(MENAFN- ProactiveInvestors) () a provider of oilfield services lowered its planned 2015 capital spending by 35 percent and deferred the construction of eight new drilling rigs pointing to continued weak oil prices. Shares fell.
Ensign now plans to spend C$220 million this year down from an initial 2015 capital budget of C$340 million announced in December the Calgary Alberta-based company said in a statement late yesterday.
Ensign cut the number of rigs it plans to build this year to nine from 17. It has already delivered two new rigs since December and plans to build seven more all of which are already contracted to work on completion.
The company also said its executives had all taken a 10 percent pay cut effective January 1 while the board of directors had taken a 20 percent cut.
Shares slipped 3.1 percent to C$8.40 at 1:46 p.m. in Toronto. The stock has lost 18 percent this year and more that half of its value in the past six months.
"The outlook for commodity prices has further declined since that time [early December] causing many of Ensign's customers particularly in North America to reduce their capital expenditure plans for 2015" the company said in the statement.
U.S. oil prices have slumped nearly 60 percent since June prompting a number of U.S. and Canadian oil and gas companies to slash spending defer projects and freeze hiring.
West Texas Intermediate for March delivery slipped 1.5 percent to $43.78 a barrel at 12:25 p.m. on the New York Mercantile Exchange. Prices reached $43.58 the lowest since March 12 2009.
A number of forecasting agencies have predicted there will be 30 per cent fewer oil and gas wells drilled in Canada in 2015 as producers cut their exploration and development budgets to deal with low oil and gas prices.
In early December Ensign announced it would reduce its building plan by 17 new high-tech drilling rigs and set its capital budget for 2015 at $340 million about $160 million less than expected by financial analysts.
According to an Ensign regulatory filing its five named executives made about $1.73 million in direct salary in 2013. If current salaries are in the same ballpark the company would save $173000 this year.
Today’s reduced budget will be split into $140 million of growth capital and $80 million of maintenance capital it said adding it may adjust the budget again if market conditions warrant.
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