Precision Drilling profit drops 15.6 percent

Wed Jul 23, 2008 11:18am EDT
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CALGARY, Alberta (Reuters) - Second-quarter profit at Precision Drilling Trust fell 15.6 percent as compensation expenses rose and profit margins narrowed, Canada's biggest oil and gas driller said on Wednesday.

Precision, which wants to expand its U.S. operations with a $1.8 billion takeover of Grey Wolf Inc, said profit dropped to C$21.7 million, or 17 Canadian cents per trust unit, down from C$25.7 million, or 20 Canadian cents, a year earlier.

Operating earnings, which exclude most one-time and unusual items, fell 19 percent to C$22.05 million from C$27.07 million.

Precision did not provide a figure on operating earnings per unit, but based on 125.79 million units outstanding in the quarter, they were 18 Canadian cents per unit, matching the average forecast among analysts polled by Reuters Estimates.

Although Precision met expectations and provided a positive outlook for the remainder of the year as high commodity prices spur more drilling, its units dropped C$1.29, or 5.5 percent, to C$22.29.

"The earnings were fine," said Kevin Lo, an analyst with FirstEnergy Capital. "No one can complain about these results.

Lo said the retreat by the units was likely due to a big drop in commodity prices over the past week, which has pushed shares of energy producers and oil field service firms lower.

Precision, which runs about a quarter of Canada's onshore drilling rigs, said incentive compensation expenses rose to C$9 million from $4 million.

The rise in expenses lowered its operating earnings profit margin to 16 percent from 22 percent.   Continued...