Eurasia Drilling Co. expects sales to grow 12.5 percent to $3.6 billion this year as the largest Russian oil driller boosts lucrative “horizontal” projects.
“The main reason is horizontal drilling, which should be up substantially,” Chief Financial Officer Richard Anderson said today by phone from Moscow. “The wells cost more.” Total meters drilled, including conventional operations, will be flat.
Drillers are able to charge oil companies higher rates for developing horizontal wells that can boost flows from deposits, allowing them to profitably exploit unconventional resources.
OAO Rosneft and OAO Lukoil, Russia’s largest oil producers accounting for more than 80 percent of Eurasia Drilling orders, have expanded investment in the past two years as Ural prices hold above $100 a barrel. Russia has also cut tax, while work on hard-to-recover resources that need premium drilling have begun.
Eurasia Drilling sees 50 percent more horizontal operations this year, pushing overall sales up from $3.2 billion in 2012.
The margin on earnings before interest, taxes, depreciation and amortization will climb to 24.8 percent from 24.3 percent, the Moscow-based company said today in a statement. Horizontal drilling will keep growing as companies start pilot projects on unconventional oil reserves this year and next, Anderson said.
The Neptune rig for offshore drilling will begin operating in the Caspian Sea in the third quarter, increasing to three the company’s rigs in the region, it said. Neptune should expand annual revenue by $45 million, Anderson said. The Mercury rig is expected to be ready for Caspian contracts in 2015, he said.
Eurasian has bought two more rigs in Iraq, giving it four operating in the country this year, according to the statement.