Canada Press Article - FYILauren Krugel, The Canadian Press, On Tuesday April 26, 2011, 1:34 pm
By Lauren Krugel, The Canadian Press
CALGARY - Precision Drilling Corp. said Tuesday itis boosting its 2011 capital spending in order to keep up with a growingappetite for new rigs in Canada's oilpatch.
Canada's largest oilfield services company (TSX:PD)said it expects to invest $514 million this year, up from its earlierforecast of $423 million.
"A prolonged Canadian winter drilling seasoncharacterized by the highest utilization since 2006 illustrated thepersistent industry shortage of Tier 1 drilling rigs," chief executiveofficer Kevin Neveu said in a statement, referring to Precision's mostpowerful type of rig.
During the first quarter, Precision signed contracts tobuild seven new rigs for its Canadian customers. That bringsPrecision's new build rig program in 2011 to 12 rigs. Neveu said heexpects to see similar demand increases south of the border.
The majority of the new rigs announced Tuesday areheaded to oil projects, which isn't surprising given the much morerobust pricing crude is enjoying versus natural gas.
"Although some deterioration in gas drilling is feared,oil should continue to pick up the slack," said UBS Investment Researchanalyst Chad Friess in a note to clients.
Earlier Tuesday, Calgary-based Precision posted netearnings of $66 million, or 23 cents per share, for the first threemonths of 2011. That compared with net earnings of $57 million, or 20cents per share, in the first quarter of 2010.
Revenue for the quarter totalled $525 million, up from $373 million for the same period of 2010.
Analysts polled by Thomson Reuters were, on average, expecting earnings of 26 cents per share and revenues of $503 million.
"Canadian drilling activity during the first quarter was at levels that haven't been reached for several years," Neveu said.
He added the company averaged 139 rigs operating, upfrom 106 rigs in the fourth quarter of 2010 and 113 rigs in the firstquarter of 2010.
Across North America, approximately 70 per cent ofPrecision's working rigs during the first quarter were drilling for oilor liquids-rich natural gas targets and over 80 per cent were drillingcomplex horizontal or directional wells.
Precision's current active rig count in Canada is 34, as wet spring weather prompts a pause in drilling across the region.
Precision shares dropped 16 cents to $14.64 in afternoon trading on the Toronto Stock Exchange Tuesday.