May 11, 2009 / 9:30 PM / in 9 years

UPDATE 1-Ensign expects "dismal" summer drilling activity

* Q1 EPS C$0.47 vs C$0.53 a year earlier

* CEO sees “dismal” summer activity levels

* Diversification, low debt cushion results (Recasts with CEO comments. In U.S. dollars unless noted)

CALGARY, Alberta, May 11 (Reuters) - Rising oil and gas prices won’t be enough to spark big gains in drilling in the coming months following the weakest winter period in more than two decades, the head of Ensign Energy Services Inc ESI.TO, Canada’s No. 2 oil field service provider, said on Monday.

Ensign, which reported lower, but better-than-expected, first-quarter profit, does not foresee oil and gas producers loosening their purse strings this summer, even as the Alberta government offers incentives, Chief Executive Bob Geddes said.

Geddes said the drilling sector operated at 40 percent of capacity in the first quarter -- typically a period when the industry is busiest -- and is currently running at 7 percent as spring road bans remain in effect with snow and ice melting.

“In spite of the government’s royalty holiday incentives, we’re still seeing very little to suggest that this summer will be anything but dismal, arguably the worst in 25 years,” Geddes told analysts.

With oil prices having bounced past $50 a barrel from the high $30s and low $40s in January and February, drilling for crude is beginning to make a comeback in some areas such as southeastern Saskatchewan, he said.

However, gas drilling is not expected to rebound until late 2010, he said. Current gas prices at just over $4.30 per million British thermal units are less than half last year’s level.

Ensign, one of several energy, industrial and sports concerns that count Calgary financier Murray Edwards as a major shareholder, said its diversification into U.S. and international markets and its low debt allowed it to cushion some of the blow from the drop-off in Canadian drilling in the first quarter.

It earned C$72.7 million ($63.3 million), or 47 Canadian cents a share, down 11 percent from a year-earlier C$81.8 million, or 53 Canadian cents a share.

Excluding items, the company earned C$70.1 million, or 46 Canadian cents a share, down 12 percent from C$92.7 million, or 60 Canadian cents a share.

Analysts, on average, expected earnings of 29 Canadian cents a share, according to Reuters Estimates.

Ensign shares climbed 45 Canadian cents, or 3 percent, to C$15.25 on the Toronto Stock Exchange on Monday. That is down by a third from a year ago.

The company said its customers have either delayed or canceled parts of their drilling programs due to the sharp declines in commodity prices, reduced access to credit and economic uncertainty.

$1=$1.17 Canadian Reporting by Jeffrey Jones and Chakradhar Adusumilli; Editing by Peter Galloway

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