A High-Risk, High-Reward Value Play For Investors

Precision Drilling Corp. (TSX:PD)(NYSE:PDS) has been a perpetual value option for investors over the years, as North American oil and gas players have gradually cut down on well drilling and overall capital expenditures to retain profitability as oil prices have remained low.

With the new extremely low commodity price levels setting in over the past few weeks, near to medium-term expectations for a company like Precision Drilling continue to get downgraded, resulting in a stock price which has lagged many energy companies of late (which says something when one takes a look at the overall Canadian energy sector recently).

The key glimmer of hope which keeps me interested in a company like Precision Drilling is the reality that despite very low commodity prices, there is a base level of activity needed to keep the industry going. Also, the Canadian Federal government, and I would suspect the Alberta provincial government, have a lot at stake to keep companies like Precision Drilling, that support the energy sector broadly, alive.

I would expect that the company’s share price right now reflects near-maximum pessimism for the sector as a whole, meaning investors are now essentially able to pick up shares of Precision Drilling at a valuation which implies a call option on survivability more than anything.

Again, I’d wait to see the dust settle over the next couple months, but this is certainly an interesting option for investors to keep their eye on.

Invest wisely, my friends.