Calgary-based Precision Drilling Corp. posted higher second-quarter revenue as rising oil prices fuelled a spike in drilling activity in Canada, but its international division struggled with challenges during conflict in the Middle East. The oil services company’s revenue increased by 11 per cent to $452.8 million for the quarter that ended on June 30. In Canada, drilling activity increased 22 per cent compared to a year earlier with an average of 61 active rigs. The rise outpaced the 16 per cent average increase in the sector, the company said in a press release on Tuesday. “Improving producer economics and expanded market access continue to support an attractive Canadian drilling environment, most notably in the condensate and heavy oil basins,” Precision’s chief executive Carey Ford said in a statement. “We expect activity during the second half of the year to remain above prior year levels.” The ongoing conflict between the United States and Iran led to increased demand for energy and higher oil prices during the spring quarter, amid concerns over attacks on infrastructure and transportation routes vital to the global oil market. The war has affected Precision’s business in two completely different ways. With North American oil averaging above US$90 a barrel in the second quarter, the company’s rigs were in demand in Canada and the United States, where it had 35 active rigs, up slightly from 33. But Precision’s international business, consisting of rigs in Saudi Arabia and Kuwait, reported lower revenues and margins, in part because of the challenges of drilling during an ongoing conflict. “Internationally, our teams continue to execute safely and reliably despite geopolitical uncertainty in the region,” said Ford. “During the quarter, we secured an additional five-year contract for an existing Kuwait rig … With this new contract, we expect our international rig count to increase from seven to eight during mid-2027.” The company’s results included a one-time restructuring charge of $3 million linked to the closing of its office in Dubai. “During the quarter, we streamlined our regional structure by closing our Dubai office and relocating leadership closer to our customers in Saudi Arabia and Kuwait,” Ford said on a conference call on Wednesday. “The move also helps reduce our cost structure in a region where we expect to have eight rigs running for the foreseeable future.” In its second-quarter filings, Precision reported the Canada Revenue Agency sent it a notice of reassessment for the 2018 tax year, denying certain deductions the company claimed. The driller said it plans to “vigorously contest” the notice, along with a follow-up letter flagging potential issues with other tax filings. “We have a very strong conviction in our position,” Precision’s chief financial officer, Dustin Honing, said on the conference call. “Although we think it’s highly unlikely, the max liability that we disclosed for any potential future reassessments on this issue would be $155 million, plus interest.” Overall, the company posted a net loss of about $1 million during the quarter, compared to a profit of $16 million last year. This was primarily because of a depreciation expense of $11 million. Looking ahead Ford remains optimistic for the rest of the year and expects the demand for drilling rigs to be high. • Email: nkarim@postmedia.com Cenovus Energy says profits tripled on higher prices, record oilsands productionAbout $500 billion in natural gas lies off Newfoundland's coast. Can Canada tap it?