Precision Drilling reports new build rig orders and asset decommissioning

Published Dec 7, 2011
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New Board member for Precision Drilling Corporation-Spotlight

Precision Drilling Corporation reported that planned capital expenditures for 2012 are $1.14 billion. The 2012 capital expenditure plan includes $738 million for expansion capital, $232 million for sustaining and infrastructure expenditures and $173 million for long lead-time item expenditures. Precision expects that the $1.14 billion will be split $964 million in the Contract Drilling segment and $179 million in the Completion and Production Services segment.

Precision's expansion capital plan includes construction of seven additional new build drilling rigs, two of which have signed long-term contracts with the remaining five rigs expected to be contracted in early 2012. These seven additional new builds bring the total number of Precision Super Series new build rigs announced during 2011 to 49. Additionally, the expansion capital plan includes the cost to complete the remaining rig new build program previously announced in 2011.

Precision's sustaining and infrastructure capital plan is based upon currently anticipated activity levels for 2012 and includes the completion of the rig upgrades previously announced in 2011 and approximately 14 additional rig upgrades in 2012. Long lead-time capital expenditures include inventory that can be used for North American or international new build opportunities and enhancements to Precision's current fleet.

Precision anticipates its 2011 capital expenditures to be approximately $740 million, a $140 million decrease from its previous guidance. The Corporation has not reduced the amount of the previously announced 2011 capital spending plan, but some costs will be incurred subsequent to the fiscal year end in the first part of 2012. All carry forward costs have been included in the 2012 capital expenditure guidance of $1.14 billion.

Precision also announced today the decommissioning of 36 Tier 3 drilling rigs and 13 service rigs from its fleet and expects to take a pre-tax charge to earnings in the range of $100 million to $120 million for the fourth quarter of 2011. Following the decommissioning and planned new build deliveries as of December 31, 2011, Precision expects its rig fleet will stand at 338 rigs, consisting of 188 rigs in Canada, 144 rigs in the United States and six rigs internationally.

"Demand for Precision's High Performance, High Value services continues to produce attractive growth opportunities for the Corporation", stated Kevin Neveu, President & Chief Executive Officer. "As a result of these growth opportunities, Precision has meaningfully increased its capital spending plans throughout the course of 2011 and into 2012. Capital expenditures in 2011 have succeeded in establishing foundations for organic growth in 2012. These successes include continued expansion of our land drilling services into the most active plays in North America, establishing a foothold in the Middle East, increasing our Super Series new build capabilities, and establishing new platforms in directional drilling and Completion and Production services targeting the horizontal completion market. Additionally, the retirement of 36 idle Tier 3 rigs and announced new builds and upgrades underlines our transition to a homogenous fleet of over 300 high performance, horizontal capable drilling rigs that today's North American marketplace demands".

Tags: Precision Drilling Trust


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