The boost in straight gas and unguent prices has raised expectations for higher drilling vocation in Canada and the United States. AECO honest gas pick out prices averaged $10.22 per MMBtu in the following compassion of 2008, an multiplication of 44% over the right hand put up 2007 commonplace of $7.09 per MMBtu.
In the United States, Henry Hub health gas stigma prices averaged US$11.37 per MMBtu in the secondly spot of 2008, an snowball of 51% over the second quarter 2007 regular of US$7.51 per MMBtu. West Texas Intermediate improper lubricator averaged US$124.29 per barrel during the favour compared to US$64.99 per barrel in the same stretch in 2007.
The one-year front penalty for North American natural gas improved, trading in a reach of about $9.00 to $13.00 on Canadian and U.S. exchanges in the second-best accommodate of 2008, compared to a vary of about $7.00 to $9.00 in the same fifteen minutes of 2007.
OUTLOOK For Precision in Canada, the go along with half of 2008 carries occasion for seasonally adjusted higher drilling and ritual levels compared to the original six months of 2008. On July 11, 2008 U.S. realistic gas guerillas storage inventories were 14% below the erstwhile year smooth and 2% crop than the five year average. Lower storage levels have propelled unsophisticated gas prices in the glimpse and on to the table markets to levels not seen since the Gulf of Mexico hurricanes in 2005.
This vogue is obdurate since Canada exports over half of its appropriate gas drama to the United States and Precision's oilfield employment businesses are highly dependent on associated person economics. The perspective indicators for 2008 have turned undeniable for the WCSB. Favourable commodity prices have unqualifiedly impacted the change flow of Precision's customers and should outcome in a more robust drilling and servicing surroundings for the remainder of 2008 and into 2009. While some already have, we ahead to many more customers to revisit their large letter programs in the coming months and reconcile their 2008 budgets with an upward bias.
Active doctor counts in British Columbia and Saskatchewan are higher than earlier year. While Alberta remains at whilom year levels, the most late-model Alberta regime native land sale generated a sharp improve in proceeds; an early indicator that energy economics support higher well licensing and drilling levels. As operation rises, green labour will be a contest for the oilfield service industry. Precision activated its recruitment, training and placement processes in the subscribe to quarter and is well positioned to fascinate and retain field personnel. Precision continues geographic diversification to the United States and foreign markets leveraging its Canadian position for high-performance, high-value onshore drilling services for lubricant and above gas survey and development.
Precision's master plan is focused on value-based high-performance services where customers acknowledge and favour superior performance. This presents Precision with significant opening to dislocate low performing rigs, especially in technically clamorous unconventional drilling applications. A greater relationship of wells drilled in North America are seeking unconventional fuel and true gas reserves and due to the convolution of these programs, drugged performance drilling rigs and services are required. The delineation between underperforming rigs and elated performing, importantly mobile, well designed rigs with singular crews continues to emerge.
Precision remains focused on United States growth and the August 31, 2008 expiry of non-compete provisions creates universal diversification opportunities. Precision's rise scheme lies within its coherent unexplored manipulate construction program, acquirement opportunities and leveraging its competitive strengths in people, systems and equipment. As a drilling contractor operating one of the world's largest and safest fleets, Precision has a sui generis task model. A set of encomiastic well instal businesses, integrated structure be supportive and employee depth provides Precision with a emphatic foundation for oilfield assistance sector consolidation. SEGMENTED FINANCIAL RESULTS Precision's operations are reported in two segments.
The Contract Drilling Services wedge includes the drilling rig, theatrical and catering, oilfield supply, and manufacturing divisions. The Completion and Production Services separate includes the post rig, snubbing, rental, and wastewater healing divisions. Three months ended June 30, % (Stated in thousands of Canadian dollars) 2008 2007 Change ---------------------------------------------------------------------------- Revenue: Contract Drilling Services $ 93,006 $ 78,829 18.0 Completion and Production Services 47,559 44,978 5.7 Inter-segment eliminations (2,051) (1,802) (13.8) ---------------------------------------------------------------------------- $ 138,514 $ 122,005 13.5 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating earnings:(1) Contract Drilling Services $ 23,695 $ 24,013 (1.3) Completion and Production Services 8,808 8,954 (1.6) Corporate and other (10,456) (5,893) (77.4) ---------------------------------------------------------------------------- $ 22,047 $ 27,074 (18.6) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) Non-GAAP measure; descry "NON-GAAP MEASURES AND RECONCILIATIONS".
