No drilling recovery in Ensign’s forecast

CA LGA RY • Lower oilpatch activity in Canada and the United States sliced deeply into first-quarter revenue and income at Ensign Energy Services Inc. but not as deeply as analysts feared.

The Calgary-based driller, which chopped executive and director pay and reduced capital spending in January, reported revenue fell 28 per cent to $449 million in the first three months of 2015 versus the same period of 2014. Adjusted earnings before interest, taxes, depreciation and amortization fell 30 per cent to $112 million, while net income was down 74 per cent to $15 million.

“The company believes that the recovery in the global economy has not yet gained sufficient momentum to result in the increases in demand for energy required to offset recent supply increases and rebalance the energy market,” Ensign said in a news release.

Analyst Dan MacDonald of RBC Dominion Securities said in a note to investors that Ensign’s EBITDA of $112 million handily beat his estimate of $90 million and consensus of $95 million, while revenue was five per cent higher than RBC estimates as U.S. and international divisions performed better than expected.

“EBITDA margins of 25 per cent were stronger than our expectation of 21.1 per cent, and down only modestly from 25.6 per cent in 1Q14, despite one-time restructuring costs of approximately $5 million that impacted both gross margin and general and administrative expenses,” he wrote.