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Precision Drilling Corp. (TSE:PD)
TSX:PD
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Precision Drilling
(TSX:PD)
66Neutral
Positive Factors
Drilling Demand
Precision Drilling is in a strong position to benefit from increased natural gas and heavy oil drilling in Canada to fill incremental pipeline export capacity.
Market Position
Precision Drilling is viewed as one of the top-tier contract drillers in Canada, owing to its fleet comprising a high percentage 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
Debt Levels
The company plans to reduce debt by ~$100 million in 2025 and $700 million by 2027, indicating current high debt levels.
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
$918.03M
Dividend YieldN/A
Average Volume (3M)155.05K
Price to Earnings (P/E)8.6
Beta (1Y)1.20
Revenue Growth-1.83%
EPS Growth-62.53%
CountryCA
Employees5,560
SectorEnergy
Sector Strength87
IndustryFossil Fuels
Share Statistics
EPS (TTM)7.82
Shares Outstanding13,644,869
10 Day Avg. Volume136,496
30 Day Avg. Volume155,049
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)1.40
P/FCF Ratio2.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$111.36Price Target Upside65.52% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering8
Precision Drilling Business Overview & Revenue Model
Company DescriptionPrecision Drilling Corporation, a drilling company, provides onshore drilling, completion, and production services to exploration and production companies in the oil and natural gas and geothermal industries in North America and the Middle East. The company operates in two segments, Contract Drilling Services; and Completion and Production Services. The Contract Drilling Services segment offers onshore well drilling services to exploration and production companies in the oil and natural gas industry. This segment's services include land and turnkey drilling; and procurement and distribution of oilfield supplies, as well as manufacture and refurbishment of drilling and service rig equipment. As of December 31, 2021, it operated 227 land drilling rigs, including 109 in Canada; 105 in the United States; 6 in Kuwait; 4 in Saudi Arabia; 2 in the Kurdistan region of Iraq; and 1 in the country of Georgia. As of December 31, 2021, this segment also operated 47 AlphaTM rigs with commercial AlphaAutomation; 18 AlphaApps; 4 grid power capable rigs; and 60 natural gas or bi-fuel rigs. The Completion and Production Services segment provides service rigs for well completion, workover, abandonment, maintenance, and re-entry preparation services; wellsite accommodations; oilfield surface equipment rentals; and camp and catering services to oil and natural gas exploration and production companies. As of December 31, 2021, it operated 123 well completion and workover service rigs, including 113 in Canada and 10 in the United States; 1,900 oilfield rental items, including surface storage, small-flow wastewater treatment, power generation, and solids control equipment; 109 wellsite accommodation units; 943 drill camp beds; 822 base camp beds; and three kitchen diners in Canada. Precision Drilling Corporation was incorporated in 1951 and is headquartered in Calgary, Canada.
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 has improved its gross profit margin and reduced leverage, but faces challenges with net profit margin and revenue consistency. The balance sheet reflects strong equity backing, though return on equity has decreased. Cash flow generation remains robust, supporting financial stability. Strategic focus on revenue growth and profitability will enhance overall financial health.Income Statement
Precision Drilling has shown a recovery in gross profit margin, climbing to 83.7% in 2024 from a significant dip in 2023. However, the net profit margin decreased to 5.8% in 2024 from 14.9% in 2023 due to reduced net income. Revenue growth has been inconsistent, with a slight decline in 2024. Their EBIT margin faced a downturn in 2024, but the EBITDA margin remains stable at 28%. The company needs to stabilize revenue and improve net income for better profitability.68
Positive
Balance Sheet