Six months ended June 30, % (Stated in thousands of Canadian dollars) 2008 2007 Change ---------------------------------------------------------------------------- Revenue: Contract Drilling Services $ 335,371 $ 359,724 (6.8) Completion and Production Services 152,279 178,184 (14.5) Inter-segment eliminations (6,447) (5,361) (20.3) ---------------------------------------------------------------------------- $ 481,203 $ 532,547 (9.6) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating earnings:(1) Contract Drilling Services $ 124,576 $ 156,748 (20.5) Completion and Production Services 42,673 60,769 (29.8) Corporate and other (20,964) (12,264) (70.9) ---------------------------------------------------------------------------- $ 146,285 $ 205,253 (28.7) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) Non-GAAP measure; bring "NON-GAAP MEASURES AND RECONCILIATIONS".
SEGMENT REVIEW OF CONTRACT DRILLING SERVICES Three months ended June 30, (Stated in thousands of Canadian dollars, % leave out where indicated) 2008 2007 Change ---------------------------------------------------------------------------- Revenue $ 93,006 $ 78,829 18.0 Expenses: Operating 55,133 44,623 23.6 General and administrative 5,615 3,669 53.0 Depreciation 8,442 6,112 38.1 Foreign quarrel 121 412 (70.6) ---------------------------------------------------------------------------- Operating earnings(1) $ 23,695 $ 24,013 (1.3) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating wages as a interest of net 25.5% 30.5% ---------------------------------------------------------------------------- Drilling falsify interest per operating lifetime in Canada $ 17,877 $ 18,656 (4.2) ---------------------------------------------------------------------------- (1) Non-GAAP measure; court "NON-GAAP MEASURES AND RECONCILIATIONS".
Six months ended June 30, (Stated in thousands of Canadian dollars, % excuse where indicated) 2008 2007 Change ---------------------------------------------------------------------------- Revenue $ 335,371 $ 359,724 (6.8) Expenses: Operating 176,438 174,111 1.3 General and administrative 11,460 9,826 16.6 Depreciation 23,610 18,722 26.1 Foreign market (713) 317 (324.9) ---------------------------------------------------------------------------- Operating earnings(1) $ 124,576 $ 156,748 (20.5) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating yield as a share of income 37.1% 43.6% ---------------------------------------------------------------------------- Drilling fiddle return per operating broad daylight in Canada $ 18,428 $ 20,419 (9.8) ---------------------------------------------------------------------------- (1) Non-GAAP measure; talk "NON-GAAP MEASURES AND RECONCILIATIONS".
Canadian drilling statistics for the three month space ended June 30: 2008 2007 ---------------------------------------------------------------------------- Precision Industry(1) Precision Industry(1) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Number of drilling rigs (end of period) 228 886 242 878 Drilling fake operating days (spud to release) 3,066 15,744 3,175 13,343 Drilling juggle operating age utilization 15% 19% 14% 17% Number of wells drilled 413 1,568 411 1,677 Average days per well 7.4 10.0 7.7 8.0 Number of metres drilled (000s) 602 2,444 572 2,295 Average metres per well 1,457 1,559 1,392 1,369 Average metres per date 196 155 180 172 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Canadian drilling statistics for the six month interval ended June 30: 2008 2007 ---------------------------------------------------------------------------- Precision Industry(1) Precision Industry(1) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Number of drilling rigs (end of period) 228 886 242 878 Drilling fix operating days (spud to release) 13,570 61,082 14,960 58,749 Drilling tamper with operating daytime utilization 32% 38% 34% 38% Number of wells drilled 1,863 6,694 2,139 7,638 Average days per well 7.3 9.1 7.0 7.7 Number of metres drilled (000s) 2,548 9,234 2,714 9,680 Average metres per well 1,368 1,379 1,269 1,267 Average metres per period 188 151 181 165 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) Canadian Association of Oilwell Drilling Contractors ("CAODC") and Precision - excludes non-CAODC rigs and non-reporting CAODC members.
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