November 3, 2010 / 9:32 AM / 7 years ago

UPDATE 2-Canada's Calfrac bullish on year-end drilling growth

* Shares up 9 pct at 52-week high

* Pick up in drilling to help growth through 2011

* Q3 EPS C$0.72 vs est C$0.40

* Q3 revenue C$275.5 mln vs est C$225.9 mln

(Recasts; adds analyst comments, detail, share movement)

By Isheeta Sanghi

BANGALORE, Nov 3 (Reuters) - Canada’s Calfrac Well Services Ltd CFW.TO said demand for its pressure pumping services is expected to grow by the end of the year and into 2011 as horizontal drilling activity in Canada is picking up to its seasonal peak.

Shares of the company rose as much as 9 percent to a year high of $28.15.

“Activity in the Montney and Deep Basin plays is strong with a greater proportion of wells being drilled horizontally. These regions are amongst the most economic plays in North America,” the company said, referring to demand in Canada.

On its U.S. prospects, the company said it expects to deploy two large fracturing crews to the Marcellus shale play during the first half of 2011 on long-term minimum commitment contracts.

“By mid-2011, Calfrac anticipates operating three large fracturing crews in this emerging basin,” it said. Firmer oil prices and brisk drilling activity for natural gas in shale rock formations in North America have buoyed the oil field services industry, which has suffered from a big drop in Gulf of Mexico drilling since BP Plc’s BP.L oil-well blowout in April.

“They’ve trimmed the fat and operating a little bit leaner now, but they’re also operating in an environment that is extremely bullish for the type of service that they provide,” BMO Capital Markets analyst Michael Mazar said in a statement.

“They’re not only firing on all cylinders, but they’ve got their cost structure in a better place than it once was,” Mazar, who has an “outperform” and a C$30 price target on the stock, said.

Mazar added that he expected the company to move pricing, margins and utilizations higher and grow even more in 2011 over the next couple of quarters with the winter drilling season peaking.

The oilfield services company posted higher third-quarter results, and said earnings jumped to C$31.2 million, or 72 Canadian cents a share, from C$2.8 million, or 8 Canadian cents a share, last year.

Revenue more than doubled to C$275.2 million.

Analysts on average were expecting the company to earn 39 Canadian cents a share, on revenue of C$225.9 million, according to Thomson Reuters I/B/E/S.

The company’s shares, which have risen about 16 percent since it raised its capital program for the second time this year in September, were trading up 8 percent at C$27.93 during morning trade on Wednesday on the Toronto Stock Exchange. (Additional reporting by Aftab Ahmed; Editing by Vyas Mohan) (aftab.ahmed@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: aftab.ahmed.reuters.com@reuters.net))

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