English: Swivel on a drilling rig (Photo credit: Wikipedia)
(T-PD) $8.11 +0.06
Today Precision Drilling .. announcing that they are going to start paying dividends. That is certainly one way to attract investor attention these days as with the bond market giving you nothing and the banks giving you so little, if you are someone with grey hair and who has saved all his life, all of a sudden you are getting nothing from traditional savings methods and being forced to buy pipelines, utilities and whatever for some sort of
income (but oh, what happens when interest rates get back to normal to all those utilities?).
Precision Drilling came up with an update of where the company stands and it is interesting to note some rather dramatic moves. It announces that it expects capital expenditures to almost halved in 2013 because of weak prices continuing to affect the drilling for dry natural gas. The company forecasts capital expenditures of $490 for 2013 versus about $920 million for this year.
The company is a huge player in the drilling business and currently has, according to Reuters, roughly 150 rigs in the United States and about 200 rigs in Canada and proudly tells anyone who will wants to know, that they believe they are in every major basin in the United States and Canada. They also have 10 rigs working internationally.
However, with the new realities of low gas prices, they expect to decommission 52 lower-tiered drilling rigs and exit the Tier 3 contract drilling
business. They also expect to take a related charge of close to $200 million in the fourth quarter.
Reuters also reports that Precision Drilling reported a 53% drop in third quarter profits as gas firms cut drilling in the face of weak demand. Much of that is bad news, but for those still thinking energy has a future, a dividend of $0.05 a share quarterly or $0.20 a year, does offer a bit of a yield.
Meanwhile, to give you a sense of history, the five-year chart on Precision Drilling shows you just what some oil and gas related companies went through in the crash of 2008 as we went from a time of oil being close to $130 a barrel to the economic/ financial crash when it seemed like the world was ending and Precision Drilling took a dive of unprecedented proportions .
First Energy analyst Kevin Lo is reducing 2013 EBITDAS by 10% to $641 mm and EPS by 18% to $0.80, but retaining a $10.00 a share target price. With the news out, PI Financial cuts their price target to $9.75 from $10.50 and RBC raises their target to $10.00 from $9.50.
