We came across a bullish thesis on Precision Drilling Corporation (PDS) on Substack by Nugget Capital Partners. In this article, we will summarize the bulls’ thesis on PDS. Precision Drilling Corporation (PDS)’s share was trading at $42.09 as of April 15. PDS’s trailing and forward P/E were 7.48 and 9.04 respectively according to Yahoo Finance.
A drilling rig fueled by the energy and expertise of the oil & gas exploration and production company.
Precision Drilling is Canada’s largest land driller, presents a compelling and timely opportunity in the oilfield services sector despite broader concerns surrounding commodity price weakness and energy market volatility. While adding exposure to oilfield services in a declining oil price environment may seem counterintuitive, the nuances of Precision’s business, including its strategic regional dominance, superior rig technology, and resilient end markets, paint a far more attractive picture than headline oil price action would suggest. At the core of the thesis lies Precision’s dominant market share in two of Canada’s most strategically important basins: the Montney and Clearwater. These basins are underpinned not only by robust production economics but also by structural demand drivers, such as LNG export development and the unique role of condensate in Canadian bitumen blending. In both basins, Precision’s proprietary rigs — Super Triples in the Montney and Super Singles in the Clearwater — are the preferred tools of major exploration and production companies. Clients like Tourmaline, Arc Resources, Tamarack Valley, and Canadian Natural are executing active growth programs supported by long-term drilling activity and high-return capital deployment, lending visibility and resilience to Precision’s earnings base.
Beyond Canada, Precision has around 30% exposure to U.S. shale, where service margins have weakened in recent quarters amid reduced drilling intensity and elevated efficiency. However, these challenges are now well-known and largely priced into the stock. U.S. operators have been able to sustain production with fewer rigs, but that trend has likely hit its limit, and either a gradual uptick in demand or exhaustion of high-return acreage could spur a rebound in drilling activity. While Precision’s U.S. business has seen some softness, Canadian operations continue to outperform. Canadian rig counts are up year-over-year, and high-spec rig utilization remains strong, particularly in Alberta and British Columbia where Precision’s operations are concentrated. Importantly, this strength is not hypothetical — recent data from March 2025 confirms a notable year-over-year increase in both drilling licenses and new spuds. These indicators are especially meaningful for forecasting short-term activity and revenue momentum. With E&P operators remaining cautious about releasing premium rigs and crews due to tight service availability, demand for Precision’s assets should remain robust even in a moderately weaker macro backdrop.