A tough first quarter in the oilpatch translated into an 82 per cent drop in profits for Iroc Energy Services Corp. (TSX: ISC).
The Red Deer-headquartered company recorded net earnings of $488,000 during the first three months of 2009, down from $2.7 million for the same period in 2008. Profit from continuing operations was $82,000, a slide of 96 per cent from the $2.1 million earned in the first quarter of 2008. Revenue from continuing operations was $14 million, down 28 per cent.
A news release issued by Iroc said the economic downturn and resulting low commodity prices hurt exploration and development activity. That produced “substantial pricing pressure and lower utilization in all oilfield-related services.”
“The global economic conditions and the uncertainty of commodity prices for oil and gas led to some of the lowest historical activity levels in the oilfield in Canada and around the world during the first quarter.
“The result of these factors has had a dramatic effect on oil and gas producers leading to many of our customers reducing their planned activity levels in exploration and development for fiscal 2009 with a focus on balance sheet preservation and matching spending with realistic cash flows.”
The release said Iroc was able to strengthen its financial position by focusing on its core businesses and selling assets, including its Oricomm and Envirocore divisions, which were sold during the quarter for a combined $8.44 million, including $6.3 million in cash that was used to reduce long-term debt.
The outlook remains uncertain, said the release, and the “declining utilization and competitive pricing environment will likely continue through the second quarter of 2009 and potentially longer, depending upon oil and gas prices.”
Iroc provides products and services to the oil and gas industry in three core areas: well servicing and equipment, downhole temperature and pressure monitoring tools, and rentals.