May 5, 2008 / 4:50 PM / in 10 years

Ensign Energy profit drops 20 pct in first quarter

CALGARY, Alberta, May 5 (Reuters) - Profit at Ensign Energy Services Inc (ESI.TO) fell by a fifth in the first quarter as a drop in Canadian drilling due to last year’s weak natural gas prices cut into results, Canada’s top oil field service provider by stock market value said on Monday.

But Ensign said its expansion outside of its home country cushioned some of the impact.

The company also said its Canadian activity levels exceeded its expectations, even after exploration and production companies clawed back their budgets for the winter drilling season late in 2007.

Canadian natural gas prices have rebounded strongly this winter, but companies and analysts have said they do not expect that to translate into sharply increased drilling budgets until next year.

“While an oversupply of equipment still exists, and it remains to be seen whether the province of Alberta’s latest tinkering with the royalty regime will improve the economics ... there is growing optimism around a recovery,” Ensign said.

“However, we are not yet out of the woods.”

It said it still expects activity to be in line with lows through the second and third quarters due to seasonal slowdowns and the weaker drilling activity rates forecast earlier this year.

In the first quarter, Ensign, one of several energy, industrial and sports concerns that count Calgary financier Murray Edwards as a major shareholder, earned C$82 million ($81 million), or 53 Canadian cents a share, down from year-earlier C$102 million, or 67 Canadian cents a share.

Revenue dipped 7 percent to C$472 million.

Canadian revenue fell 17 percent, but international operations generated 20 percent more sales, the company said.

U.S. revenues increased 2 percent as the company increased its rig fleet in the United States by 15 percent.

Ensign shares were up 18 Canadian cents at C$22.26 on the Toronto Stock Exchange. They have surged more than 45 percent this year.

$1=$1.01 Canadian Reporting by Jeffrey Jones; Editing by Peter Galloway

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