Precision Drilling to convert to corporation

Precision Drilling will convert out of the trust structure and become a corporation by the end of May, the income trust announced Friday.

The news came alongside financial results that showed a $24.9-million loss in the fourth quarter.   

The Calgary-based trust said the switch to a corporate structure will be more attractive to investors given changes to federal law announced in October 2006 that would slap new requirements on income trusts starting in 2011. 

Precision, one of the North American energy sector's biggest contract drillers, provided few details of the plan.

A year ago, Precision suspended distributions to unit holders as a result of weakened activity in the oil and gas sector and didn't specify in its announcement whether it intends to pay dividends to shareholders.   

Other income trusts that have converted or announced plans to convert have been able to maintain their regular cash distributions in the form of dividends.   

At the very least, a corporate structure will remove certain limits on non-resident ownership and Precision's ability to make acquisitions, the trust said.

Fourth-quarter revenue fell 14.6 per cent, to $286 million from $335 million a year earlier.   

Precision had net loss of $24.9 million in the three months ended Dec. 31, compared with a profit of $92.4 million in the fourth quarter of 2008.   

The trust made no distributions in the fourth quarter, compared with $53.5 million in cash and $24 million in kind for the comparable period of 2008.   

Precision had a net loss of nine cents per unit in the fourth quarter of 2009, compared with net income of 66 cents per diluted unit a year before.   

The units were changing hands at $8.81 on the Toronto Stock Exchange Thursday.