Precision Drilling Posts a C$76M Net Loss in Q2; Shares Plunge 7%

Shares of Precision Drilling Corp. (PD) fell 7% in early trading on Thursday after the company reported a huge loss in its second quarter. However, the largest drilling contractor in Canada reported a 6% rise in revenue to C$201 million due to better pricing and increased drilling activity.

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Meanwhile, adjusted EBITDA of C$29 million was 50.5% lower than in the previous year. Net loss widened to C$76 million (C$5.71 per share) in the quarter ended June 30 from C$49 million (C$3.56 per share) in the prior-year quarter.

Precision’s President and CEO Kevin Neveu said, “Precision delivered higher than expected second quarter revenue of $201 million, supported by increased activity and improved pricing resulting from strengthening energy fundamentals and higher oil and natural gas prices. In addition, field margins were better than expected in our contract drilling business with strict cost control, Alpha technology revenues, and the benefit of operating leverage from higher than expected activity. Adjusted EBITDA excluding the $26 million share-based compensation accrual was $55 million, significantly higher than our expectations, and reflective of our focus on cost management and maximizing our operating leverage.”

The outlook for the oilfield services industry and customer sentiment continue to improve as the economy recovers and commodity prices strengthen. (See Precision Drilling stock charts on TipRanks)

Last week, CIBC analyst Jamie Kubik downgraded the stock to Hold from Buy. He also raised his price target from C$50.00 to C$60.00. This implies 43.4% upside potential.

Kubik stated that the setup for increased drilling activity is favorable across North America, but Precision Drilling shares reflect much of that increase.

The rest of the Street is cautiously optimistic about PD with a Moderate Buy consensus rating based on 5 Buys and 5 Holds. The average Precision Drilling price target of C$56.74 implies upside potential of about 28.7% to current levels.