Precision Drilling Corporation Stays Strong During the Oil Price Slump

Precision Drilling Corporation (TSX:PD)(NYSE:PDS) expects the oil services industry to improve in the second half of the year.

| More on:
The Motley Fool

Oil prices remain stubbornly low, hampering the recovery of numerous Canadian oil and gas companies. One firm bucking the downward trend is Precision Drilling Corporation (TSX:PD)(NYSE:PDS), whose stock is trading higher this year as management of the oil services company looks forward to a stronger second half of the year; management also insists there’s no chance of a dividend cut.

Precision Drilling provides contract drilling and production services to oil and natural gas exploration and production companies in Canada and the United States. Precision, which reported weaker net earnings and revenue in the first quarter, expects more spending by its customers in the second half of the year.

In an interview, Chief Executive Kevin Neveu said he expects the North American oil rig count, a key measure for the industry, to rebound, with wells restarting and equipment being upgraded, following cost-cutting measures in the first half of the year.

Baker Hughes, which tracks rig counts in North America, said rig counts in the United States and Canada climbed to 1,032 in the week ending July 10, 2015, up from 1,001 the previous week. That’s a long way off from a count of 2,190 in the same period last year, but the number has been slowly rising in recent weeks.

A stronger rig count recovery would require oil prices to rise to the $60 to $70 per barrel range, Neveu said. Oil prices were trading at about $52 per barrel as of Monday.

Despite the challenges in the oil sector, Precision Drilling is the ninth-best performer on the TSX’s energy index this year, up 5%, compared to a 7.8% overall decline in the energy indicator. Precision offers a dividend of $0.07 per share, with a dividend yield of 3.77%. Neveu said the current oil price slump will not affect Precision’s dividend.

In the last quarter, Precision surprised analysts with earnings per share of $0.08 per share, compared to estimates of just $0.04. In the second quarter, analysts project EPS of -$0.20 on revenue of $326 million. In the second quarter of 2014, Precision reported EPS of -$0.02 per share on revenue of $475 million. Another surprise to the upside in Precision’s second-quarter report, due July 23, could give the stock a welcome boost.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Doug Watt has no position in any stocks mentioned.

More on Dividend Stocks

four people hold happy emoji masks
Dividend Stocks

1 Stellar Canadian Stock Down 22% From 52-Week Highs to Buy and Hold Forever

Capital Power (TSX: CPX) might be the buying opportunity that pays off for decades.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

This 7.9% Dividend Stock Pays Monthly, Even During Recessions

SmartCentres REIT (TSX:SRU.UN) pays a monthly distribution through thick and thin.

Read more »

senior man smiles next to a light-filled window
Dividend Stocks

I’d Buy This 3.3% Dividend Stock in Bulk Before the Next CRA Audit Wave

It might not have the highest dividend yield, but it certainly has one thing on its side: consistency.

Read more »

Middle aged man drinks coffee
Dividend Stocks

How I’d Invest $250,000 in Canadian Dividend Stocks to Never Worry About Money Again 

Invest in dividend stocks for stable returns. Learn how these investments can provide a yield that outpaces inflation.

Read more »

shopper buys items in bulk
Dividend Stocks

Retirees: How to Protect Your OAS and Earn Income With 1 Stock

Retirement is a scary time, but it doesn't have to be! Especially with a monthly payer like this one.

Read more »

A solar cell panel generates power in a country mountain landscape.
Dividend Stocks

The Best Renewable Energy Stock to Invest $200 in Right Now

Here’s why this renewable energy stock could be a strong long-term bet even if you're starting with a small investment.

Read more »

Person holding a smartphone with a stock chart on screen
Dividend Stocks

4 Blue-Chip Dividend Stocks Every Canadian Should Own

These Canadian stocks are a reliable source of passive income, consistently paying and even increasing their dividends year after year.

Read more »

money goes up and down in balance
Dividend Stocks

The Ultimate Value Stock to Buy With $500 Right Now

This TSX stock has a well-established business, solid earnings growth potential, and a valuation that leaves room for significant upside.

Read more »