PRECISION DRILLING CORP. $8.40 (Toronto symbol PD; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 276.3 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.4%; TSINetwork Rating: Extra Risk; www.precisiondrilling.com) sells contract drilling services to oil and gas producers, mainly in North America. It ended 2012 with 321 active rigs.
The company is slowly expanding its international operations: it now has a total of eight rigs in Mexico and the Persian Gulf region.
In 2012, Precision’s earnings fell 72.9%, to $52.4 million, or $0.18 a share. It earned $193.5 million, or $0.67 a share, in 2011. If you exclude writedowns of older rigs, earnings per share would have declined by 12.9%, to $0.81 from $0.93.
Low natural gas prices have hurt drilling activity in North America. However, Precision has spent the past five years replacing older rigs with new models that can reach deeper oil and gas pockets. Thanks to strong demand for these rigs, revenue rose 4.6% in 2012, to $2.0 billion from $1.95 billion.
Precision recently resumed paying dividends; it suspended its payout in 2009 to lower its debt. The new annual rate of $0.20 yields 2.4%. The company’s 2013 earnings will probably slip to $0.80 a share due to the higher depreciation charges related to its new rigs. The stock trades at 10.5 times that forecast.
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