- Precision Drilling (TSX:PD) has announced a 50 per cent reduction to its planned capital budget for this year
- The reduction to C$48 million is in response to the expected decline in demand for commodities as people reduce their spending
- While COVID-19 has not had a major effect on the company’s operations, new risk mitigation policies have been implemented company-wide
- Precision Drilling’s chief concern for this year is to establish strong free cash flow and reduce its current debts
- Precision Drilling (PD) is currently up 6.1 per cent to $0.44 per share, with a market cap of $118.36 million
Calgary-based Precision Drilling (TSX:PD) has announced a 50 per cent reduction to its planned capital budget for this year.
The oil and gas service provider previously announced a 2020 capital expenditure plan of C$95 million. In order to see itself through the current market volatility and COVID-19 crisis, this figure has been reduced to $48 million.
Despite the significant cut, Precision Drilling has not ruled out further adjustments dependent on activity levels over the course of the year.
To facilitate the cash saving measures, the company announced a 20 per cent reduction in both the CEO’s salary and compensation for Board Members. Executive officer salaries will also be cut by 10 per cent.
In addition, it was revealed that some staff members will be laid off, while the remaining workforce may be subject to salary reductions. All non-essential travel and entertainment expenses have been completely eliminated.
Precision Drilling estimated that these fixed-cost reductions will result in an overall annualized saving of more than 30 per cent.
Kevin Neveu, CEO of Precision Drilling, believes that the company is well positioned to outlast the current market volatility.
“Financially, the progress we have achieved over the last three years to generate free cash flow, prioritize aggressive debt reduction, manage debt maturities and preserve cash liquidity…leaves Precision well positioned to navigate this challenging environment.
“With future drilling activity levels uncertain, the capital spending and fixed cost reductions announced today will continue to support Precision’s strong free cash flow capability and financial flexibility,” he said.
While the outbreak of COVID-19 has not had a major influence on the company’s operations, sweeping policies have been implemented in order to mitigate risk.
Precision Drilling has established a dedicated Crisis Management Website and is revising leave plans to assist at-risk employees. Personal hygiene, distancing and self-quarantine standards have been implemented, along with work area disinfecting requirements.
Despite the significant changes, however, the company confirmed its chief commitment to generating strong free cash flow and reducing its current debts.
“Our reaffirmed debt reduction targets demonstrate the financial flexibility of the company and we will continue to ensure that our liquidity needs are not compromised,” continued Kevin.
Precision Drilling (PD) is currently up 6.1 per cent to $0.44 per share at 11:02am EST.