The decision by China Oilfield Services (COSL) to build a drilling rig instead of buying on the second-hand market has prompted Credit Suisse First Boston to downgrade its 2004 profit forecast for the company by 3.6 per cent.
However the impact from the change in COSL's capacity expansion plan could be offset by a potential reduction in corporate tax from 33 per cent to 15 per cent.
COSL said last week the new rig was expected to come on stream by the end of 2005.
The company said previously it planned to buy two second-hand rigs by next year for US$120 million, but a rise in oil prices led to higher asking prices, prompting it to revise its plan.
Capacity expansion is the key to COSL's growth, although management has indicated it had other strategies to relieve capacity constraints, such as revising drilling schedules with customers to improve efficiency.
In a research report, Credit Suisse said COSL had not provided definite plans to meet drilling demand next year. COSL would continue to monitor the second-hand rig market and may buy a rig later, the brokerage said.