Post by
retiredcf on Aug 01, 2024 8:41am
TD 2
As predicted, TD bump their target by 25 bucks to $140.00. GLTA
Q2/24 RESULTS: H2/24 TO SHOWCASE ROBUST CANADIAN MARKET
THE TD COWEN INSIGHT
The Canadian outlook continues to improve despite several near-term challenges. In the U.S., activity is subdued but pricing discipline is mitigating negative impacts. Multiple expansion has occurred, but Precision trades at an attractive relative 2024/25 FCF yield of 19%/25% (coverage group avg: 15%/19%). In this context, Precision moves toward the top of our pecking order (mid-pack previously).
Event: We are updating our estimates following management's conference call. Our target price increases to $140.00/share ($115 previously) and we are maintaining our BUY rating.
Impact: POSITIVE
Q2/24 Results: Precision reported Q2/24 EBITDAS of $125.0 million, 6% above our estimate of $117.7 million. Details on page 4.
Conference Call Takeaways:
Q3/24 Margin Guidance:
Canadian margins to be in the range of $13,500-$14,000/day. Notably, super singles remain in high demand generating margins in the range of $7,000-$14,000/day, overlapping with AC triples which start at $12,000/day. U.S. margins to remain stable and be above US$10,000/day. Management characterized its guidance as conservative.
Activity Outlook:
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In Canada, Precision is active on 77 rigs and expects to be in the range of 75 to 80 rigs through August, trending upward through the fall. Management believes that U.S. activity levels have troughed with 38 rigs currently active. Management believes it could potentially add a couple of rigs through H2/24, as early stage discussions commence with Haynesville customers.
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Forest fires/rain is pushing service rig activity into the fall. Precision expects to operate 70 to 85 service rigs through Q3, and trend to ~95 service rigs in Q4.
Excess Demand for AC Triples: Based on recent contracting discussions, Precision estimates a shortage of AC triples for the Canadian market. Precision could redeploy AC Triples from the DJ Basin to Canada and would require contracted day-rates in the upper 30s and mobilization costs to be covered by the customer.
Shareholder Returns to Expand in 2025: Management expects to achieve its ND/EBITDAS target of <1.0x in 2025 (TD estimate: Q3/25E), and will transition to returning 50% of its free-cash-flow before debt repayment to shareholders.
Estimate Changes: Based on management's guidance noted above, our 2024 and 2025 EBITDAS estimates increase by 4% and 5%, respectively. Details on page 5.
Research analysts marked with ^ above are not associated persons of TD Securities (USA) LLC and are not registered as Research Analysts under FINRA rules. Research analysts registered solely with FINRA are not subject to CIRO disclosure requirements.
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