Ensign has banner earnings
Chris Varcoe <a href=www.canada.com>Calgary Herald Friday, May 09, 2003
Canada's second-largest oilfield services firm rode the wave of high commodity prices and drilling activity to post a one-third jump in first-quarter profits.
Calgary-based Ensign Resource Service Group reported Thursday that net income in the first quarter rose to $38.9 million, or 52 cents a share. During the same period a year earlier, Ensign made $29.2 million, or 40 cents per share.
Revenues during the first quarter jumped 40 per cent to $281 million, while cash flow increased 37 per cent to $62 million, or 83 cents per share.
"It was the second-best quarter in the history of our company," Ensign's chief financial officer Glenn Dagenais said in a conference call.
Ensign operates across Western Canada and the United States, and is one of the companies in the stable of oilpatch entrepreneur Murray Edwards.
Demand for oilfield services shot up this winter drilling as petroleum producers gained access to frozen land and searched for new oil and natural gas reserves.
Ensign said the number of wells completed in Western Canada has increased 14 per cent so far this year from 2002 levels.
More important, the number of well licenses issued -- reflecting intentions to drill wells -- has soared almost 55 per cent.
In Canada, Ensign's drilling fleet of 144 rigs operated at 69 per cent capacity during the quarter, compared with 53 per cent of rigs working a year earlier.
"The good news is that operators did not get all of the wells they wanted to drill in the first quarter, therefore we had a backlog going into the second quarter," said Ensign vice-president Bob Geddes.
Across the sector, Canadian oil companies are enjoying the benefits of strong commodity prices.
Crude oil averaged $33.80 US per barrel during the quarter, up 56 per cent, due to strife in Venezuela and the Middle East.
Tight inventory levels pushed spot prices for western Canadian natural gas up 129 per cent to $7.15 per gigajoule.
With oil and natural gas prices remaining relatively high, this trend should spur additional work for service firms such as Ensign and rival Precision Drilling Corp., analysts say.
"If the weather co-operates and gas prices get near where we expect them to be, the oilfield service sector is going to be a big winner," said analyst Todd Kepler of Griffiths McBurney Partners.