Fourth quarter earnings expectations for Calgary-based Precision Drilling Corp. were cut nearly 70% (by C31-37 cents/share) on Wednesday because of lower-than-expected Canadian drilling activity. However, on a positive note, Precision said strengthening natural gas and world oil prices will position it to take advantage of a stronger Canadian market by the first quarter.

“We are optimistic that the U.S. market will soon react to these same strong fundamentals and alleviate some of the negative pressure that currently exists in this market,” the company said in a written statement. “We expect that increased activity levels globally, combined with a heightened focus on operational efficiencies, particularly in the Technology Services Group, should enhance future profitability.”

In October, Precision forecast that it would earn in the range of C45-55 cents/share in the fourth quarter. However, earnings now are expected to range between C14-18 cents/share.

Most of the shortfall is within Precision’s Technology Services Group, which “has experienced a number of negative influences on its global operations.” The Contract Drilling Group’s expected earnings also were revised down by 10%; however, pricing levels remain at previous levels. The company’s Rental and Production Group is expected to generate expected results.

Within Technology Services, Precision said, “new product launch teams and service delivery infrastructures established to support the group’s long-term growth strategy have been under-utilized due to the delayed roll-out of new wireline and logging-while-drilling technologies. This is having the greatest effect in the U.S., Latin America and Asia Pacific regions. In addition, political instability, project delays and adverse weather conditions in a number of regions have further impacted activity levels.”

The integrated oilfield company provides land drilling, well servicing operations, industrial process services and oilfield equipment rentals in Canada and globally. For the nine months of this year, revenues fell 14% to C$1.29 billion, and net income fell 46% to C$82.4 million. Precision said the drop reflected a decline in Canadian drilling activity, as well as a drop in its rental business.

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