Precision Drilling Corporation
Highlights from the RBC Global Energy, Power and Infrastructure Conference 2024
TSX: PD | CAD 95.55 | Outperform | Price Target CAD 122.00
Sentiment: Neutral
We hosted Gene Stahl (President, North America Drilling), and Lavonne Zdunich (VP 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 $150-200MM this year, diversifying customers for its US rig fleet, and capitalizing on relative strength in the Canadian land drilling market where it has approximately 35% market share. PD is rated Outperform.
• USA. PD is running approximately 35 rigs in the US (according to Enverus) and sees activity remaining stable through 2H24, as volatility in commodity pricing and weak natural gas activity drove weakness in industry activity YTD. PD highlighted that the company's targeted customer mix has shifted from private operators to larger public operators, and this should provide a more stable activity for the company in the foreseeable future. Base rig pricing also appears to be holding in the low-mid $30k/day range.
• Canada. 1Q24 activity was strong, and demand for the company's Super Triple rigs remains solid, with PD highlighting that activity outlook for 2H24 is expected to be strong highlighting the resiliency in the CAD drilling market compared to the US drilling market coming from the 590mbbl/d Trans Mountain expansion and first phase of LNG Canada commissioning in 2025.
• Capital allocation. The company's $195MM capital budget includes $153MM for maintenance/infrastructure/intangibles (including strategic long-lead items of ~$40MM) plus $42MM for expansion and upgrades. PD expects to reduce total debt by $150-200MM debt this year and allocate 25-30% of FCF to shareholder returns, and 50% as debt targets are met.