July 22, 2010 / 11:32 AM / 8 years ago

UPDATE 3-Precision Drilling posts Q2 loss on forex, charges

* Q2 loss C$0.24 vs yr-earlier EPS C$0.22

* Revenue up 25 pct

* Says 2010 activity to exceed 2009 levels

* Shares down 3 pct (Adds comment and updates shares)

CALGARY, Alberta, July 22 (Reuters) - Precision Drilling Corp (PD.TO), Canada’s biggest oil and gas well drilling firm, reported an unexpected second-quarter loss on Thursday, hurt by charges and foreign exchange losses, but said activity levels for the rest of 2010 will exceed those of 2009.

Demand for energy is rising as global economies start to improve and move off the bottom of the recession, the company said. It said customers are increasing drilling programs as liquidity in capital markets and oil prices rise, though heavy rains in Western Canada have reduced activity.

“Notwithstanding the difficult weather so far in the summer of 2010, activity is running about 30 percent ahead of 2009,” Kevin Neveu, Precision chief executive, said on a conference call.

For 2010, Precision expects to have an average of about 78 rigs under term contract, with 41 rigs contracted in the United States, 36 in Canada and one in Mexico.

It’s budgeting for capital expenditures of about C$189 million ($182 million) this year.

Precision, which converted back to a corporate structure last month in advance of a Canadian government deadline ending the tax-advantaged trust structure next year, said it expects to have an average of 24 rigs in Canada under term contract in 2011.

For the second quarter, ended June 30, the company posted a net loss of C$66.5 million, or 24 Canadian cents a share, compared with net income of C$57.5 million, or 22 Canadian cents a share, a year earlier.

The latest quarterly results included a foreign exchange loss of C$26 million and finance charges of C$52 million.

Precision was expected to post a profit of 3 Canadian cents per share, according to the average of analysts’ forecasts compiled by Thomson Reuters I/B/E/S.

Increased drilling activity led to a 25 percent rise in revenue to C$261.8 million.

The company has been coping with weak demand for drilling services as natural gas prices remain low and new technology is introduced that uses one well, rather than several, to produce gas from a large area.

Precision shares fell 23 Canadian cents, or 3 percent, to C$7.57 on Thursday on the Toronto Stock Exchange

$1=$1.04 Canadian Reporting by Bhaswati Mukhopadhyay and Scott Haggett; editing by Peter Galloway

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