The Clearwater at Marten Hills is proving itself as a strong demand driver for the super-single rig market, which bodes well for Precision Drilling Corporation, says president and chief executive officer Kevin Neveu.

“Precision is currently operating 11 super-single rigs in the Clearwater region, holding a 55-per-cent market share. This has grown from just three rigs in 2019, before the pandemic,” he told Thursday’s Q4 2021 results conference call. “We think the Clearwater, like the Montney, has good long-term fundamentals, with strong commodity-price support, very good geology, and pad-style horizontal drilling for high-efficiency drilling rigs to de-risk the F&D costs.”

According to Neveu, the Clearwater is a relatively new heavy oil play, which has grown to 21 industry rigs active currently from “just a handful of rigs” in recent years. With horizontal wells and measured depths in the 2,800-metre range, he noted, Clearwater drilling programs are ideally suited for Precision’s high-performance, super-single, pad-style rigs.

“The Precision super-single rig was developed back in 1992 specifically for heavy-oil drilling and exactly for this type of play. They’re designed to be small, fast-moving, light, pad-capable rigs that have a small footprint and can run through spring breakup if necessary, and have a low, efficient operating cost. And so, it’s a really cool design that has stuck with us the last 30 years, and really kept that competitive edge out there. The rig fits in that market well.”

Warm weather woes

Looking at the Canadian segment overall, Neveu said, the current winter drilling season is off to a good start, with activity slightly lower than anticipated peak levels, due largely to some customer-driven delays. However, Precision expects activity to remain firm in Canada, with any seasonal slowdowns driven by weather and not budget exhaustion.

“Certainly, it’s quite warm this week, and we have already run into some situations where we have some rigs that can’t get onto location yet, and so it’s causing a few delays. My sense is: If there’s an early weather breakup, then that pushes a lot more work and pricing tension into late Q2 and Q3. It might be a short-term drag on activity, but probably a net positive for the year.”

Precision is currently running 66 rigs in Canada, he told the conference call. Four additional rigs are delayed due to customer supply-chain and location issues, and this work should be completed later in the quarter.

“Customer indications for the second quarter look very strong, with spring breakup rig demand running 25-30 per cent higher than last year, and early indications are that Q3 activity may again exceed winter activity levels. All of this bodes very well for our Canadian business.”

He added: “We’ve demonstrated excellent rig traction in Canada during 2021, and we expect that trend to continue into 2022. I know that our customers don’t like to hear this, but it is essential that Canada’s services industry recovers to sustainable financial returns.”

Evergreen grows

In Q3 2021, Precision launched its Evergreen brand of environmental solutions, which are designed to enhance the performance of the firm’s drilling operations while reducing the environmental and emissions impact for customers. In both Canada and the U.S., said Neveu, Evergreen is receiving good traction with customers.

“That ESG, emissions responsibility and focus is universal across particularly our public customers, but actually most of our private customers as well. That’s a trend we’re seeing right across the customer mix and geographic mix.”