Precision Drilling Trust, Canada's largest oilfield services provider, cut its distribution to investors Friday by 31.5% after it said customer demand for its services was continuing to decline.
The Calgary-based company reported profits fell in the first quarter on lower activity, and it said Friday that the "activity decrease has become more entrenched during the second quarter due to weather conditions and a further weakening in customer demand. This weakening in demand is consistent with the large decline in the number of government licenses issued for new natural gas wells in the Western Canada Sedimentary Basin over the past two months."
The company said its decision to cut its distribution rate to C13 cents/unit from C19 cents "reflects low equipment utilization levels, on a seasonally adjusted basis, for Precision's operations in Canada and an increasingly competitive pricing environment."
Earlier this month, Precision Chairman Hank Swartout announced his decision to retire this year. Precision reported April 30 that net earnings in the first quarter fell 29% to C$159 million (C$1.26/unit). Revenue was down 23% from a year earlier to C$411 million. It said the January-March period represented its lowest count for drilling rig operated days for a first quarter since 1999.
Late last year in Western Canada, higher service costs led several producers to cut back planned conventional gas drilling projects (see Daily GPI, Nov. 2, 2006; Oct. 26, 2006). The cutbacks were followed by an exceptionally snowy winter in northern British Columbia and Alberta, which contributed to a further pullback in late-season drilling (see Daily GPI, April 13). Energy executives said last month that as service costs stabilized, they might ramp up drilling later this year, but they acknowledged the late ramp up may not compensate for the early-year slowdown (see Daily GPI, April 26).
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