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Precision Drilling shares up on spending plans

NEW YORK (AP) -- Precision Drilling Corp.'s U.S. shares rose Tuesday on expectations that the Canadian company will focus on upgrading its drilling fleet this year, boosting demand for its oil and natural gas rigs down the road.

THE SPARK: Stifel Nicolaus analyst Lara King backed her "Buy" rating for Precision, pointing to the capital spending plans outlined by the company on Monday that call for upgrading about 20 rigs next year.

THE BIG PICTURE: Precision expects to spend 485 million Canadian dollars ($491.5 million) next year, with about 40 percent of that going toward maintenance and 60 percent to growth and upgrades.

That compares with an estimated $920 million in capital spending this year.

THE ANALYSIS: While the company expects to have fewer chances to build new rigs next year, it continues to upgrade its fleet, King said.

She said the improvements will allow Precision to take advantage of high-demand drilling opportunities over the next several years and should protect its profitability in the event of an industry slowdown.

THE SHARES: Up 43 cents, or 5.5 percent, to $8.27 in afternoon trading, after peaking at $8.30 earlier in the day. Over the past 52 weeks, the stock has traded between $5.82 and $12.89.