Pioneer Drilling Company

Pioneer Drilling is taking advantage of the push to "drill, drill, drill" as revenues spiked 48% in the second quarter. The company has surprised on estimates 2 out of the last 4 quarters. Pioneer Drilling is cheap, trading at only 7x projected earnings.

Company Description

Pioneer Drilling Company (PDC - Snapshot Report) provides two services to companies in the energy sector: contract drilling and workover rig, wireline and fishing and rental services.

The company, a Zacks #1 Rank (Strong Buy), engages in Contract Drilling Services for both the major oil companies and the independent operators in Texas, Louisiana, Oklahoma, Kansas, the Rocky Mountain Region and in Central America, in Colombia.

The Production Services Division, which supplies energy producers along the Gulf Coast, Mid-Continent and Rocky Mountain regions, has a fleet of 69 land drilling rigs that drill in depth ranges between 6,000 and 18,000 feet, 66 workover rigs, 51 wireline units and fishing and rental tools.

Revenues Jump 48% in the Second Quarter

On Aug 7, Pioneer reported second quarter earnings that missed Wall Street estimates by 6 cents per share. Net income was $19.1 million, or 38 cents per share, compared with $13.1 million, or 26 cents, for the year earlier period. The quarter included results from the Production Services Division that was formed in March. The Production Services Division was the result of acquisitions combined with the Colombian operations.

Revenues rose 48% to $152.5 million from $102.8 million a year ago. The Drilling Services Division continues to be the primary revenue generator, with $109.3 million in the second quarter, up $6.5 million from the prior year. Rig utilization rose to 90% compared to 84% in the first quarter. The margins increased 14% to $8,026 per day, the highest of the year, up from $7,047 in the first quarter.

Pioneer expects continued improvement in margins throughout the rest of the year. The company also moved a 4th drilling rig into Colombia.

The Production Services Division saw revenues of $43.3 million. The company said the division was performing better than expected and generated a 49% margin in the second quarter. It is also bullish on demand for services for the remainder of the year.

Estimates Rise for the Third Quarter and the Full Year

In spite of volatility in the energy sector as crude prices have moved lower, covering analysts are bullish on Pioneer. Consensus estimates for the third quarter rose 7 cents to 43 cents in the last 60 days. Full year estimates jumped 17.8% to $1.52 from $1.29 during the same period.

Value Fundamentals

Pioneer's stock has fallen as energy and commodities-related stocks sold off. It now trades at only 7x forward earnings. Its price-to-book is 1.35, under the industry average of 1.78. It has a five year average return on equity (ROE) of 10.25%.

Read the full analyst report on PDC