Precision Drilling Corp. (PD) Price Target - Jan 31

[dan_s]

This is a very profitable drilling company that is going to get a lot more profitable this year. I don't cover it myself, but Stifel's note below tells me it is one to add if you want to get more oilfield service sector companies in your portfolio.

Precision Drilling Corporation (PD-TSX, C$106.31, Buy; Target C$185.00) -
Highlighting PD's U.S. day rate upside and earnings torque - Cole Pereira - Leading-
edge day-rates for U.S. drilling have climbed from US$20,000/day at the beginning
of 2022 to above US$35,000 in October, and we suspect could now be through US
$40,000. Additionally, these day-rates have yet to materially show up in results as it
typically takes 9-months for rigs to be re-contracted. Our estimates are largely aligned
with the Street, and our analysis indicates these figures could be biased meaningfully
higher. Without any additional rigs, we estimate all of its U.S. fleet re-contracting to
the leading edge of US$36,000-40,000/day could drive 2024E EBITDAS upside of
8-24%, or 14-31% using our 2024 forecast of 65 active rigs. Without any additional
rig additions or any re-rating from its valuation at 3.5x 2024E EV/EBITDAS this would
imply 15-44% equity upside, or 95-136% at 5.0x 2024E EV/EBITDAS. Meanwhile, 65
rigs at 5.0x would imply 109-153% upside.
As such we believe PD's estimates and share price are biased higher.