CALGARY – Precision Drilling is trimming its planned 2025 capital spending due to market uncertainty and a possible dip in demand from the oil and gas producers that contract its rigs.
Chief executive Kevin Neveu says Precision expects to spend $200 million this year, a reduction of $25 million from its earlier forecast.
That includes an $8-million drop in upgrade spending that acted as a “placeholder” in Precision’s budget for potential projects in its U.S. or international segments.
Neveu says if either of those markets rebound this year, Precision would consider ramping that spending back up — but only if the financial returns and contract terms pass muster.
The rest of the spending cuts were to be for maintenance capital, which Precision had earmarked to take advantage of year-end vendor discounts.
Precision has cut some staff as it exited its well servicing business in North Dakota, where it had 10 rigs.
“We originally entered this market to provide services to Canadian customers operating in North Dakota. And for several years, this business performed well,” Neveu told analysts on a conference call Thursday.
“When our Canadian customers exited the market, we were left competing with local mom-and-pop service providers for highly price-sensitive customers. And although last year was a positive cash flow year for this segment, we did not achieve our target of return on capital.”
Six service rigs are being moved back to Canada from North Dakota, while the rest are to be sold in the U.S., he added.
Neveu said the sense he’s getting from customers is that they should be able to keep operating with West Texas Intermediate crude prices at their current levels just above US$60 a barrel — but it’s more tenuous for U.S. players than for Canadian ones.
He cautioned that the information Precision gets from customers is “designed to create some pricing tension with us” and so may not provide the full picture.
“But it does feel like in the U.S. oily basins, low US$60s, high US$50s is probably stable. Get below kind of high US$50, and the uncertainty level increases,” he said.
In Canada, which has seen the discount on its heavy crude narrow with the opening of the Trans Mountain pipeline expansion to the B.C. coast, crude would have to dip to around US$50 “before our customers get too nervous about activity,” he said.
Neveu’s comments come a day after Precision reported first-quarter net earnings attributable to shareholders of $34.5 million, or $2.20 per diluted share, down from $36.5 million or $2.53 per diluted share a year earlier.
Revenues were $496.3 million during the first three months of 2025, down from $527.8 million.
This report by The Canadian Press was first published April 24, 2025.
Companies in this story: (TSX: PD)