oil market, and customers are not budget constrained during the traditional breakup season. However, concerns about U.S. tariffs on Canadian energy have moderated, and negotiations are progressing positively.

International Business and Strategic Growth:
- Precision's international drilling activity averaged 8 rigs, with consistent 2025 activity levels expected. The company is exploring new unconventional gas inquiries for multiple rigs in three different regions.
- These inquiries are opportunities for Precision to leverage their North American-style pad rigs and technology to pursue shale gas developments, but contract negotiations and mobilization times are expected to delay deployment until later in the year.