Precision Drilling Revenue Drops 38% In 1Q; Shares Plunge 6%


Precision Drilling Corp. shares fell as much as 6% on Thursday after the company reported its first-quarter financial results. Canada’s largest drilling contractor revenue fell 38% from 1Q 2020, mainly due to lower contract drilling activity and day rates.

Precision Drilling (PD) revenue came in at C$236 million in 1Q 2021, compared to C$379 million in 1Q 2020. The adjusted EBITDA of C$55 million was 47% lower than in the previous year. Net loss widened to C$36 million (C$2.70 per share) in the quarter ended March 31 from C$5 million (C$0.38 per share) in 2020.

Precision’s President and CEO Kevin Neveu said, “I am pleased with Precision’s response to the rebounding North American drilling market during the first quarter of 2021. Our current active U.S. rig count sits at 40 rigs; a milestone achieved several weeks earlier than previously anticipated and represents a 40% increase since the beginning of the year. In Canada, which is now experiencing the seasonal break-up slowdown, we are operating 20 rigs, an increase of 100% from this time last year.”

Improving fundamentals resulting from the recovery in global demand for oil should further stabilize commodity prices and encourage customers to continue increasing their activity levels throughout the year. (See Precision Drilling stock analysis on TipRanks)

Last week, National Bank analyst Dan Payne upgraded the stock to Buy from Hold. He also raised his price target from C$32.50 to C$40.00 (28% upside potential).  Payne told investors he believes Precision “exemplifies the value proposition” offered by expanding market share and margins in what he sees as an “otherwise relatively stagnant activity landscape.”

The rest of the Street is cautiously optimistic about Precision Drilling with a Moderate Buy consensus rating based on 5 Buys and 3 Holds. The average analyst price target of C$41.20 implies an upside potential of about 32% to current levels.

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