April 22, 2009 / 11:39 AM / in 9 years

UPDATE 2-Precision Drilling warns on pricing as earnings drop

* Profit drops 49 pct

* Says weak pricing to continue

* Shares up 5.7 pct

(Adds detail and comment; changes dateline from TORONTO.)

CALGARY, Alberta, April 22 (Reuters) - First-quarter profit at Precision Drilling Trust PD_u.TO dropped by nearly half as weak commodity prices forced energy firms to slash spending on new wells, Canada’s No. 1 oil and gas well driller said on Wednesday.

Precision, which this week secured C$380 million in financing from Alberta’s public-sector fund manager in order to slash the cost of servicing debt incurred in a big acquisition, said demand for its services remained weak in the quarter, prices fell and are dropping still.

“Precision expects this trend (of lower rates) to continue into the second quarter of 2009 and potentially longer depending on commodity prices,” the company said in its earnings release.

Precision borrowed heavily to finance last year’s $2 billion acquisition of U.S. driller Grey Wolf Inc, hastening a U.S. expansion just as the market weakened because of collapsing oil and gas prices.

Despite the timing, the company thinks the purchase has helped it offset the impact of drilling cutbacks in Western Canada, because the U.S. market has been stronger.

PROFIT FALLS

Precision, which operates about a fourth of Canada’s oil and gas drilling rigs, said net earnings in the quarter fell 46 percent to C$57.4 million, or 30 Canadian cents per unit, from C$106.3 million, or 84 Canadian cents in the first quarter of 2008.

It had been expected to post a per-unit profit of 35 Canadian cents, the average analysts’ estimate according to Reuters Estimates.

Revenue rose 31 percent to C$448.4 million.

The company said that fleet of drilling rigs rose 54 percent to 380 from the prior-year with the addition of Grey Wolf’s rigs. Rig utilization days for its Canadian fleet fell 37 percent, to 7,482 days.

It also has 229 service rigs, up 6 from the year-ago quarter. Service rig operating hours dropped 42 percent to 64,854.

Precision units rose 30 Canadian cents to C$5.53 on Wednesday morning on the Toronto Stock Exchange. ($1=$1.24 Canadian) (Additional reporting by Andrea Hopkins) (Reporting by Scott Haggett; editing by Janet Guttsman)

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