Precision Drilling Corporation
Highlights from the RBC Global Energy, Power and Infrastructure Conference
TSX: PD | CAD 63.28 | Outperform | Price Target CAD 120.00
Sentiment: Neutral
We hosted Kevin Neveu (President & CEO), Carey Ford (CFO), and Lavonne Dzunich (Director, Investor Relations) for a break-out session at the RBC Global Energy, Power and Infrastructure Conference. Overall, PD remains focused on reducing its debt levels by at least $150MM this year, holding pricing for its US rig fleet, and capitalizing on relative strength in the Canadian land drilling market where it has approximately 30% market share. PD is rated Outperform.
• USA. PD is running approximately 49 rigs in the US and sees additional near-term softness, related to recalibration in activity levels with lower commodity prices, as noted in its recent press release. The company stressed, however, that there is no "fire drill" in the industry, but fluctuations in activity levels are a function of continued industry capital discipline. PD is signing rig contracts for 2H23 start-ups which should be additive to its current rig counts under stable commodity prices. Base rig pricing also appears to be holding in the low-mid $30k/day range.
• Canada. 1Q23 activity was strong, and demand exceeded rig supply by roughly 5 Super Triple rigs. PD also retains strong market share in the Clearwater heavy oil play with a 40-55% market share. The company noted it recently signed a Super Single rig to a long-term contract, a rarity in the market.
• Alpha and EverGreen. PD has 73 Super Triple rigs equipped with Alpha, and expects to reach 80 by YE23. The company charges $1,500/day for its Automation platform, which maps to about 1/3 of the projected savings from the operator. PD is also getting uptake from its EverGreen suite of offerings, where it has 9 Battery Energy Storage Systems, (BESS), 18 GHG monitoring systems, and 32 mast LED lighting systems.
• Capital allocation. The company's $195MM capital budget includes $146MM for maintenance/infrastructure/intangibles (including reactivation of Middle East rigs) plus $49MM for expansion and upgrades. PD expects to reduce total debt by at least $150MM debt this year and allocate 10-20% of FCF to shareholder returns.