The debt-to-equity ratio improved to 0.53 in 2024, indicating reduced leverage compared to prior years. Return on equity decreased to 6.6% in 2024 from 18.4% in 2023, reflecting lower net income. The equity ratio remains healthy at 56.7% in 2024, showing strong equity backing. Precision Drilling should focus on improving ROE while maintaining a stable debt profile.72
Positive
Cash Flow
The free cash flow in 2024 decreased slightly, reflecting lower operating performance. The operating cash flow to net income ratio is strong, indicating efficient cash generation relative to net income. The free cash flow to net income ratio is also positive, demonstrating the company's ability to generate free cash flow. Maintaining or increasing operating cash flow will be critical to sustain financial flexibility.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.90B | 1.94B | 1.62B | 986.85M | 935.75M |
| Gross Profit | ||||
| 1.59B | 733.31M | 213.56M | 6.38M | 36.01M |
| EBIT | ||||
| 0.00 | 303.97M | 32.57M | -89.55M | -34.86M |
| EBITDA | ||||
| 532.14M | 657.73M | 311.61M | 191.19M | 309.14M |
| Net Income Common Stockholders | ||||
| 111.19M | 289.24M | -34.29M | -177.39M | -120.14M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 73.77M | 54.18M | 21.59M | 40.59M | 108.77M |
| Total Assets | ||||
| 2.96B | 3.02B | 2.88B | 2.66B | 2.90B |
| Total Debt | ||||
| 887.59M | 992.19M | 1.15B | 1.17B | 1.30B |
| Net Debt | ||||
| 813.82M | 938.01M | 1.13B | 1.13B | 1.19B |
| Total Liabilities | ||||
| 1.27B | 1.44B | 1.65B | 1.44B | 1.49B |
| Stockholders Equity | ||||
| 1.68B | 1.58B | 1.23B | 1.23B | 1.41B |
| Cash Flow | Free Cash Flow | |||
| 265.38M | 273.82M | 52.85M | 63.28M | 164.53M |
| Operating Cash Flow | ||||
| 482.08M | 500.57M | 237.10M | 139.22M | 226.12M |
| Investing Cash Flow | ||||
| -202.99M | -214.78M | -144.41M | -56.61M | -40.52M |
| Financing Cash Flow | ||||
| -261.38M | -251.97M | -113.17M | -149.91M | -145.62M |
Precision Drilling Technical Analysis
Neutral
67.28
Price Trends
76.82
Negative
82.29
Negative
87.10
Negative
Market Momentum
-2.86
Negative
43.58
Neutral
88.50
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:PD, the sentiment is Neutral. The current price of 67.28 is above the 20-day moving average (MA) of 65.78, below the 50-day MA of 76.82, and below the 200-day MA of 87.10, indicating a neutral trend. The MACD of -2.86 indicates Negative momentum. The RSI at 43.58 is Neutral, neither overbought nor oversold. The STOCH value of 88.50 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:PD.
Precision Drilling Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
66 Neutral | $918.03M | 8.61 | 6.90% | ― | -1.83% | -62.53% | |
63 Neutral | C$312.03M | 166.54 | 0.49% | ― | 0.98% | -96.29% | |
58 Neutral | $9.28B | 5.49 | -6.28% | 7.46% | -0.20% | -73.68% | |
53 Neutral | C$443.77M | 14.37 | -1.55% | ― | -6.00% | -150.20% | |
48 Neutral | C$76.65M | ― | -2.44% | ― | -4.44% | 0.75% |
* Energy Sector Average
Performance Comparison
TSE:PD
Precision Drilling
66.76
-24.37
-26.74%
CESDF
CES Energy Solutions
5.22
1.79
52.19%
TSE:ESI
Ensign Energy Services
2.38
-0.21
-8.11%
TSE:WRG
Western Energy Services
2.26
-0.49
-17.82%
TOLWF
Trican Well Service
3.31
0.37
12.59%
TSE:STEP
STEP Energy Services
4.32
0.62
16.76%
Precision Drilling Earnings Call Summary
Earnings Call Date: Feb 12, 2025 | % Change Since: -16.27% | Next Earnings Date: Apr 23, 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
Business Operations and StrategyFinancial Disclosures
Precision Drilling Reports 2024 Financial Results with Strategic Investments and Resilience
Neutral
Feb 13, 2025
In its 2024 financial results, Precision Drilling announced a decrease in fourth-quarter revenue by 8% compared to 2023, primarily due to lower activity in the U.S., despite increased operations in Canada and internationally. The company invested significantly in fleet and infrastructure upgrades and plans to continue debt reduction and shareholder returns in 2025, highlighting strong market resilience, particularly in Canadian and international operations, despite weaker U.S. customer demand.
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.