Strong Buy on Pioneer Energy
On Apr 16, 2014, Zacks Investment Research upgraded contract land drilling service provider, Pioneer Energy Services Corp. (PES) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The company reported a positive earnings streak in the last four quarters with an average beat of 84.7%. The company’s asset divestiture, contract renewals and debt reduction endeavors have placed Pioneer Energy well in the market. In the first quarter 2014, Pioneer Energy projects Drilling Service segment margin in the range of $8,000 to $8,500 per day and expects production service segment revenue to be flat.
Mounting exploration and production activity in the U.S. on account of the shale boom has boosted the need for drilling services including well services and wireline services which in turn proved beneficial for Pioneer Energy.
The positive factors are reflected in our estimates. The Zacks Consensus Estimate for 2014 increased sharply by 125% over the last 60 days to 9 cents per share. This reflects a year-over-year estimated increase of 276%.
Pioneer Energy successfully renewed all of its eight drilling rigs contracts at higher day rates with Ecopetrol SA (EC) which will improve the its revenue stream.
Pioneer Energy’s financial position also looks promising given its strong cash balance backed by impressive operating cash flow and proceeds from asset sale. Moreover, the company’s efforts to alleviate its debt level are progressing well. In the fourth quarter 2013, the company decreased its debt by $35 million.
Oil and gas exploration and production operators will continue to exploit the oil and gas plays. Consequently, demand for drilling services is expected to escalate by 8.1% annually through 2014 which could provide increased growth opportunities for Pioneer Energy.
Other Stocks to Consider
Other players in oil and gas drilling industry presently looking attractive are Zacks Ranked #1 (Strong Buy) Helmerich & Payne, Inc. (HP) and Seadrill Partners LLC (SDLP).
Read the Full Research Report on PES
Read the Full Research Report on HP
Read the Full Research Report on EC
Read the Full Research Report on SDLP
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