Stock picks: High oil prices push up Precision Drilling’s earnings

Precision Drilling Corp., Toronto symbol PD, provides contract-drilling services to oil and gas producers. The company owns 360 drilling rigs in Canada, the U.S. and Mexico. We analyze Precision in The Successful Investor, our newsletter that recommends stock picks for conservative investors. Precision recently converted from an income trust to a regular corporation. Investors received one common share for each trust unit they held. The change was in response to Ottawa’s new tax on income-trust distributions, which came into effect on January 1, 2011. In the second quarter ended June 30, 2011, revenue rose 31.9% to $345.3 million from $261.8 million a year earlier. Continued high oil prices are stimulating demand for rigs. This is letting Precision raise prices. Precision earned $16.4 million, or $0.06 a share, in the quarter. That’s a big improvement over its year-earlier loss of $69.4 million, or $0.25 a share. However, the year-earlier results suffered from much higher financing costs and a $26.1-million foreign-exchange loss. The outlook for the remainder of 2011 and for 2012 is strong, as high oil prices are prompting Precision’s customers to increase their drilling activity. You can get our latest analysis, including our clear buy/sell/hold advice, on Precision and dozens of other stock picks in The Successful Investor. What’s more, you can get one month free when you subscribe today. Click here to learn how.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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