In the oil & gas space, a wide range of options are available to investors looking to find value in today’s market. With many sectors exhibiting valuation multiples which are indicative of over-valuation, many companies in the oil & gas space have conversely retracted in recent years as commodity prices have stagnated.
Every oil & gas firm carries risk, and in that regard, companies like Precision Drilling Corp. (TSX:PD) leave a lot to be desired for many. The company has long been touted as a value stock, and while I do believe that the fundamental valuation of Precision Drilling remains low, the question of the ability of the company to generate higher levels of cash flow remains to be seen.
The company recently reported a net loss of $0.16 per share compared to analyst estimates of $0.14 and a net loss of $0.12 a year earlier. A widening net loss is certainly not a good thing for investors; that said, a significant portion of this is attributable to expansion related expenses which tripled year over year due to the addition of eight new rigs in the U.S. market.
Maintenance spending has also increased substantially, as Precision Drilling looks to service these additional rigs.
Over the long term, companies like Precision Drilling will see their stock prices move in a correlated fashion to commodity prices, with some variance due to operational risk and performance.
This is a company I would keep an eye on for long-term investors, and while the company’s fundamentals don’t necessarily support a bullish outlook at the moment, things can change.
Invest wisely, my friends.
