Precision Drilling Q2 Earnings Call Highlights

Precision Drilling NYSE: PDS reported higher second-quarter revenue as record Canadian drilling activity and a rebound in U.S. rig utilization offset weaker international results, while the company said it remains on track to reduce debt and repurchase shares during 2026.

Second-quarter revenue increased 11% from a year earlier, with North American revenue up 14% and international revenue down 11%, President and Chief Executive Officer Carey Ford said on the company’s earnings call. Year-to-date revenue has increased 8%, according to Ford.

Adjusted EBITDA was C$97 million for the quarter, or C$95 million before a share-based compensation recovery, compared with C$108 million, or C$112 million before share-based compensation expense, in the prior-year quarter. Precision posted a net loss of C$1 million, compared with net earnings of C$16 million in the second quarter of 2025.

Cash from operations totaled C$146 million, matching the prior-year quarter. The company spent C$76 million on capital expenditures, including C$46 million for sustaining and infrastructure investments and C$30 million for rig upgrades. It reduced debt by C$50 million and used C$12 million for share repurchases during the quarter.

Canadian activity reaches record level

Precision’s Canadian drilling business averaged a record 61 active rigs in the second quarter, up 11 rigs from a year earlier and one rig above its prior guidance. Reported daily operating margins were C$13,855, including C$3 million in customer upfront upgrade payments. Excluding those payments, normalized daily operating margins were C$13,331, above the upper end of the company’s previous guidance range but below C$13,866 a year earlier.

Chief Financial Officer Dustin Honing said the year-over-year margin difference reflected rig mix, including a larger proportion of Super Singles and doubles operating during the spring season.

For the third quarter, Precision expects Canadian average rig activity in the low-to-mid-70s, compared with 63 rigs in the prior-year third quarter. Daily operating margins are expected to range from C$12,000 to C$13,000 as more Super Singles work. Ford said the company expects its Super Triple and Super Single fleets to be fully utilized through year-end and expects Canadian activity to remain between 70 and 80 rigs during the third and fourth quarters.

The company was operating 75 Canadian rigs at the time of the call and expected to reach 80 rigs within two weeks. Its Canadian fleet includes 32 Super Triple rigs available for Montney and related natural gas and condensate markets, as well as 48 Super Singles available for SAGD, Clearwater and other heavy-oil applications.

Ford said Precision expects to deliver its 20th Super Single pad rig in September, followed by major Super Triple upgrades in October and November. While the company has increased some Canadian prices, Ford said broader pricing momentum has not yet fully emerged. New upgraded rigs entering service should support fleet pricing because they will be positioned at the top of the market, he added.

U.S. reactivations pressure margins

In the U.S., Precision averaged 35 active rigs in the second quarter, down from 37 sequentially but up from 33 a year earlier. Daily operating margins fell to C$6,212 from C$9,291 in the first quarter, below the company’s prior guidance range.

Honing attributed the decline primarily to rig reactivation costs. Precision increased its U.S. operating rig count from 32 in April to 42 at June 30, including seven major reactivations during the quarter. Revenue per utilization day increased because of stronger pricing and greater technology adoption, he said, but the costs of staffing and preparing rigs for deployment weighed on profitability.

Precision expects to average a rig count in the low 40s during the third quarter, its highest level since 2023, with daily operating margins of C$7,000 to C$8,000. The company expects about five rigs to be reactivated during the quarter. Honing said reactivation costs can range from roughly C$1,500 to more than C$2,000 per day.

Ford said the company expects margins to approach C$10,000 per day in the fourth quarter as reactivation activity becomes less significant. He said Precision has approximately 50 rigs that are warm, upgraded or recently active and could return to work without requiring substantial reactivation spending. The company expects U.S. rig count to reach the high 40s before year-end if current customer discussions progress.

Precision said it has secured rate increases in the U.S. market, with increases varying by contract. Ford said some customers have accepted low-single-digit-thousands of Canadian dollars per day in increases, while rigs that had been priced below market have seen increases of up to C$5,000 per day. Honing said fleetwide pricing gains could average about C$500 to C$1,000 per day per quarter.

Ford said customer contract preferences currently support terms generally ranging from six months to one year, although some customers are seeking two-year contracts to secure high-quality rigs. He added that the company is targeting business with existing customers and selected new customers that value its digital technology, safety and operating performance.

International restructuring and technology investments

International operations averaged seven active rigs during the quarter, while average day rates declined 5% year over year to C$50,524. Margins were affected by rig mix, with one Kuwait rig idled and an additional rig working in Saudi Arabia, as well as elevated costs related to Middle East tensions.

Precision also incurred C$3 million in one-time restructuring costs from closing its Dubai office. The company expects the move, which shifts leadership closer to customers in Saudi Arabia and Kuwait, to generate annualized savings of C$3 million.

The company expects to operate seven international rigs in the third quarter, with margins below prior-year levels because of elevated regional operating costs. It secured a five-year contract early in the second quarter for its idled Kuwait rig, which is expected to bring the international count to eight working rigs by mid-2027 after recertification and upgrades. Ford said the Kuwait reactivation is expected to require approximately C$12 million to C$15 million in capital, with some spending this year and more next year.

Ford also highlighted Precision’s technology initiatives. Its AlphaARMS robotics rig has operated for two and a half years in the Montney, drilling 54 wells, handling more than 3 million feet of tubulars hands-free and recording 17,000 man-free hours on the rig floor. The company received a grant from Emissions Reduction Alberta to support development of a robotics solution for a Canadian Super Triple 1200 rig and plans to open a Canadian Alpha Remote Operations Center in Calgary the following month.

Capital allocation and tax matter

Precision maintained its 2026 capital expenditure budget of C$265 million, including C$172 million for sustaining and infrastructure spending and C$93 million for upgrades, with spending weighted toward Canada. It expects full-year depreciation of C$320 million, cash interest expense of about C$45 million and SG&A of approximately C$95 million before share-based compensation.

The company reiterated plans to reduce debt by C$100 million in 2026 and allocate up to 50% of free cash flow to share repurchases. At midyear, it had reduced debt by C$75 million and repurchased C$16 million of shares. Precision reported an average cost of debt of 6.7% and more than C$502 million of liquidity.

Honing also addressed a Canada Revenue Agency notice of reassessment related to 2018. Precision plans to file a notice of objection and said it and its external tax advisers believe its filing position is appropriate. While the company considers an adverse outcome unlikely, Honing said the maximum potential liability disclosed for future reassessments could be C$155 million plus interest. Precision said any required payment could accelerate the point at which it becomes cash taxable, but management said its capital-allocation plans have not changed.

About Precision Drilling (NYSE:PDS)

Precision Drilling Corporation NYSE: PDS is a Calgary, Alberta–based oilfield services company that has provided drilling solutions since its founding in 1951. With more than seven decades of industry experience, the company delivers contract drilling services, directional and horizontal drilling, well servicing, and a suite of specialized equipment designed to meet the evolving needs of exploration and production companies worldwide.

The company's core business activities include operating a fleet of onshore drilling rigs, offering managed pressure drilling, measurement-while-drilling (MWD) and logging-while-drilling (LWD) services, and providing completion and workover rigs.

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