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Precision stumped for answers on drilling slowdown
Tuesday September 10, 7:04 pm ET
(Figures in U.S. dollars unless noted)
TORONTO, Sept 10 (Reuters) - Canada's biggest energy service company, Precision Drilling Corp. (Toronto:PD.TO - News), is at a loss to explain a dramatic slowdown in oil field drilling activity in its biggest market and sees few immediate signs of a recovery, its chief financial officer said on Tuesday.
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Dale Tremblay told an energy conference in Toronto that the decline in activity could possibly be blamed on wet weather in some regions of Western Canada, although he pointed out that winter was traditionally the busiest drilling season.
Statistics from the Canadian Association of Oilwell Drilling Contractors show the rig count is smaller than last year -- 33 percent of rigs were drilling this week, down from 55 percent a year ago -- despite higher prices for both oil and gas.
"It is an interesting position we're in today," he told analysts and portfolio managers at Peters & Co Ltd.'s annual energy conference.
"I'm not sure if it's the weather... but activity went from 38 percent in July to 31 percent in August. The weather continued to be not in our favor and we're now in the first part of September at 31 percent.
"And there are not a lot of signs of improvement, although our marketing people say there is still a lot of interest...and they are very positive, so it's an interesting problem," he added.
Declines in drilling activity slashed Precision's second-quarter profits this year by 90 percent.
Tremblay said Precision was aggressively looking to increase its international business to reduce its exposure to the volatility of the North American markets.
"Our commitment is to slowly take Precision from being 70 percent Canadian to be 50/50," he said. "It's not that we don't like Canada... it's just that we feel we need to get our revenue diversified."
In Mexico, where Precision has a $270 million contract to drill 240 wells for state oil monopoly Pemex, Tremblay said the company was interested in doing more business.
"That market needs outside help to develop their resources...so they can become self efficient," he said.
He said Precision was also seeking to develop its technology group and was currently building inventories.
"We are now producing product and building inventories but it will take us at least through 2003 for us to get enough kit to be effective and generate profitability from these new technologies," he added.
Shares in Precision closed up C$1.34 at C$52.25 in Toronto on Tuesday.
(Lesley Wroughton, Reuters Toronto newsroom +416-941-8101, |
