Opinions Michael Sprung
Precision DrillingPD.TOHOLDJan 07, 2015
Michael SprungStock price when the opinion was issued
As of Jun 05, 2026. Market Open.
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Heck of a rally, perhaps based on sanctioning of LNG Canada for next year. Achieved debt target, so pivoting to 50% return of capital to shareholders. Trades at about 20% FCF yield next year, buying back 10% of stock -- pretty compelling.
Services stocks actually do well when trading at very high multiples (it tells you that you're at a cyclical low) -- he has no exposure right now. Spreadsheet math is positive, but it's just not the right time yet.
He sold this around $90. It's tied to the fall in oil prices as drilling activity slides. Shares are at a 28% free cash flow yield, but he isn't confident about that figure. Revisit this in maybe 6 months after the market absorbs OPEC oversupply.
Drilling services to energy (oil & gas) producers. This name weakens when energy companies decide to pull back on drilling; they do that when the commodity's weak and there's less $$ to spend. Very volatile, and that's why she stays away.
Gets swayed by underlying commodity prices and the energy sector, in general, has come off. OPEC has indicated its cutbacks won't continue; a bizarre move in the face of weaker demand, which suggests they need revenue from energy volumes to drive their economies.
He exited at a profit. Services have been selling off when gas/oil was recently weak. The problem is that drillers have gotten too efficient. That said, this is looking tempting, trading at 3x EBITDA and 32% free cash flow yield.
Eric Nuttall
More drilling 'should' result in more activity for the service sector, of course. PD is very cheap and seeing fundamental improvement. We would be comfortable in the $76 to $77 range.
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Remember to buy a sector when it looks terrible, not when it's up 80-90% ;)
Still likes it but not as much, as drilling is weaker than thought. Selloff in oil, drop in rig count. More efficient drilling ultimately means less work. Continues to de-lever. Everyone's excited about natural gas. Massive exposure to nat gas in Canada, which has better dynamics than US. About a 3.7% weight for him.
Eric Nuttall
Still constructive, especially after Q2 reporting. US activity and nat gas remain weak. US investors are buying because Canada's oil & gas industry is very, very strong. LNG Canada is a huge catalyst. Sees $185 target, or 93% upside from here.
Eric NuttallConsolidating, as are a lot of stocks in the sector. Attempting to break out, wrestling with the older highs of $120. Longer term, likes oil. Hard to say if this one will break out. If you're patient, you'll probably be rewarded. But also a chance could tumble back into the trading tunnel. It's a flip of the coin.
Modest multiple. Trades today at 22-23% free cashflow yield at modest activity levels; forward free cashflow yield of 26%. Offers strong optionality for better activity levels in 2025, predicated on higher nat gas price. No interest in services right now, so that's one of the best value propositions. No dividend.
(Analysts’ price target is $127.38)Eric Nuttall
Took about half of his position off at around $15. Oil service companies are going to be hit hard in this environment. When companies don’t put out new wells or take options they have on increasing production, the drillers are going to be among the first to feel those effects. They are not likely to see any precipitous increase until there are signs that things have definitely bottomed and there is more activity in terms of profitability turning around for the industry. If your outlook is long-term, you can buy into this as this company will be one of the survivors. If you have a five-year view, you should do extremely well. They have a good balance sheet.