RE:Eric Nuttall Market Call Link Precision Drilling (PD TSX)
With 2024 being a neutral-ish year for service companies (low natural gas price = limited drilling). We like that we can justify ownership using conservative 2024 estimates while getting free optionality to a stronger year in 2025 given the need to drill gas wells to offset base declines and meet LNG demand growth. We believe the stock is trading at a 23 per cent free cash flow yield on 2024 estimates and 28 per cent free cash flow yield on our 2025 numbers. With the company returning around 35 per cent of free cash flow back to shareholders the company has the ability to retire 18 per cent of its stock over the next two years. Fair value = 14 per cent free cash flow yield = $207 target price = 117 per cent potential upside.