Canada’s Precision Drilling Corporation has announced the award of one new build ST-3000 drilling rig in Kuwait under a five year take-or-pay contract with an optional one year extension.
Precision has five active rigs in Kuwait on long term contract and expects the sixth rig to commence operations in the third quarter of 2019. All six rigs have standardised rig design features and specifications delivered within the last five years. Capital cost for the new build is approximately $60mn with approximately $10mn expected to be spent in 2018 and the remainder in 2019.
One of Precision’s three strategic priorities for 2018 is to reduce debt by generating free cash flow while continuing to fund only the most favourable investment opportunities. The firm aims to reduce debt by $75mn to $125mn in 2018, and has achieved the low end of that range in the first half of this year. Capital expenditures for the year are expected to be funded with free cash flow, with debt repayment remaining a key priority. The expected cash balance for the end of the second quarter is approximately $95mn.
Precision currently has 54 active rigs in Canada. Despite a fairly flat industry rig count, activity levels are tracking ahead of last year with visibility to exceed 60 active rigs by mid-August, surpassing the peak rig count in the third quarter of last year. In the US, demand for Precision’s rigs continues to strengthen with 78 rigs currently active and visibility to reach 80 rigs by the end of this month.