December 6, 2011 / 11:24 AM / 6 years ago

UPDATE 3-Precision Drilling ups 2012 capex, sees Q4 charge

* Orders 7 new drilling rigs

* Cuts 2011 capex by 16 pct

* To scrap rigs, take Q4 pretax charge C$100-C$120 mln (Adds details, analysts’ comments)

By Arnav Sharma

Dec 6 (Reuters) - Precision Drilling Corp raised its 2012 capital budget by 54 percent to help meet strong demand for its services, but Canada’s No. 1 oil and gas driller forecast a fourth-quarter charge as it scraps some of its lower-tier rigs.

High crude oil prices will help push 2012 global energy exploration and production spending to a record high of $598 billion, Barclays Capital said on Monday. This is expected to spur demand for oilfield services companies.

Precision Drilling forecast a capital expenditure of C$1.14 billion ($1.13 billion) for next year, and said it would order 7 new rigs, two of which have already signed long-term contracts.

“Capex plan reflects Precision Drilling’s positive outlook and expected strong demand for its services, particularly for high-end equipment,” RBC Capital Markets’ analyst Victor Marchon said in a note.

Last month, North American rival Helmerich & Payne said it sees 2012 capital expenditure at about $1.1 billion, up 58 percent from last year.

Precision Drilling, however, cut its budget outlook for this year by about 16 percent to C$740 million, with plans to carry forward some of its costs to next year.

The company plans to scrap 36 lower-tier rigs and 13 service rigs from its fleet and sees a related pretax charge of about C$100-C$120 million for the fourth quarter.

“Positive to see Precision scrapping rigs, continuing trend of industry wide rig retirements,” Tudor, Pickering, Holt & Co analysts wrote in a note.

Shares of the company closed at C$11.74 on Monday on the Toronto Stock Exchange. ($1 = 1.0131 Canadian dollars) (Reporting by Arnav Das Sharma in Bangalore; Editing by Sriraj Kalluvila)

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