Trinidad Drilling launches strategic review as Canadian oilfield slump drags on

Three weeks after announcing it would move two idle Canadian drilling rigs and three from Saudi Arabia to greener pastures in the United States, Trinidad Drilling Ltd. has put itself on the block.

The Calgary-based oil and gas drilling company said Tuesday it has appointed a committee to look at options including a corporate sale or merger because its share price doesn't reflect what it believes is its true value.

Shares in Trinidad rose about seven per cent to $1.90 on Tuesday after closing at $1.77 on the Toronto Stock Exchange on Friday. The stock's five-year high was $12.75 in June 2014.

The news comes as Canada's oil and gas producers continue to budget for lower exploration and production spending this year than their American counterparts Peters & Co. has estimated Canadian spending will fall six per cent this year while U.S. spending rises 14 per cent.

• Canadian drillers move rigs south to chase better prospects in Texas oilfields
• Trinidad Drilling made more from cancelled rig contracts than actual drilling work in Q2

In Canada, 288 of the 622 drilling rigs in the fleet were working in the most recent weekly report from the Canadian Association of Oilwell Drilling Contractors, up six per cent from 270 a year ago.

In the U.S., there were 975 active rigs as of last Friday, up 30 per cent from 751 a year ago, according to Baker Hughes.

Winter is the most active season for Canada's drilling industry because the frozen ground permits access to more backcountry drilling sites.

'What's happening in the U.S.?'

In an interview in late January, Trinidad CEO Brent Conway said his American customers in the prolific Permian Basin in Texas are helping to pay relocation costs because they want to contract his rigs.

"What's happening in the U.S.? They're lowering taxes, they're building pipelines and they're starting to export oil," he said.

In Canada, he added, "we've raised taxes, we're increasing costs because of labour laws that are changing, we aren't building pipelines and we can't get federal or provincial governments to do anything to help us."

Following its rig redeployments, Trinidad said it would have 69 rigs in the U.S., 68 in Canada, six in Mexico and two in the Middle East.

The company refused further comment on Tuesday.

In a news release, Trinidad said it is in a "strong financial position," with enough free cash flow to fund its $74-million 2018 capital program and with access to additional available credit.

Company announced cost-cutting measures last month

In January, it announced it would reduce costs by cutting its head office workforce, lowering salaries and fees for executives and directors and reviewing underutilized facilities for possible sale.

In its fourth-quarter financial report last week, Canada's largest drilling company, Precision Drilling Corp., said it expects further recovery in pricing for its rigs in the U.S. this year as activity levels rise but it predicted little change in Canada.

In its November forecast, the CAODC said 6,138 wells would be drilled in Canada in 2018, up just 107 from the total in 2017.

Almost twice as many wells11,200were drilled in 2014 before the current industry slump began.

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