PD stock is down more than 5.8% today, to a 12-month low of $1.12.
Precision Drilling Corp. (TSX:PD) (NYSE:PDS), the largest drilling rig contractor in Canada, has seen its stock fall by more than 31.6% in 2019 alone. PD stock has been on the slide since hitting a year high of $2.93 in April, subsequently posting a loss of $0.04 per share in Q2.
What Shape is the Industry In?
As we can see by the declining value of PD stock, the Oil and Gas industry outlook is pretty bleak at the moment. On one hand, international oil prices have rallied around 26% this year, and as a result, work for drillers has picked up, as evidenced by a rise in the international rig count. Now, this might sound like the future is looking good for the industry, but this rise in drilling activity has mostly been confined to onshore rigs, and so activity for offshore rigs has remained pretty stagnant. Operating days in Canada fell by 14.9 percent, and revenue per day was down 2.1 percent.
This slump has forced leading energy companies to cut spending, especially on the more expensive offshore drilling projects. This is where most of Precision’s operations take place, and so we see a declining value in PD stock to correlate with the stagnant drilling activity.
Weak Energy Investment Climate
PD stock took another hit in late July after the company’s CEO Kevin Neveu took aim at political leaders in Ottawa, BC, and Quebec over policies that the company believes are damaging to the industry. “I’m very disappointed with the weak energy investment environment in Canada. I believe this is a direct result of the lack of federal government leadership and unco-operative political self-interest evident in British Columbia and Quebec,” said Mr. Neveu in a conference call.
He added that the passage of a bill in Ottawa, which will revamp the way mining projects are approved, and a bill in BC banning oil tanker traffic on the North Coast, are “clearly intended to undermine the domestic energy industry.”
Despite posting reasonably positive Q2 results, with net loss down from $47.2 million CAD to $13.8 million CAD and revenue increasing by 9%, investors in PD stock are clearly not feeling hopeful for the future of the market, and so this looks like a stock to maybe stay clear of.
Featured image: DepositPhotos @ boscorelli