Wednesday, contract drilling service provider Precision Drilling Trust (PDS,PD_UN.TO), reported a surge in second-quarter profit, benefiting primarily from a foreign exchange gain, partially offset by an increase in finance charges. Revenues for the quarter increased 51% from last year on contribution from the Grey Wolf acquisition.
The Calgary, Canada-based company posted a second quarter net income of C$57.5 million or C$0.22 per unit, compared to net income of C$21.7 million or C$0.16 per unit in the same quarter last year.
Earnings for the quarter increased from a $74 million foreign exchange gain or $0.20 per unit after-tax, however, was also impacted by a $43 million increase in finance charges. Net earnings per unit were also impacted by the 119% increase in units outstanding in the one-year period ending June 30, 2009.
Commenting on the results, Kevin Neveu, President and Chief Executive Officer said, " Precision's second quarter results were achieved against the back drop of historically low utilization during Canadian spring break-up and the apparent bottoming of customer demand in the United States. Under these challenging market conditions, I appreciate the exceptional efforts of our people delivering cost reductions and successfully integrating the Grey Wolf acquisition while reinforcing our promise of high performance, high value services to our customers."
In the preceding first quarter, Precision's net earnings declined to $57.42 million or C$0.30 per unit from C$106.27 million or C$0.84 per unit a year back.
Revenue for the second quarter increased 51% to C$209.6 million from C$138.5 million in the comparable quarter last year.
The increase in revenue was due to the acquisition of Grey Wolf, Inc., an onshore drilling contractor in the United States with 123 rigs including two in Mexico, last year. Contract Drilling Services segment revenue almost doubled to C$185.2 million from the previous fiscal year, while Completion and Production Services segment revenue declined sharply to C$25.6 million from C$47.5 million.
Average revenue per utilization day for contract drilling rigs in the quarter increased to US$24,817 per day from US$22,006 per day in the United States last year, and to C$18,335 from C$15,924 for Canada.
Within Completion and Production Services segment, average hourly rates for service rigs were C$604, compared to C$649 in the earlier year.
Average operating costs per utilization day for drilling rigs increased to US$14,405 per day in the quarter from US$10,331 per day in the US a year ago and decreased marginally in Canada to C$10,573 from C$10,685.
Average hourly operating costs for service rigs within the Completion and Production Services segment increased to C$507 from C$453 a year before.
In the first quarter, the company reported a 31% rise in revenue to C$448.45 million from the prior-year comparable quarter.
For the first six months of the year, Precision reported net income of C$114.9 million or C$0.50 per unit, compared to C$128.0 million or C$0.95 per unit in the prior year.
Revenue for the six month period increased 38% to C$658.0 million from C$481.2 million in the previous year.
The company noted that as part of its ongoing net debt reduction plan, it expects to keep capital expenditures at low levels during 2009.
"Through a combination of equity, debt and cash generation activities, we have paid off and eliminated our bridge facility, reduced total debt, significantly reduced annual interest expense and removed financing uncertainties," noted Neveu.
Looking ahead, Neveu said that Canadian activity will remain depressed with a diminishing likelihood of a meaningful recovery this year. In the US, due to rig oversupply, day rate pressure will persist in many areas of the market for some time to come, he added.
PDS is currently trading on the NYSE at $5.08, up $0.14 or 2.83%, with a volume of 1.06 million shares. The stock is trading on the TSX at C$5.54, up C$0.08 or 1.47%, with a volume of 0.66 million shares.
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