CALGARY — The outlook for Canada's oil and gas industry heading into 2024 is "exceedingly strong," the CEO of Canada's largest drilling rig contracting company said Thursday.
Kevin Neveu, CEO of Calgary-based Precision Drilling Corp., said overall Canadian drilling activity during the third quarter of this year was six per cent lower than the same period last year, according to industry sources. But he said Precision's year-to-date drilling activity has surpassed 2022 levels and the company expects high activity levels to continue into 2024.
Fuelling his bullish outlook, Neveu said, is the fact both the Trans Mountain oil pipeline expansion project and the Coastal GasLink pipeline — which will transport natural gas to the LNG Canada export facility in Kitimat, B.C. — are expected to come online in early 2024.
"For Canada, these projects are absolute game-changers, resulting in significantly improved upstream commodity prices for our customers, de-bottlenecking production and providing global market access for Canadian energy," Neveu said on a conference call with analysts.
Currently, Precision has 68 rigs active in Canada, but Neveu said that number will climb to the low 70s by Christmas. He said he then expects a "strong and fast start" to 2024, with demand for rigs from oil and gas producers exceeding that of last year — potentially by as much as 10 to 15 per cent as companies ramp up to fill the additional export capacity.
"Natural gas drilling ... is growing to meet the imminent needs of LNG Canada and heavy oil drilling has rebounded to levels not experienced since 2014," Neveu said.
"This is truly a game-changer for the Canadian drilling market."
For the third quarter of 2023, Precision Drilling Corp. reported a profit of $19.8 million, down from $30.7 million a year earlier, as its revenue edged higher.
The company said the profit amounted to $1.45 per diluted share for the quarter ended Sept. 30, down from $2.03 per diluted share in the same quarter last year.
Revenue for the quarter totalled $446.8 million, up from $429.3 million a year earlier.
Precision Drilling says the 4.1-per-cent increase in revenue compared with a year ago was due to further strengthening of drilling and service revenue rates, partially offset by lower activity.
The increase in revenue came as oil prices surged more than 30 per cent in the quarter, with the benchmark West Texas Intermediate topping US$90 per barrel in September.
Neveu said while he's encouraged by commodity price fundamentals, oil and gas producers remain disciplined when it comes to spending.
"Our customers are functioning very well in this environment. They're not responding to short-term commodity price signals or volatility," he said.
Precision's drilling rig utilization days in Canada were down 2.7 per cent compared with a year ago, while its U.S. operations saw a 27.8-per-cent drop. International drilling rig utilization days were up 0.4 per cent compared with last year.
The company said its service rig operating hours for the quarter were down 10.4 per cent from a year ago.
This report by The Canadian Press was first published Oct. 26, 2023.
Companies in this story: (TSX:PD)
Amanda Stephenson, The Canadian Press
