Release Date: March 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ensign Energy Services Inc (ESVIF, Financial) reduced its debt by $220 million in 2024, exceeding its target of $200 million.
- The company generated $450 million of EBITDA in 2024, demonstrating strong financial performance.
- Ensign Energy Services Inc (ESVIF) achieved 100% utilization in its Middle East and Latin American business units.
- The company successfully upgraded approximately 20 rigs with operator funding and expanded its drilling solution penetration by 25% year over year.
- Ensign Energy Services Inc (ESVIF) ended the year with its second-best safety performance in the company's history, with three divisions operating without incidents.
Negative Points
- Total operating days were down by 7% for the year ended December 31, 2024, with a significant decrease of 23% in the United States operations.
- Revenue for the year ended December 31, 2024, decreased by 6% compared to the prior year, totaling $1.68 billion.
- Adjusted EBITDA for 2024 decreased by 8% compared to 2023, primarily due to reduced activity in the US because of customer consolidation and depressed natural gas prices.
- The company faced decreased activity in the United States division as a result of customer consolidation and depressed natural gas prices.
- Ensign Energy Services Inc (ESVIF) experienced a 12% decrease in adjusted EBITDA for the fourth quarter of 2024 compared to the same period in 2023.
Q & A Highlights
Q: Can you speak to what you're seeing in terms of spring breakup in Canada?
A: Robert Geddes, President and COO, explained that after March 15, any operational days are considered a bonus. The rigs running through breakup are already on pads, so they won't be affected much. The company expects to maintain operations as long as weather permits, but a gradual reduction is anticipated as the season progresses.
Q: How are you tracking against your quarterly term loan payments and credit facility capacity reduction in Q2?
A: Michael Gray, CFO, stated that Ensign is confident in meeting its debt obligations, having already made significant repayments in the first half of 2023. The company plans to make further payments in the first half of 2024, supported by reduced interest expenses and current activity levels.
Q: Could you provide an update on the rig moved from Canada to the US Northwest for geothermal drilling?
A: Robert Geddes confirmed that the rig is fully operational and discussions are underway to extend the program, indicating a successful deployment.
Q: Are there any impacts of tariffs on the cost of goods sold in the US and Canada?
A: Robert Geddes noted that while tariffs could impact costs, Ensign has provisions in contracts to discuss cost coverage with clients. The situation is fluid, and the company is monitoring developments closely.
Q: What are you seeing in terms of pricing in the US, and how does it compare to three to six months ago?
A: Robert Geddes mentioned that rig rates have stabilized after a decline of $2,000 to $3,000 per day six months ago. The company is focusing on performance-based contracts, which offer an uplift of $3,000 to $7,000 per day, to maintain margins.
Q: Can you discuss the pace of contracting in the US and your strategy regarding contract durations?
A: Robert Geddes explained that Ensign prefers six-month contracts to avoid being locked into lower rates. Some rigs are on annual contracts with escalations for wage increases, providing stability and flexibility.
Q: Are there any additional levers for debt reduction in 2025 beyond organic free cash generation?
A: Michael Gray highlighted that Ensign has properties on the market and other smaller opportunities, such as yard cleanups, to generate additional cash for debt reduction.
Q: Are there any movements from the US government to open more federal lands for drilling, and how might this impact Ensign's activity in the Permian?
A: Robert Geddes noted that while there are discussions about opening federal lands, any impact would be delayed due to the time required for auctions and infrastructure development, with no immediate effect expected.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
