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Dec 5, 2016

Precision Drilling to nearly halve capital spending, but CEO sees stronger demand amid OPEC cut

Precision Drilling says 2017 capex actually increasing

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CALGARY - Precision Drilling Corp. (PD.TO) says it plans to spend $109 million on capital expenditures in 2017, down from $213 million this year.

The spending plans comes as the company says it sees signs of strengthening demand for its services.

Chief executive Kevin Neveu says recent actions to stabilize and improve commodity prices appear to be well received by his customers.

The energy services company says the spending plan for next year includes $105 million on its contract drilling services business and $4 million for its completion and production services operations.

Precision Drilling says 2017 capex actually increasing

Precision Drilling says the two rigs built in Kuwait overstated the 2016 capex, which has made its 2017 spending look as though it's been cut by nearly half from this year. BNN clears this up with the man in charge, Kevin Neveu.

The plan includes the upgrade of 33 Super Triple rigs in North America and long lead items for additional future upgrades.

The forecast for $213 million to be spent this year is down from earlier guidance of $222 million.

Neveu said in an interview with BNN that OPEC's decision to cut oil production by 1.2 million barrels per day from January is "very constructive" for the energy sector and demand overall. 

"It seems like our customers were anticipating that, because most of what they were doing over the past two or three months has been kind of in line with a commodity price in the mid-US$50s, maybe touching US$60 in later 2017," Neveu said. "It’s a much better environment for 2017 than what we experienced in 2016."