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Precision Drilling Corp. (TSE:PD)
TSX:PD
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Precision Drilling
(TSX:PD)
68Neutral
Positive Factors
Market Position
Precision Drilling is viewed as one of the top-tier contract drillers in Canada, benefiting from strong drilling day rates due to its fleet of tier 1 rigs.
Shareholder Returns
A shift in shareholder returns to ~50% of free cash flow is imminent, which is seen positively by analysts.
Negative Factors
Financial Performance
PD reported Q4/24 results below expectations, with softer U.S. operating margins offset by stronger Canadian and International activity.
Precision Drilling (PD) vs. S&P 500 (SPY)
Market Cap
$892.71M
Dividend YieldN/A
Average Volume (3M)151.06K
Price to Earnings (P/E)8.1
Beta (1Y)1.35
Revenue Growth-0.02%
EPS Growth60.38%
CountryCA
Employees5,560
SectorEnergy
Sector Strength73
IndustryFossil Fuels
Share Statistics
EPS (TTM)7.80
Shares Outstanding14,067,270
10 Day Avg. Volume199,140
30 Day Avg. Volume151,059
Financial Highlights & Ratios
PEG Ratio0.08
Price to Book (P/B)N/A
Price to Sales (P/S)0.48
Price to Cash Flow (P/CF)2.90
P/FCF Ratio8.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$115.37Price Target Upside81.80% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering8
Precision Drilling Business Overview & Revenue Model
Company DescriptionPrecision Drilling Corporation is a leading provider of oilfield services, primarily operating in the North American market. The company specializes in offering onshore drilling, completion, and production services to oil and natural gas exploration and production companies. With a comprehensive fleet of drilling rigs and an emphasis on technology and innovation, Precision Drilling delivers high-performance services tailored to meet the unique demands of its clients in the energy sector.
How the Company Makes MoneyPrecision Drilling generates revenue primarily through its contract drilling services, which involve leasing its fleet of rigs to oil and gas companies for use in their extraction operations. The company earns income based on day rates for the rigs, which are negotiated with clients and can vary depending on factors such as rig specifications, market demand, and contract duration. Additionally, Precision Drilling provides ancillary services, including directional drilling, well servicing, and equipment rentals, which contribute to its earnings. The company's strategic partnerships with energy firms and a focus on technological advancement also play a crucial role in maintaining competitive pricing and expanding its service offerings.
Precision Drilling Financial Statement Overview
Summary
Precision Drilling demonstrates solid financial performance with strong revenue growth and operational efficiency, as shown by consistent margins. The balance sheet indicates an improving leverage position, while the cash flow statement reflects good cash conversion with some challenges in free cash flow growth. Overall, the company is on a positive trajectory, balancing growth with financial stability.Income Statement
Precision Drilling has shown strong revenue growth with a 20.05% increase in 2023 compared to 2022. The company maintains a solid Gross Profit Margin of 19.7% in the TTM period, reflecting efficient cost management. However, the Net Profit Margin has slightly decreased to 12.53% from 14.92% annually, indicating some pressure on profitability. The EBIT and EBITDA margins remain relatively strong at 12.68% and 30.35% respectively, showcasing operational efficiency.76
Positive
Balance Sheet
The company's Debt-to-Equity ratio improved to 0.52 in the TTM, indicating a healthier leverage position compared to previous years. The Return on Equity is robust at 14.67%, reflecting effective use of equity capital. However, the Equity Ratio is moderate at 57.38%, suggesting a balanced capital structure but with room for improvement in financial stability.68
Positive
Cash Flow
Precision Drilling's Free Cash Flow shows a slight decline, but remains healthy at $256.87 million in the TTM. The Operating Cash Flow to Net Income Ratio is strong at 2.01, indicating good cash conversion efficiency. However, Free Cash Flow to Net Income has declined to 1.06, suggesting some challenges in maintaining free cash flow relative to net income growth.74
Positive
| Breakdown | |||||
| TTM | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 1.94B | 1.94B | 1.62B | 986.85M | 935.75M | 1.54B | Gross Profit |
| 382.30M | 733.31M | 213.56M | 6.38M | 36.01M | 168.74M | EBIT |
| 246.09M | 303.97M | 32.57M | -89.55M | -34.86M | 44.46M | EBITDA |
| 589.23M | 657.73M | 311.61M | 191.19M | 309.14M | 378.08M | Net Income Common Stockholders |
| 243.12M | 289.24M | -34.29M | -177.39M | -120.14M | 6.62M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 96.63M | 54.18M | 21.59M | 40.59M | 108.77M | 74.70M | Total Assets |
| 3.64B | 3.02B | 2.88B | 2.66B | 2.90B | 3.27B | Total Debt |
| 1.71B | 992.19M | 1.15B | 1.17B | 1.30B | 1.49B | Net Debt |
| 1.61B | 938.01M | 1.13B | 1.13B | 1.19B | 1.42B | Total Liabilities |
| 2.08B | 1.44B | 1.65B | 1.44B | 1.49B | 1.74B | Stockholders Equity |
| 1.56B | 1.58B | 1.23B | 1.23B | 1.41B | 1.53B |
| Cash Flow | Free Cash Flow | ||||
| 256.87M | 273.82M | 52.85M | 63.28M | 164.53M | 127.47M | Operating Cash Flow |
| 488.23M | 500.57M | 237.10M | 139.22M | 226.12M | 288.16M | Investing Cash Flow |
| -194.27M | -214.78M | -144.41M | -56.61M | -40.52M | -74.50M | Financing Cash Flow |
| -318.10M | -251.97M | -113.17M | -149.91M | -145.62M | -231.81M |
Precision Drilling Technical Analysis
Negative
63.46
Price Trends
82.65
Negative
84.18
Negative
88.83
Negative
Market Momentum
-5.29
Positive
17.51
Positive
13.90
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:PD, the sentiment is Negative. The current price of 63.46 is below the 20-day moving average (MA) of 72.68, below the 50-day MA of 82.65, and below the 200-day MA of 88.83, indicating a bearish trend. The MACD of -5.29 indicates Positive momentum. The RSI at 17.51 is Positive, neither overbought nor oversold. The STOCH value of 13.90 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:PD.
