* First-half net income $217 mln
* Full-year revenue guidance trimmed to $3.55 bln
* Horizontal drilling up 20 pct, trend to remain
* Total drilling output up 6 pct in first half
By Vladimir Soldatkin
MOSCOW, Aug 29 (Reuters) - Russia’s biggest oilfield services company, Eurasia Drilling, said its first-half net income rose 15 percent as clients used more of its complex drilling technology to tap depleted fields.
The company is looking forward to an intensification of efforts to extract hard-to-recover “tight” oil, potentially replicating the shale boom in North America and helping Russia maintain President Vladimir Putin’s output target of at least 10 million barrels per day this decade.
Tax breaks to encourage the extraction of tight oil, trapped in non-porous rock, will take effect from Sept. 1, ensuring as much as $21 more per barrel stays in the pocket of exploration companies if oil prices average $100, experts say.
State-controlled oil major Rosneft, which lobbied for the tax concessions, has teamed up with ExxonMobil Corp of the United States to develop the vast Bazhenov tight oil play in Siberia that was discovered in the Soviet era but remains largely untapped.
Bazhenov, measuring 2,000 km by 1,700 km, could hold as much as 1 trillion barrels of oil, according to one estimate, four times the reserves of Saudi Arabia and enough to meet current global demand for 30 years.
Eurasia Drilling (EDC), the oilfield services company originally spun out of Russia’s leading private oil firm Lukoil in 2004, said January-to-June net profit rose to $217 million.
“Some 80 percent of the rigs we are buying right now are heavier rigs which are well-suited for unconventional oil extraction. So we will be well-positioned whenever this unconventional oil drilling will kick off,” EDC’s Chief Financial Officer Richard Anderson said by telephone.
Earlier this year, he told Reuters the company expected the first impact of the unconventional oil drive in 2015, when clients begin tight oil production in earnest.
The company’s horizontal drilling grew almost 20 percent in the first half of 2013 to 492,000 metres, while total drilling output edged up 6 percent to 3 million metres.
Horizontal drilling is technically more challenging and more expensive than conventional vertical drilling but taps hydrocarbon reservoirs more efficiently and yields better flows.
Companies use the method to increase productivity at mature fields which now account for more than 80 percent of Russia’s total oil resource base.
Anderson said he expected to at least maintain the 20 percent increase in such drilling throughout the year, short of an original target of a 50 percent increase over 2012.
“The clients’ plans change dynamically during the year. For the year, horizontal drilling would probably be up by something more than 20 percent over last year,” the CFO said.
The company’s revenue grew almost 8 percent to $1.7 billion in the January-to-June period, while earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 17 percent to $441 million.
Anderson trimmed the company’s full-year revenue guidance to $3.55 billion from a previous estimate of $3.6 billion because of rouble depreciation.
“We upgrade our EBITDA margin guidance from 25.1 percent to 26 percent for the full year on the back of the strong performance of all our business segments. Our capital expenditures are now expected to be up to $550 million. And we expect to be free cash flow positive,” he said.
Analysts see EDC and Vienna-based Cat oil AG as the main long-term beneficiaries of the Russian horizontal drilling spree. Cat oil reports earnings on Friday.