Precision Drilling misses Q3 expectations as industry activity slows

CALGARY - On Thursday, Precision Drilling Corporation (NYSE:PDS) reported third-quarter financial results that fell short of analyst expectations, with a surprise loss of Cdn$0.51 per share compared to the estimated profit of Cdn$1.48. Revenue came in at Cdn$462.25 million, slightly below the consensus estimate of Cdn$465.63 million and down 3% from Cdn$477 million in the same quarter last year.

The company’s shares were essentially flat following the announcement, edging up just 0.05% in pre-market trading.

The company’s performance was impacted by lower drilling activity in North America, though it outperformed industry-wide drilling rig activity declines of 15% in Canada and 7% in the U.S. Adjusted EBITDA fell to Cdn$118 million from Cdn$142 million in the prior-year period, with results affected by Cdn$11 million in share-based compensation expense.

A significant factor in the quarterly loss was a higher deferred income tax expense related to U.S. operations, as the company waived certain tax deductions to mitigate minimum taxes resulting from stronger operating results.

"Precision’s third quarter not only achieved financial results that exceeded most expectations, but also demonstrated our ability to meet shareholder capital allocation commitments while continuing to strengthen our competitive position through fleet investments in key operating markets," said Carey Ford, Precision’s President and Chief Executive Officer.

Despite industry headwinds, Precision maintained strong pricing in Canada with revenue per utilization day improving 6% YoY to Cdn$34,193. The company averaged 63 active drilling rigs in Canada during the quarter, down 13% from the same period last year. In the U.S., Precision averaged 36 active rigs versus 35 in Q3 2024, while revenue per utilization day decreased to US$31,040 from US$32,949 due to downward pressure on rates.

The company achieved its annual debt reduction target during the quarter, reducing debt by over Cdn$100 million year-to-date. Precision also repurchased Cdn$9 million of common shares in Q3, bringing year-to-date repurchases to Cdn$54 million.

For the remainder of the year, Precision expects its fourth quarter activity levels to be steady YoY with potential upside, maintaining Canadian operating margins between Cdn$14,000 and Cdn$15,000 per utilization day and U.S. margins between US$8,000 and US$9,000 per utilization day.

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