Precision Drilling Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $1.56B | 8.52 | 26.23% | 1.81% | 5.94% | 46.19% | |
75 Outperform | $832.61M | 8.25 | 21.89% | 4.16% | 0.84% | -1.74% | |
73 Outperform | C$387.86M | 14.37 | -1.55% | ― | -7.71% | 48.35% | |
68 Neutral | $892.71M | 8.13 | 6.90% | ― | -0.02% | 60.38% | |
67 Neutral | C$296.29M | 7.17 | 10.71% | ― | 0.05% | -43.08% | |
57 Neutral | $8.36B | 5.49 | -6.03% | 7.47% | 0.03% | -68.65% | |
48 Neutral | C$76.49M | ― | -2.44% | ― | -4.44% | 0.75% |
* Energy Sector Average
Performance Comparison
TSE:PD
Precision Drilling
63.18
-19.55
-23.63%
TSE:CEU
CES Energy Solutions
6.87
2.22
47.87%
TSE:TCW
Trican Well Service
4.40
0.42
10.61%
TSE:ESI
Ensign Energy Services
2.22
-0.29
-11.55%
TSE:WRG
Western Energy Services
2.23
-0.51
-18.61%
TSE:STEP
STEP Energy Services
4.07
0.32
8.53%
Precision Drilling Earnings Call Summary
Earnings Call Date: Feb 12, 2025 | % Change Since: -21.02% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Neutral
The earnings call reflected a mixed sentiment with strong cash flow, debt reduction, and growth in certain segments offset by challenges in the U.S. market, reduced EBITDA, and margin pressures in Canada.Highlights
Strong Cash Flow and Profitability
Precision Drilling reported strong cash flow with $482 million generated from operations and positive earnings per share every quarter during 2024 and for the past 10 consecutive quarters.
Debt Reduction and Share Repurchases
The company reduced debt by $176 million and repurchased $75 million in shares, representing 4% of outstanding shares, achieving midpoints in targets.
Growth in Canadian and International Drilling
Year-over-year activity increased by 37% in international drilling, 12% in Canada drilling, and 26% in well servicing. Market share growth was achieved in Canada.
Expansion of EverGreen and Alpha Products
EverGreen revenue nearly doubled year-over-year, and two new product offerings were added, enhancing the market penetration of Alpha and EverGreen products.
Lowlights
Decrease in Adjusted EBITDA
Adjusted EBITDA decreased by 15% year-over-year to $521 million.
U.S. Drilling Segment Challenges
The U.S. segment faced challenges with a decrease in rigs and lower daily operating margins due to lower day rates and higher overhead costs.
Impact of Nonrecurring Charges
Fourth quarter adjusted EBITDA included a $15 million share-based compensation charge and $8 million in nonrecurring charges, affecting overall profitability.
Margin Pressure in Canadian Operations
Canadian drilling margins were slightly below guidance due to rig reactivation costs and rig mix changes, with expectations of continued margin pressure.
Company Guidance
During the Precision Drilling Corporation's 2024 fourth quarter and year-end conference call, several key metrics and strategic priorities for 2025 were highlighted. The company generated $482 million in cash from operations and achieved debt reduction of $176 million, with $75 million allocated to share repurchases, representing 4% of outstanding shares. Despite a decrease in adjusted EBITDA by 15% to $521 million and funds from operations by 13% to $463 million, Precision maintained robust financial performance with consistent positive earnings per share throughout 2024. The company plans to allocate 25% to 35% of free cash flow for share repurchases and aims for a further debt reduction of at least $100 million in 2025. Additionally, they intend to invest $225 million in capital expenditures, focusing on sustaining and infrastructure, as well as upgrades and expansion. Guidance for 2025 includes a depreciation of $300 million, cash interest expense of $65 million, and an effective tax rate of 25% to 30%. The company also projects steady international drilling activity and anticipates Canadian drilling margins to range from $14,500 to $15,000 per day in Q1 2025.Precision Drilling Corporate Events
Precision Drilling’s Strong Q3 2024 Financial Performance
Oct 29, 2024
Precision Drilling reported a strong third quarter for 2024, with revenues climbing to $477 million and net earnings nearly doubling from last year. The company achieved significant debt reduction and is on track to use a portion of its free cash flow for share buybacks, underscoring its financial resilience and strategic growth initiatives.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.