Precision Drilling signs new international contracts, increases 2014 CAPEX plan
Precision Drilling has signed a multi-year contract for a Super Triple newbuild, ST-2000 rig that will be delivered in Q4 late this year. In Mexico, the company has also signed multi-year contracts for a total of six rigs, including re-contracting three existing 3,000-hp rigs working for a major integrated project management (IPM) service provider and contracting, as part of a consortium, for three 1,000-hp rigs.
Additionally, Precision’s 2014 capital expenditure plan of CAN $634 million is an increase of CAN $119 million from the plan announced in February.
The updated 2014 plan includes CAN $320 million for expansion capital, CAN $195 million for sustaining and infrastructure expenditures, and CAN $119 million to upgrade existing rigs. Precision expects that the CAN $634 million will be split CAN $597 million in the contract drilling segment and CAN $37 million in the completion and production services segment.
Precision’s expansion capital plan includes completion and deployment of 12 newbuilds. In 2014, the company plans to deliver six newbuilds to Canada, two newbuilds to the US, three newbuilds to international locations and one newbuild that will only be completed once a firm customer contract is secured. Additional expansion capital is allocated to equipment for completion and production services and long-lead items.
“The interest in contracted upgrades in all of our markets also is encouraging with greater customer demand in North America from areas such as the Permian in West Texas and from LNG-related activity in deep basins in Canada potentially leading to contracted newbuilds later in the year,” said Precision CEO Kevin A. Neveu.
The plan includes the cost to complete four rig upgrades previously announced in 2013 and 11 to 15 additional rig upgrades in 2014. The increase in the expected number of rig upgrades this year is driven by strengthening customer demand for contracted rig upgrades in both North America and internationally.