Precision Drilling Trust (PDS)

[makesumgravy]

Now who's getting drilled?
Changing gears a bit, let's turn to a land driller getting no love. Earlier this month, I suggested that people picking up shares of drillers like Precision Drilling Trust (NYSE: PDS) or Helmerich & Paynes (NYSE: HP) were likely to get burned in the near term. That's turned out to be horribly prescient in the case of the former company.

The shares of this well-heeled contract driller have collapsed from what seemed like already depressed levels to $2 and change. Precision has been attempting to shore up its balance sheet by various means, from dashing its dividend to raising fresh capital. Mr. Market has been most unimpressed. Somehow, Precision managed to place new units at $3.75 yesterday. The proposed debt issuance, however, has stalled. That leaves Precision stuck with a bridge loan charging 17% interest.

Is Precision perilously close to defaulting on its obligations? The market price suggests an affirmative answer, but the real pressure doesn't hit until the very end of 2009, when debt maturities begin to surface. That suggests to me that Precision has time to maneuver its way through this funding crunch. But I'm just one guy, and the market has spoken. Unless you have some unique insight into the situation here, I would probably suggest standing aside.