CALGARY - Precision Drilling Trust (TSX:PD.UN) says its first-quarter profits fell by nearly half from a year ago, as dismally low natural gas prices prompt oilpatch firms to leave their drilling rigs idle.
The Calgary-based company said Wednesday it earned $57.4 million in the first three months of 2009, down 46 per cent from a year-earlier $106.3 million.
"As we move through this second quarter, the sector is experiencing record low activity levels in Canada and again, the impact is mitigated by the less seasonal nature of our expanded United States operations," Precision chief executive Kevin Neveu stated.
"The economic conditions and continuing weak commodity prices continue to drive activity down in Canada and the United States at an unprecedented rate."
Revenue rose 31 per cent from $343 million to $448 million, thanks to the $2.1-billion acquisition of U.S. driller Grey Wolf Inc. in December.
Neveu said the consolidation of Grey Wolf's 123 drilling rigs with Precision's fleet of 257 rigs has been successful, despite the tough economic environment.
Precision's first-quarter net earnings, worth 30 cents per unit, compared with 84 cents per unit in the first three months of 2008.
The results were below a consensus estimate compiled by Thomson Reuters. Analysts, on average, expected revenue of $458 million and earnings per share of 35 cents.
BMO Capital Markets analyst Michael Mazar said he had expected a rough first quarter for Precision, which did reasonably well from an operational standpoint.
"They were able to control their costs, margins were reasonable, despite the fact that rig utilization was way down," he said.
"The one thing that was holding this company back was the balance sheet. The debt issues were not insurmountable, but they were certainly acting as an overhang on the stock."
Precision said it took a $34-million foreign exchange hit and a $36-million increase in interest expense during the quarter, and per-unit earnings were diluted by a 56 per cent increase in the number outstanding.
Earlier this week, the company said an Alberta government crown corporation is taking a 15 per cent stake in Precision through $280 million in financing, paving the way for the oilfield services company to restructure its heavy debt load.
