* Suspends distributions indefinitely
* To pay down debt through $400 mln in offerings
* Net earnings C$92 mln vs C$89 mln
* Units rise 2 Canadian cents (Adds details, updates unit prices and changes dateline from Toronto. In U.S. dollars unless noted)
CALGARY, Alberta, Feb 9 (Reuters) - Precision Drilling Trust PD_u.TO will suspend distributions to investors indefinitely and raise $400 million through offerings of notes and units as it struggles to repay debt from an ill-timed acquisition and cope with an industry downturn.
Precision, Canada's No. 1 contract oil and gas drilling firm, plans to raise $150 million through an issue of trust units and $250 million from a senior notes issue as it looks to repay debt from its $2 billion purchase of Grey Wolf Inc in December.
After months of wrangling, Precision acquired the Houston-based drilling firm to speed up a planned U.S. expansion. But the deal came just as the drilling market began to collapse on plunging oil and gas prices.
"The timing really couldn't have been worse," said Brian Purdy, an analyst with National Bank Financial.
Despite the cut in its payouts, Precision units rose on Monday because, Purdy said, investors had already anticipated the trust would take steps to raise money to pay off the short-term financing needed for the Grey Wolf deal.
"People were expecting that something dilutive was coming and sold prior to this announcement," Purdy said.
Indeed, Precision's units had fallen 53 percent since the end of 2008. They rose 2 Canadian cents to C$4.97 by late Monday morning on the Toronto Stock Exchange, recovering from an early 12 percent plunge.
Precision said it does not expect its business to be strong in the short term, as oil and gas prices remain low amid the recession and its customers cut back on drilling.
"Contraction in the global economy and low commodity prices have led to a decline in customer demand for Precision's services early in 2009," Kevin Neveu, the trust's chief executive, said in a statement. "The shift in momentum has been swift."
Precision expects to have 102 drilling rigs working under contract in the first quarter of this year and average of 93 in the second-quarter, out of a fleet of 229 rigs.
For all of 2009, Precision said it expects to have an average of 85 rigs under contract: 53 in the United States, 30 in Canada and two in Mexico.
The company also released it fourth-quarter earnings on Monday, posting a profit C$92 million ($75.4 million), or 71 Canadian cents a unit, for the three months ended Dec. 31. That compared with C$89 million, or 71 Canadian cents a unit, a year earlier.
Revenue was C$335 million, up 34.7 percent from C$248.7 million, helped by the Grey Wolf purchase.
$1=$1.22 Canadian Reporting by Scott Haggett and Scott Anderson; editing by Rob Wilson