​The investment community is overlooking the value of oilpatch companies: Precision CEO

Image: Precision Drilling

Miffed by mediocre oil and gas prices, many stock market investors are overlooking the value behind oilpatch companies, including Precision Drilling Corporation, the company’s chief executive told analysts this week.

In a second-quarter conference call, Kevin Neveu was asked about the apparent disconnect between Precision’s ongoing efforts to add value through initiatives like improved technology and the rough ride the company has had on Canada’s stock markets recently.

Reaching nearly $14 per share only three years ago, Precision’s stock traded near $3.60 per share on the Toronto Stock Exchange on Tuesday. On Monday, the company had good news as revenue rose sharply in the second quarter and year to date, as it cut losses in both periods, boosting capital spending for the year.

Nonetheless, with ongoing oil and gas price volatility, stock market investors have found it hard to understand the drilling business in the short term, Neveu said, despite oil and gas producers taking a longer-term view.

However, he added that the strengthening of WTI recently should help the situation.

“We’ve got prices hovering close to $50 WTI [and] that will improve customer sentiment in time,” Neveu said.

Improving prices aside, he believes the company’s initiatives to address technology and efficiency are delivering “very good results” for Precision’s customers. Those initiatives include the company’s rig automation technology, the Process Automation Control system. In the field, Neveu also sees other reasons for optimism.

“Activity is relatively strong,” he said. “The trend in the last few days seems to be improving, but we’ll need to see more fundamental data on global supply and demand to get more confidence in that before the market’s going to react.”

At the same time, as second-quarter results are released, some producers have cut capital budgets, somewhat undercutting what looked like a broad industry recovery.

Neveu is not discouraged. Barring a sharp drop in prices, the kind that would take oil below $40 for a sustained period, “I think we’re feeling much more confident about the business now than we might have been in more volatile periods,” he said.

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