March 14, 2011 / 10:34 AM / 7 years ago

UPDATE 3-Ensign Energy profit rises on more drilling

* Q4 EPS C$0.27 vs est C$0.23

* Q4 rev up 45 pct

* Sees 2011 rig utilization to be flat in Canada

* Suspends four drilling rigs in Libya (Adds analyst comments)

By Aftab Ahmed

BANGALORE, MARCH 14 (Reuters) - Canada’s No. 2 oilfield services company Ensign Energy Services Inc posted a higher-than-expected quarterly profit, helped by a rise in drilling activity, but warned that lower natural gas prices may offset gains in 2011.

Oil prices spiked in the past year, with the U.S. benchmark averaging $85 per barrel in the fourth quarter, up 12 percent from a year earlier, spurring oil drilling, while natural gas prices averaged 19 percent lower at about $3.98 per million British thermal units (mmBtu).

Ensign expects uncertain drilling demand in natural gas to offset strong demand from crude oil and liquids-rich natural gas projects in Canada and the United States.

Since the beginning of this year, while natural gas prices have hovered around $4, crude has crossed the $100 per barrel mark.

It expects its rig utilization rate in Canada, a region which contributed 43 percent of the revenue in the quarter, to be flat in 2011. Its rig utilization rose 8 percent to 37 percent in Canada and by 24 percent in the United States between October and December.

The United States contributed about 35 percent of the company’s revenue.

BMO Capital Markets analyst Michael Mazar said 2011 should be better than 2010. “They are just being a little bit conservative.”

Ensign, which operates in the United States, Canada, Libya, Australia and seven other countries, also said wet weather hampered Australian operations “significantly” in early 2011.

Earlier this year, Australia’s mining industry bore the brunt of the economic impact from massive floods in Queensland state.

The company also said it has suspended operations at four drilling rigs in Libya.

“It’s not a huge part of their business. So it’s not a big deal,” Mazar said.


The company earned C$41.3 million, or 27 Canadian cents a share, compared with C$22.6 million, or 15 Canadian cents a share, last year. Analysts on average had expected the company to earn 23 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 45 percent to C$404 million, beating the average analyst estimate of C$378.5 million.

Ensign Energy said it will build 19 drilling rigs and 12 servicing wells throughout 2011 and early 2012 for North America.

Industry leaders such as Schlumberger Ltd and Halliburton Co have also reported strong results. Canada’s largest oil- and gas-well drilling company Precision Drilling Corp also posted a solid fourth quarter last month.

Shares of Calgary-based Ensign Energy, with a market cap of about C$2.5 billion, were trading up 5 Canadian cents at C$16.10 on Monday on the Toronto Stock Exchange. They have gained more than a third in the last six months. (Reporting by Aftab Ahmed in Bangalore; Editing by Don Sebastian and Sriraj Kalluvila)

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