Just took a nice stake in PDS. Here's why:
Precision Drilling's New MODERN Fleet!
In Canada, Precision is the largest contract driller in the premium rig category. Going into 2016, the company had ~134 rigs deployed in Canada accounting for ~30% market share of the high-performance rig segment.
In the US, PDS operates the fourth largest fleet of ~102 rigs, over 70 of which are high-performance newbuilds (the fourth largest modern-generation fleet after Helmerich & Payne, Nabors, and Patterson-UTI). The company's market share in the high-performance US segment is close to 10%, and its stock price is under $6 while HP is $60+, NBR is near $11, and PTEN is $21+.
PDS retired all its older rigs and reduced its fleet to 238 Super Series "tier 1" rigs worldwide. It is modeling itself after the highly successful Helmerich & Payne (HP). They had to do it because the big boys were pushing the small drillers out of business.
The Super Series "tier 1" rigs feature AC drive, digitized control systems, integrated top drive, bi-directional pad walking or skidding systems for multi-pad well drilling, highly mechanized pipe handling, and high capacity mud pumps. The Super Single specification is a smaller, fast-moving, hydraulically-powered mechanized rigs that are optimized for shallow- to medium-depth resource plays in North America.
Tier 1 are rigs are high performance and very mobile. These are automated with advanced drilling controls. Horizontal capabilities and capacity mud pumps make these highly suited for deeper shale plays that have complex drilling needs, especially when drilling for oil. These rigs have hydraulic legs and can walk around on a large drilling pad to drill many holes in a given area. They are designed for pad-drilling operations.
The latest Pad-optimal rigs have six specific characteristics: 1,500 hp, dual-fuel capabilities, 7,500-psi mud system, safe by design and capable of fast conventional moves, omnidirectional walking systems, and AC drive. These rigs will be the first to achieve 100% utilization in 2016. Equipment that doesn’t meet these characteristics will returned to work on a slower tempo than pad-optimal rigs.
PDS is also stacked 10 Tier 2 rigs. These rigs can drill deep horizontal holes, but aren't mobile for pad-drilling operations. They have scrapped all but 15 Tier 3 rigs because they are unsuitable for horizontal drilling. They do have market niche opportunities so holding 15 makes sense, especially since they are already paid for 10 times over.
This make PDS the least expensive way to play the upcoming land drilling boom (see me next post).