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Precision Drilling shares rise on higher outlook

Precision Drilling president and CEO Kevin Neveu listens to a shareholder after the company's annual general meeting in Calgary May 6, 2009.

REUTERS/Todd Korol/REUTERS/Todd Korol

Precision Drilling Corp.'s second-quarter results narrowly missed expectations, but its bullish outlook for the rest of 2011 caused investors to drive the company's stock up more than 6 per cent on Friday.

Canada's largest oil field services company reported profits of $16.4-million, or 6 cents per share, during the three months ended June 30. Analysts polled by Thomson Reuters had called for earnings of seven cents per share.

A year ago, Precision reported a loss of $69.4-million, or 25 cents per share. Revenues grew to $345.3-million from $261.8-million a year earlier.

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Precision's stock soared 98 cents to $16.37 in mid-day trading on the Toronto Stock Exchange, with nearly 1.27 million shares trading hands.

"The results themselves are not really the story here," said Michael Mazar, an analyst with BMO Capital Markets.

Rather, Mr. Mazar said investors are likely more interested on the outlook Precision offered for the rest of this year and 2012.

Calgary-based Precision said unusually wet weather throughout Western Canada took a bite out of revenue and earnings during the second quarter - a time of year when soggy ground conditions already put a damper on activity.

But chief executive Kevin Neveu said Precision customers are likely to play catch-up for the remainder of the year, which means more work for his company.

"The high activity levels expected later this year and next winter in Canada will likely create labour challenges for the oil field services industry," Mr. Neveu said in a statement.

"We believe Precision is uniquely positioned to meet the challenge of the imminent labour shortage with well staffed field operations supported by employee retention, recruiting, training and leadership development programs."

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Precision bumped up its capital spending budget for 2011 from the $790-million it announced in May to $841-million. Due to strong demand, Precision aims to build two more rigs than the 28 it initially planned for 2011.

"I expect you'll see another 10 to 20 be announced as we move through the second half of 2011," said Mr. Mazar.

"They're not building these and just hoping somebody's going to use them. They've got a customer already lined up for them by the time they're done. It just underscores the fact that demand for the types of equipment Precision is running is still pretty strong."

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