On Wednesday, Precision Drilling Trust (NYSE: PDS ) struck as positive a note as possible, given the circumstances.
In a market just described by competitor Nabors Industries (NYSE: NBR ) as either "dismal or pretty bad," Precision saw first-quarter Canadian drilling rig utilization at 50%, and customer pricing down 11% year over year. The utilization was even lower than the broader industry's rate, because Precision refuses to chase volume by giving up margin. Operating margin came in at a fairly impressive 36%.
Precision talked about the current financial period being a bottoming quarter. Even if the firm proves optimistic on the home front, there are many interesting things happening outside Canada.
I've noted Precision's southern sojourn, in which the firm targeted 12 rigs operating in the U.S. by the end of 2007. That program is going smashingly well, with strong contracts in place and near-100% utilization. The company's fifteenth rig will be coming to America this month, and that's just one out of a possible eight transplants for the second quarter. One rig is working on the Marcellus shale -- beloved to Chesapeake Energy (NYSE: CHK ) and many others -- in New York State. The company expects to get more work there as the play heats up.
That's not the only shale play that will demand Precision's quality high-efficiency rigs. Back at home, the Montney formation is just starting to turn heads, and EnCana (NYSE: ECA ) already has a 50-well program for 2008. Importantly, those are all horizontal wells -- exactly the sort of work that Precision is well-suited to perform.
Precision's technological leadership helped spur Weatherford International (NYSE: WFT ) to acquire the company's international arm back in the day. This deal made sense for both parties at the time, but now the international scene is really the place to be seen. Unfortunately, there's a non-compete agreement attached to that deal, which only lifts in August of this year. The holdup means that Precision can only watch and wait while folks like Bronco Drilling (Nasdaq: BRNC ) gallop off to grab Eastern assets.
Some analysts bemoan this fact, believing that Precision has a poor shot at gaining pole position. But given the firm's financial strength and its leader's background at equipment emporium National Oilwell Varco (NYSE: NOV ) , I don't think the driller will have too much trouble breaching international shores.
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