A reduction in price discounts on Canadian oil following Alberta government-ordered production cuts this year has put more money in producer pockets and that's fuelling more oilpatch activity, according to the head of Ensign Energy Services Inc.

The Calgary-based drilling company hopes to put 45 to 50 rigs to work in Western Canada in the third quarter, up from about 15 now, and is seeing signs of continuing stronger demand later this year, said president and chief operating officer Bob Geddes.

"While the (Alberta) government-imposed curtailments certainly cut into first-quarter activity in Canada, it did serve the purpose of reducing differentials and, with that, operators have free cash flow to put toward drilling projects," he said Monday on a conference call to discuss first-quarter results.

The quarter is the first since Ensign outbid larger cross-town rival Precision Drilling Corp. to buy Trinidad Drilling Ltd. and gain access to its Canadian, American and international drilling fleet in November.

"With the Trinidad transaction, we've become one of the largest land-based drillers in the world with 302 rigs," said Geddes.

"Forty-five per cent of our fleet is in the U.S., roughly 35 per cent in Canada and 20 per cent international."

He said Ensign has largely completed its reorganization of employees and assets, recording costs of $8.5 million in the first quarter, including severance of $6.9 million.

The company has identified more than $40 million of annual cost savings and roughly $50 million of redundant facilities that will be sold, he added.

The industry has moved about 20 high-specification drilling rigs from Canada to the more active oilfields of the United States over the past year or so — including an Ensign rig moved to Colorado earlier this year — and that has tightened the Canadian market enough to allow day rates to rise, Geddes added.

The company reported a 72 per cent increase in revenue to $445 million in the first three months of 2019, up from $258 million in the same period a year earlier.

Ensign lost $22.3 million or 14 cents per share in the quarter, down from a loss of $26.7 million or 17 cents the year before.

Analyst on average expected a loss of 31 cents, according to Thomson Reuters Eikon.

"This was an important result for Ensign as this was the first full quarter with the Trinidad assets," said analyst Ian Gillies of GMP FirstEnergy in a report. "Clearly, its increased U.S. presence is paying off."

The earnings beat was driven mainly by higher overall gross profit margins, he said.

Ensign said its U.S. operations in the first quarter accounted for $274 million or 61 per cent of its revenue, more than double the revenue recorded a year earlier before the Trinidad purchase.

Its Canadian arm experienced a 56 per cent increase in operating days compared with the year-earlier period but contributed just 24 per cent of revenue.

Keep reading