PRECISION DRILLING EARNS UPGRADE
It may seem strange to hear that an energy-related company is being upgraded, but that’s exactly what happened for Precision Drilling Corp.
The Calgary-based oilfield services company got a ratings lift to outperform from neutral at Scotiabank after its second-quarter results showed its resiliency.
Despite management’s acknowledgment that there is very little visibility at the macro level, and no expectation of a quick bounce-back for the energy sector, Precision emphasized that in first half of 2015 it was focused on rightsizing its business for the long haul given the current environment.
Precision’s earnings came in well ahead of analysts’ expectations, in large part due to a 10-per-cent improvement in day rates for its U.S. drilling business, or 14 per cent on an annual basis.
Scotiabank analyst Vladislav Vlad estimates that Precision’s market share in Canada grew to 26 per cent, a 215-basis-point gain, along with a 64-bps lift to 6.5 per cent in the U.S. market.
Vlad hiked his price target on the stock by $1 to $9.50, citing the strong results, expectations for further market share gains, and Precision’s discount to its U.S. peers.
“In Canada, Precision has lost market share over the years,” the analyst told clients. “This is in contrast with the most recent numbers coming out of break up …”
Vlad also noted that earlier this year, the company suggested it could decrease debt, repurchase shares, increase dividends or a combination of all three.
He believes that remains the case and a dividend hike should be coming in the second half of the year.