(Reuters) - Precision Drilling Corp‘s, Canada’s No. 1 oil and gas driller, quarterly profit narrowly missed analysts estimates as an unusually warm winter led to lower rig utilization in the country.
The warm weather in Canada delayed winter season drilling and the annual spring break-up arrived earlier, resulting in lower average utilization rates for the quarter, the company said.
Precision Drilling, which has three-fourths of its rigs operating in oil wells, echoed the larger trend and said it expects glut in the natural gas industry to continue until the gas rig count reaches its bottom over the coming months.
“The gas rig count is a big question right now ... it is true that the market will be kind of stalled there in terms of growth, till we see the natural gas rig count bottom,” Desjardins Securities analyst Jamie Murray said.
Increased use of hydraulic fracturing has ensured that the oilfield services industry’s profit soared in the last few years, but the efficient extraction method has also created a glut that has pushed natural gas prices to decade lows.
The low prices have also forced energy companies to move to liquids-rich regions in Canada and the United States.
Its larger North American peers, such as Halliburton Co and Schlumberger Ltd, have said the movement out of natural gas basins would hit the industry in the near term, even as they posted strong results.
Precision Drilling’s first-quarter net income rose to C$111 million, or 39 Canadian cents per share, from C$65.6 million, or 23 Canadian cents per share, a year earlier.
Revenue rose 22 percent to C$640.1 million.
Analysts had expected the company to earn 41 Canadian cents per share on revenue of C$647.4 million, according to Thomson Reuters I/B/E/S.
However, drilling margins rose by over C$2,000 per utilization day both in Canada and the United States from last year.
Precision Drilling cut its 2012 spending budget by C$150 million to C$975 million, citing deferral of some infrastructure projects and non-contracted projects and reduced maintenance.
“The market had some concerns about their capital spending levels and they pulled those back ... that will be viewed positively,” Murray said.
Shares of the company, which has a market value of C$2.51 billion, were trading down 2 percent at C$9.38 on Thursday on the Toronto Stock Exchange. They have fallen 15 percent this year.
Reporting by Aftab Ahmed in Bangalore; Editing by Don Sebastian and Sriraj Kalluvila