Precision Drilling Q2 Revenue Climbs 11%, but a C$155M CRA Reassessment Casts a Shadow
PDS sits 50% above its 52-week low of $52.02.
Summary
Precision Drilling posted strong Q2 revenue growth but disclosed a C$155 million potential tax liability from a CRA reassessment, overshadowing otherwise solid operational results and updated guidance.
Key Events · Earnings and Guidance · PDS
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Q2 Revenue Up 11%, Net Loss of C$1M
Revenue rose to C$453 million, driven by 22% higher Canadian rig activity and 6% U.S. growth. Net loss of C$1 million included C$11 million in extra depreciation from a change in drill pipe useful life estimates.
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CRA Reassessment: Up to C$155M Tax Liability
The CRA denied intercompany dividend deductions for 2018–2023. Precision estimates a maximum tax liability of C$155 million, excluding interest. The company will contest the reassessment and has not recorded a liability.
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Adjusted EBITDA Down 10% on Higher Costs
Adjusted EBITDA fell to C$97 million as U.S. rig reactivation costs averaged US$2,387 per day (vs. US$648 last year) and international margins were squeezed by geopolitical tensions and rig mix changes.
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2026 Guidance Reaffirmed with Debt and Buyback Targets
Capital spending remains at C$265 million. Precision plans to reduce debt by C$100 million and allocate up to 50% of free cash flow before debt repayments to share buybacks.
Analysis · PDS · Energy & Transportation
Precision Drilling turned in a solid operational quarter, with revenue climbing 11% to C$453 million on the back of robust Canadian heavy oil activity and improving U.S. rig utilization. Yet Adjusted EBITDA slipped 10% to C$97 million, as higher reactivation costs and international restructuring eroded margins. The real story, however, is the CRA's denial of intercompany dividend deductions for 2018–2023, which could trigger a C$155 million tax liability — a material overhang for a company with a C$1.4 billion market cap. Management is contesting the reassessment, but the uncertainty and potential cash outflow will weigh on the stock until resolved.
At the time of this filing, PDS was trading at $78.27 on NYSE in the Energy & Transportation sector, with a market capitalization of approximately $1B. The 52-week trading range was $52.02 to $103.80. This filing was assessed with negative market sentiment and an importance score of 8 out of 10.