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Precision Drilling lowers 2013 capital spending target, hikes dividend rate

The Canadian Press

CALGARY - Precision Drilling (TSX:PD) said Thursday it will hike its quarterly dividend by 20 per cent, despite a soft market that has caused the oilfield services company to reduce its 2013 capital budget.

The increase to six cents per share is the first rate hike since last December when the Calgary-based company initiated dividend payments at five cents per share.

When the fourth-quarter dividend is paid Nov. 15, Precision will have made $72 million of the payments to shareholders since Dec. 28.

However, the company also announced Thursday that it has revised its 2013 capital spending budget to $609 million, down from $654 million. As of Sept. 30, $413 million of the budget had been spent.

CEO Kevin Neveu says the dividend increase is an indication of Precision's confidence in its outlook despite recent soft conditions, as well as its commitment to maximizing returns for shareholders.

"Precision's third-quarter results reflect overall softness in customer demand and weak demand for Canadian completion and production services. Additionally a non-recurring vendor issue and a difficult turnkey project weighed negatively on the quarter," Neveu said.

"Precision continues to exercise capital discipline by linking near-term capital expenditures with industry activity and, as such, we are reducing our 2013 planned capital expenditures by $45 million."

Precision's revenue was essentially flat compared with last year, rising less than one per cent to $484.4 million from $484.8 million, and net income was down 25 per cent to $29.4 million from $39.4 million.

Cash provided by operations was up, however, rising to $88.3 million from $61.2 million a year earlier.

On the Toronto Stock Exchange, Precision shares were down 30 cents, or 2.75 per cent, at $10.60 in mid-afternoon trading Thursday.