May 8, 2009 / 1:23 PM / in 9 years

UPDATE 2-Canada's Eveready Q1 profit sinks 74 pct

* Q1 rev falls 12 pct

* Sees weak demand for exploration, production services

* Says ‘09 rev could contract by as much as 10-15 pct (Adds details, analyst’s comments, updates share movement)

By Isheeta Sanghi

BANGALORE, May 8 (Reuters) - Canada’s Eveready Inc EIS.TO, a provider of oilfield production services, posted a 74 percent drop in first-quarter profit as customers significantly curtailed oil sands drilling programs.

“We believe this negative trend could continue for the remainder of 2009 until economic conditions in the oil and gas industry improve... we anticipate our lodging services will operate at lower occupancy levels this coming summer compared to 2008,” Eveready said in a statement.

The company said this year the winter drilling programs ended in February, whereas in prior years these programs continued till the end of March.

Eveready, which expects 2009 revenue to contract by 10 to 15 percent, said the weakness in oil and gas prices and uncertainties in the capital markets would hurt demand for exploration and production services.

Fraser Mackenzie analyst Paul Bradley said the industrial services segment can hold up reasonably well, even though the accommodation business, which is largely built around the oil sands in Western Canada, has dropped significantly.

Bradley said activity at the company’s exploration group, which is largely involved in doing seismic surveys, will be muted as there is less oil and gas exploration happening in Western Canada.

The environmental services segment will see less activity, but not as much as the rest of the businesses.

“When you put the four of those together, yes absolutely I think the rest of the year will go down,” Bradley said.

For the first quarter, the company posted net earnings of C$4.9 million, or 27 Canadian cents a share, compared with C$18.7 million, or 96 Canadian cents a share, a year earlier.

Revenue dropped 12 percent to C$162.7 million, dragged by a sharp decline in revenue from core hole drilling support services provided in the Alberta oil sands region in March.

The revenue drop is not surprising, according to Bradley.

“The customer base they have, the type of services they provide, I was pretty sure they’d be having a pretty weak first quarter,” he said.

On April 29, U.S waste-management company Clean Harbors Inc (CLH.N) made a bid to acquire Eveready, valuing the company at nearly three times its previous day close on the Toronto Stock Exchange. [ID:nBNG229129]

The analyst, who has a “tender” rating on the stock, said his advice to investors is “take this deal.”

The company’s shares, which shot up more than 200 percent since the deal was announced, were up 10 Canadian cents at C$10.55 in morning trade on the Toronto Stock Exchange. (Editing by Himani Sarkar, Ratul Ray Chaudhuri)

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