CALGARY — A 40 per cent decline in revenue in the fourth quarter due to a steep downturn in drilling activity in Western Canada resulted in 160 lost jobs at Calgary-based Trican Well Service Ltd.
The well completion company posted $5.1 million in severance costs in its fourth-quarter results as its revenue dropped to just $168 million from $280 million in the same period of 2017.
“2018 proved to be a lot more challenging than we anticipated at this time last year,” CEO Dale Dusterhoft told a conference call to discuss the results on Thursday.
“We saw a significant decline in activity from September onwards, which required us to adjust our business and adjust our overall cost structure.”
He said the company’s overall head count at the end of 2018 was 1,841, down more than 11 per cent from 2,083 at the start of the year.
Drilling contractors have moved at least 26 rigs from Canada to the United States since 2017 as Canadian producers reduce activity due to a shortage of investment capital blamed on volatile commodity prices and not enough export pipeline capacity.
Well completion firms like Trican step in to make a well ready to produce oil and gas after it’s been drilled, using technologies including hydraulic fracturing or “fracking.”
Fracking involves injecting water, sand and chemicals under high pressure to crack tight rock formations deep underground and allow trapped oil and gas to flow into the well.
The Petroleum Services Association of Canada said last month it expects 5,600 wells to be drilled in the country this year, down from 6,948 in 2018, due to what it calls deteriorating investor confidence in Canada.
In November, the Canadian Association of Oilwell Drilling Contractors issued a drilling forecast calling for little change in activity in 2019 versus 2018.
But CAODC president Mark Scholz said Thursday activity is actually down substantially so far in 2019 and, if it continues on that trend, the industry will likely support 5,800 fewer jobs than the 30,000 expected in the forecast.
He said more than 60,000 jobs were associated with the drilling industry before oil prices crashed in late 2014.
Source Energy, which supplies the specialized sand used in fracking, reported in an operational update on Wednesday that sales fell by 33 per cent to 373,000 tonnes in the fourth quarter from 557,000 tonnes in the same quarter in 2017.
Trican reported a fourth-quarter net loss from continuing operations of $159 million as it recorded a $134-million goodwill impairment charge, compared with a net profit of $14 million a year earlier.
It said its total job count in the quarter fell by 30 per cent to 2,054 from 2,909 a year earlier.
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Companies in this story: (TSX:TCW, TSX:SHLE)
Dan Healing, The Canadian Press