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1. Company Snapshot

1.a. Company Description

Precision 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.

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1.b. Last Insights on PD

Precision Drilling Corporation's recent performance has been positively driven by strategic capital investments, successful debt reduction, and strong US growth. The company's appointment of Carey Ford as President and CEO, succeeding Kevin Neveu, may bring new leadership dynamics. Additionally, the renewal of its normal course issuer bid, allowing for share buybacks, signals confidence in its financial position. The company's mixed Q3 results, with a net loss but revenue beating estimates, also highlight its resilience amid industry challenges. Earnings growth forecasts of 13.1% annually outstrip the Canadian market average.

1.c. Company Highlights

2. Precision Drilling's Q3 Earnings: A Resilient Performance Amidst Industry Challenges

Precision Drilling reported adjusted EBITDA of $118 million in Q3, a decline from $142 million in the prior year, primarily due to a decrease in international drilling activity. The company's EPS came out at -$0.77, missing estimates of $2.19. Revenue resilience was evident in the C&P segment, which reported adjusted EBITDA of $19.3 million, marginally lower than $19.7 million in Q3 of the prior year. As CFO Dustin Honing noted, the company's U.S. drilling activity averaged 36 rigs, an increase of 3 rigs from the previous quarter, contributing to the overall revenue.

Publication Date: Oct -28

📋 Highlights
  • Capital Budget Increase: Precision Drilling raised its 2025 capital budget to $260 million, adding $20 million to fund 5 extra rig upgrades.
  • Adjusted EBITDA Performance: Q3 adjusted EBITDA was $118 million, down from $142 million in the prior year, with $19.3 million in C&P segment EBITDA.
  • Drilling Activity Trends: U.S. active rigs averaged 36 (up 3 from Q2), while Canada averaged 63 rigs, outperforming industry activity.
  • 2025 Upgrade Plan: The company expects to complete 27 major rig upgrades in 2025, supported by customer contracts or upfront payments.
  • 2026 Upgrade Strategy: Anticipates starting 2026 with similar upgrade commitments as 2025, driven by demand for longer reach horizontals in the U.S.

Operational Highlights

The company's operational performance was marked by outperforming industry activity and growing U.S. drilling activity, with resilient operating margins within guidance. In Canada, drilling activity averaged 63 active rigs, while international drilling activity averaged 7 rigs, down from 8 rigs in the prior year Q3. The company is on track to meet its 2025 capital allocation plans, having achieved its debt reduction target.

Guidance and Outlook

For Q4, Precision Drilling expects activity to meet or slightly exceed last year's winter activity, with a rig count of around 65. Operating margins in Canada are expected to range between $14,000 and $15,000 per day, while in the U.S., margins are expected to range between $8,000 and $9,000 per day. The company has increased its 2025 capital budget by $20 million to support 5 additional contracted rig upgrades, taking the total to $260 million.

Valuation and Growth Prospects

With a P/E Ratio of 10.78 and an EV/EBITDA of 3.58, the company's valuation appears reasonable. Analysts estimate next year's revenue growth at 3.1%. The company's ROIC of 5.78% and ROE of 6.26% indicate a decent return on capital. The Net Debt / EBITDA ratio of 1.36 suggests a manageable debt burden. The company's strategy, focused on leveraging scale, utilizing technology, and customer focus, is expected to drive growth and improve profitability.

Strategic Focus and M&A

The new CEO, Carey Ford, has emphasized his focus on supporting field operations and proving to customers that Precision delivers the best performance. He does not anticipate a significant change in the company's M&A strategy, instead focusing on organic growth through high utilization of assets, improved pricing, and rig upgrades. The company's unique customer contract structure in Canada and opportunities for rig upgrades in key basins are expected to drive growth.

3. NewsRoom

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Precision Drilling (TSX:PD) Margin Miss Challenges Bullish Valuation Narrative

Oct -24

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Precision Drilling Corp (PDS) Q3 2025 Earnings Call Highlights: Navigating Challenges and ...

Oct -23

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Precision Drilling (PDS) Earnings Call Transcript

Oct -23

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Precision Drilling Swings to Q3 Net Loss on U.S.-Related Tax Expense

Oct -23

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Precision Drilling (PDS) Reports Q3 Loss, Tops Revenue Estimates

Oct -22

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Precision Drilling: Q3 Earnings Snapshot

Oct -22

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Precision Drilling Announces 2025 Third Quarter Unaudited Financial Statements

Oct -22

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NBR Stock Up 11.4% in a Month: Should Investors Hold or Move On?

