December 16, 2009 / 4:51 PM / 8 years ago

UPDATE 1-Precision Drilling parks rigs, takes charges

* Decommissioning 38 drilling rigs

* Taking charges of up to C$98 mln pretax in Q4

* Units up 1 percent (Adds details)

CALGARY, Alberta, Dec 16 (Reuters) - Precision Drilling Trust PD_u.TO said on Wednesday it will cut its drilling fleet by nearly 10 percent and record fourth-quarter charges of up to C$98 million ($92.1 million) pretax as it looks to boost profit during an industry downturn.

Precision, which drills more oil and gas wells in Canada than any other company, also said it will continue indefinitely with a policy of not paying out monthly cash distributions to unitholders, opting to use the cash to cut its debt.

Precision and other oilfield service companies are looking to cope with a widespread drop in drilling sparked by the recession, low natural gas prices and new technology that uses one well, rather than several, to produce gas from a large area.

To cope, the company is decommissioning 38 of its least-efficient rigs -- 26 in Canada and 12 in the United States -- and upgrading others to improve their efficiency. The company has a fleet of 352 rigs.

“This repositioning of the Precision fleet supports our strategy of providing high performance, high value services,” Kevin Neveu, Precision’s chief executive, said in a statement.

The company will also decommission 30 service rigs and nine snubbing units.

The trust said that it would take a noncash, pretax charge in the fourth quarter of between C$80 million and C$90 million to account for the costs of the rigs.

“It’s a relatively neutral move,” said Kevin Lo, an analyst at FirstEnergy Capital. “The rigs that they’re parking weren’t working this year anyway.”

Precision said it will also continue to take steps to cut its long-term debt, which stood at C$899 million at the end of November.

It made a cash payment of C$75 million against the amount owing and will take a C$8 million, noncash charge before taxes to account for the amortization of deferred financing costs.

The trust also said it continues to evaluate a switch to becoming a corporation, and expects to make the move well ahead of the Canadian government’s Jan. 1, 2011 deadline for trusts to lose their tax breaks.

Precision units were up 7 Canadian cents at C$7.45 late on Wednesday morning on the Toronto Stock Exchange. ($1=$1.06 Canadian) (Reporting by Scott Haggett; editing by Peter Galloway)

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