Calgary-based Precision Drilling is cutting its capital spending by about 50 per cent, reducing its staff headcount and salaries in response to lower than anticipated commodity prices.
In a news release, the company said it is reducing its 2020 capital expenditure plan to $48 million, down approximately 50 per cent from its previously set plan of $95 million. Further adjustments may be considered depending on activity levels realized as the year progresses, it said.
Precision said it is taking measures to enhance free cash flow by reducing fixed operating overhead and G&A (general and administrative expenses) costs throughout the organization, including:
- CEO salary reduction of 20 per cent;
- Board of Director compensation reductions of 20 per cent;
- Executive officer salary reductions of 10 per cent;
- Staff headcount and salary reductions; and
- Elimination of all non-essential travel, entertaining and other discretionary spending.
The company said it expects these fixed cost reduction measures will reduce annualized fixed costs by over 30 per cent, including up to a $30 million reduction in G&A expense.
It did not say how many staff would be reduced.
“Precision extends our thoughts to those affected by the COVID-19 pandemic and we remain committed to doing our part to minimize the spread of this very serious virus. Our top priority is the well-being of our people and local communities and we have taken comprehensive proactive measures to make sure that their health and safety is not compromised while we continue to provide our High Performance, High Value service to our customers,” said Precision’s CEO, Kevin Neveu.
“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 through stringent cost management and responsible capital deployment, leaves Precision well positioned to navigate this challenging environment. 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. 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. We remain actively engaged in managing the business accordingly and will continue to heavily scrutinize all expenditures to further protect the interests of our stakeholders.”