Oct -06

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.15%)

6. Segments

Contract Drilling

Expected Growth: 1.2%

Precision Drilling Corporation's 1.2% growth in Contract Drilling is driven by increasing demand for oil and gas, improved operational efficiency, and strategic expansion into new markets. Additionally, the company's focus on technology adoption, such as automation and digitalization, has enhanced its drilling capabilities, leading to increased customer satisfaction and loyalty.

Completion and Production

Expected Growth: 0.8%

Precision Drilling Corporation's 0.8 growth in Completion and Production is driven by increasing demand for oilfield services, improved operational efficiency, and strategic acquisitions. Additionally, the company's focus on technology advancements, such as its DrillBit and Rig Automation, has enhanced its competitive edge, leading to increased market share and revenue growth.

Inter-segment Eliminations

Expected Growth: 0.5%

Precision Drilling Corporation's 0.5% inter-segment eliminations growth is driven by increased drilling activity, improved operational efficiency, and strategic cost management. Additionally, the company's diversified service offerings and expansion into new markets have contributed to this growth, offsetting the impact of fluctuating oil prices and industry volatility.

7. Detailed Products

Drilling Rigs

Precision Drilling Corporation offers a fleet of drilling rigs that provide efficient and safe drilling operations for oil and gas exploration and production companies.

Well Servicing

The company provides well servicing solutions, including well maintenance, workovers, and abandonment services to optimize well performance and extend the life of oil and gas wells.

Directional Drilling

Precision Drilling Corporation offers directional drilling services that enable precise wellbore placement and navigation in complex geological formations.

Drilling Fluids

The company provides drilling fluids and mud logging services to optimize drilling operations, improve wellbore stability, and reduce drilling risks.

Camp and Catering Services

Precision Drilling Corporation offers camp and catering services to provide comfortable and safe accommodations for drilling personnel in remote locations.

Drilling Waste Management

The company provides drilling waste management services to handle and dispose of drilling waste in an environmentally responsible manner.

8. Precision Drilling Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Precision Drilling Corporation is medium due to the availability of alternative drilling services and equipment. However, the company's specialized drilling services and equipment may limit the threat of substitutes.

Bargaining Power Of Customers

The bargaining power of customers for Precision Drilling Corporation is low due to the company's strong market position and the lack of alternative drilling services. Customers have limited bargaining power to negotiate prices.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Precision Drilling Corporation is medium due to the availability of alternative suppliers of drilling equipment and services. However, the company's large scale of operations may give it some bargaining power over suppliers.

Threat Of New Entrants

The threat of new entrants for Precision Drilling Corporation is low due to the high capital requirements and regulatory barriers to entry in the drilling services industry. New entrants may find it difficult to compete with established players like Precision Drilling Corporation.

Intensity Of Rivalry

The intensity of rivalry for Precision Drilling Corporation is high due to the competitive nature of the drilling services industry. The company faces intense competition from other drilling services providers, which may lead to pricing pressures and reduced market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 37.24%
Debt Cost 7.85%
Equity Weight 62.76%
Equity Cost 18.38%
WACC 14.46%
Leverage 59.34%

11. Quality Control: Precision Drilling Corporation passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Teekay

A-Score: 7.0/10

Value: 9.4

Growth: 6.2

Quality: 7.5

Yield: 10.0

Momentum: 3.5

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
PHX Energy

A-Score: 7.0/10

Value: 8.7

Growth: 7.2

Quality: 5.9

Yield: 10.0

Momentum: 2.5

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Precision Drilling

A-Score: 5.0/10

Value: 8.5

Growth: 6.6

Quality: 5.6

Yield: 0.0

Momentum: 4.0

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Borr Drilling

A-Score: 4.4/10

Value: 8.6

Growth: 8.2

Quality: 4.6

Yield: 2.0

Momentum: 1.0

Volatility: 2.0

1-Year Total Return ->

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Stock-Card
Ensign Energy Services

A-Score: 4.2/10

Value: 9.3

Growth: 4.9

Quality: 3.0

Yield: 0.0

Momentum: 3.5

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Independence Contract Drilling

A-Score: 3.7/10

Value: 10.0

Growth: 3.8

Quality: 2.4

Yield: 0.0

Momentum: 5.0

Volatility: 1.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

95.06$

Current Price

95.06$

Potential

-0.00%

Expected Cash-Flows