Precision Drilling Corp (PDS) Q2 2025 Earnings Call Highlights: Strong EBITDA Amid Revenue Decline
Revenue: $407 million, a decrease of 5% from Q2 2024.
Net Earnings: $16 million or $1.21 per share.
Funds and Cash Provided by Operations: $104 million and $147 million, respectively.
US Drilling Activity: Averaged 33 rigs, with operating days increasing 13% and daily operating margins at USD 9,026.
Canadian Drilling Activity: Averaged 50 rigs, with daily operating margins at $15,306.
International Drilling Activity: Averaged 7 rigs, with average day rates at USD 53,129.
Capital Expenditures: $53 million for the quarter, with a full-year plan increased to $240 million.
Debt Reduction: $74 million in Q2, with a long-term debt position net of cash at approximately $644 million.
Share Repurchases: $14 million in Q2.
Net Debt to EBITDA Ratio: Approximately 1.3x.
Average Cost of Debt: 6.9%.
Warning! GuruFocus has detected 4 Warning Sign with PDS.
Release Date: July 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Precision Drilling Corp (NYSE:PDS) reported stronger-than-expected Q2 financial results with adjusted EBITDA of $108 million, driven by robust drilling activity in Canada and improved activity in the US.
The company achieved its 12th consecutive quarter of positive earnings, with net earnings of $16 million or $1.21 per share.
Precision Drilling Corp (NYSE:PDS) has successfully reduced its long-term debt by $74 million in Q2, with a target to reduce debt by $700 million between 2022 and 2027.
The company has seen increased customer demand for rig upgrades, leading to a capital plan increase from $200 million to $240 million for 2025.
Precision Drilling Corp (NYSE:PDS) has locked in additional term contracts in the US and Canada, with strong demand for its Super Triple rigs in North American gas basins.
Negative Points
Revenue for Q2 was $407 million, a decrease of 5% from Q2 2024.
The Completion and Production Services segment saw a decline in adjusted EBITDA by 18% compared to the prior year quarter, impacted by a 23% decrease in well service hours.
Canadian activity has been slower to rebound compared to last year, with a reduction in customer demand for the telescoping doubles rig segment.
The company faces macro uncertainties, including potential deterioration of US and Canada trade relations and tariff discussions.
Precision Drilling Corp (NYSE:PDS) has experienced contract churn in the US oil plays, particularly in West Texas, which could impact future rig activations.
Q & A Highlights
Q: Can you provide insights into the growth in the US, particularly in the Northeast and Haynesville regions? How does the split between public and private companies look, and what is the expected rig activity moving forward? A: Kevin Neveu, President and CEO, explained that the growth is primarily driven by private companies, especially in the Marcellus and Haynesville regions. The company aims to increase its rig count to 40-45, with gas playing a significant role. However, this is contingent on stable oil prices; a drop could affect these targets.
Q: What is the strategy for the oversupplied double-rig segment in Canada, given the pricing pressures? A: Kevin Neveu noted that consolidation is necessary in the double-rig segment, which is currently fragmented with many contractors. Precision Drilling is unlikely to lead this consolidation due to its market share, but it sees potential for other players to bring more discipline to the market.
Q: Could you clarify the contract disclosures and the impact of rig upgrades on contract durations and market strategy? A: Carey Ford, CFO, clarified that not all of the 22 rig upgrades have been signed yet, and some are with existing customers where the day rate increases without changing the contract term. The upgrades are typically in the $1 million to $5 million range, allowing for returns within six months to a year.
Q: How do you plan to allocate capital as you approach your debt reduction targets? A: Kevin Neveu emphasized that debt reduction remains a priority, but the company will also invest in rig upgrades with high returns and continue shareholder returns. The balance between these priorities will depend on market opportunities and financial performance.
Q: Are US customers in the natural gas markets seeking term contracts, and what is Precision Drilling's approach to these contracts? A: Kevin Neveu stated that while longer-term contracts are possible, they would come at lower rates. The company prefers balancing higher day rates with shorter terms, typically in the one- to two-year range, to optimize returns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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