Precision Sees US Rig Market Bottoming Out Sooner, Not Later
April 22 2009 - 4:00PM
Dow Jones News
Precision Drilling Trust (PDS) is in no hurry to convert to a
corporation, at least not until 2010 when there is perhaps more
visibility in Canada's drilling-rig market, President and Chief
Executive Kevin Neveu said Wednesday.
"There is no pressing reason to change; the clock hasn't started
ticking yet but we know the game ends at the end of 2010," said
Neveu, referring the government's intention to start taxing income
trusts at corporate rates Jan. 1, 2011.
His comments were made during an analyst conference call
following the release of first-quarter earnings for 2009 earlier in
the day.
Precision's results - showing a quarterly profit figure that
dropped by almost half from a year ago - came as U.S. counterparts
such as Halliburton Co. (HAL) predicted a second-quarter trough in
North American drilling activity.
Precision spent US$2 billion last year to buy U.S. driller Grey
Wolf, Inc., to push up its market share in the U.S. But that
acquisition happened just as the drilling market started to
collapse, as oil prices fell.
The Canadian-based company has been hit on both sides of the
border as the global recession has undermined the demand for
energy, meaning oil and gas companies have slashed or deferred
spending on new wells.
Precision controls about 20% of the gas-drilling rig market in
Canada.
Neveu said the U.S. drill-rig market is starting to show some
bright spots, with some recovery seen in markets such as south
Texas. He said these first signs of a turnaround mean the bottom of
the market is nearer rather than farther away.
"We expect the bottom in the second quarter and nothing I see
suggests it will be pushed out until the end of the year," he
said.
The trust managed to secure C$380 million in financing Monday
from Alberta Investment Managment Corp. and also announced a rights
issue to shore up the balance sheet.
Precision said the goal for 2009 is to work on reducing debt and
integrating its U.S. acquisition.
Precision's first-quarter earnings fell to C$57.4 million or 39
Canadian cents per unit, from C$106.3 million or 84 Canadian cents
a year earlier.
The company expects demand to remain weak with prices continuing
to fall.
"Precision expects this trend...to continue into the second
quarter of 2009 and potentially longer depending on commodity
prices," the company said in a statement.
In Toronto Wednesday, Precision is up 54 Canadian cents, or 10%,
to C$5.77 on 3 million units.
Company Web Site: http://www.precisiondrilling.com
-Brian Truscott, Dow Jones Newswires; 604-669-1595;
brian.truscott@dowjones.com