Ensign profit slides on lower demand, increased costs

Mon Nov 12, 2012 7:04am EST
 

(Reuters) - Ensign Energy Services Inc's (ESI.TO: Quote) third-quarter profit fell 30 percent on higher costs and reduced demand for its services in North America.

the company also said it expects oilfield services activity levels at its Canadian operations to improve sequentially in the current quarter.

Canada's largest oil field services provider by market value said pricing pressures inherent in reduced demand for oilfield services hurt gross margins at its North American operations.

Ensign, which raised its quarterly dividend by 5 percent last week, also said it experienced a reduction in activity levels and pricing, particularly for conventional drilling rigs in United States.

Production companies have switched towards oil-rich and liquids-rich plays since 2008, driven by the gas glut and falling gas prices. But now the number of rigs targeting oil and condensate plays also appears to have peaked.

Ensign's net income fell to C$44.8 million, or 29 Canadian cents per share, down from C$64 million, or 42 Canadian cents per share, a year earlier.

Excluding unusual items, the company's net income was C$47.2 million, or 31 Canadian cents per share, beating an average estimate among analysts of 30 Canadian cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose 10 percent to C$525.7 million as a result of Ensign expanding and upgrading its rig fleet, it said.

Gross margin fell to 28.9 percent in the quarter, from 31.3 percent, a year earlier.

Expenses rose 16 percent to C$451.3 million.

Ensign shares closed up 11 Canadian cents at C$14.41 on the Toronto Stock Exchange on Friday. They are down 11 percent year to date. (Reporting by Jeff Jones in Calgary and Ankur Banerjee in Bangalore; Editing by Joyjeet Das)