Intrinsic value of Precision Drilling - PDS

Previous Close

$3.75

  Intrinsic Value

$1.10

stock screener

  Rating & Target

str. sell

-71%

Previous close

$3.75

 
Intrinsic value

$1.10

 
Up/down potential

-71%

 
Rating

str. sell

We calculate the intrinsic value of PDS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -38.84
  47.50
  43.25
  39.43
  35.98
  32.88
  30.10
  27.59
  25.33
  23.29
  21.47
  19.82
  18.34
  17.00
  15.80
  14.72
  13.75
  12.88
  12.09
  11.38
  10.74
  10.17
  9.65
  9.19
  8.77
  8.39
  8.05
  7.75
  7.47
  7.22
  7.00
Revenue, $m
  704
  1,038
  1,488
  2,074
  2,820
  3,748
  4,876
  6,220
  7,796
  9,612
  11,675
  13,989
  16,554
  19,369
  22,430
  25,732
  29,271
  33,039
  37,033
  41,247
  45,678
  50,322
  55,178
  60,246
  65,528
  71,025
  76,744
  82,688
  88,866
  95,286
  101,958
Variable operating expenses, $m
 
  1,351
  1,929
  2,683
  3,643
  4,835
  6,286
  8,016
  10,042
  12,378
  15,031
  17,992
  21,291
  24,911
  28,848
  33,095
  37,646
  42,493
  47,629
  53,049
  58,747
  64,720
  70,965
  77,484
  84,277
  91,348
  98,702
  106,347
  114,293
  122,550
  131,130
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  820
  1,351
  1,929
  2,683
  3,643
  4,835
  6,286
  8,016
  10,042
  12,378
  15,031
  17,992
  21,291
  24,911
  28,848
  33,095
  37,646
  42,493
  47,629
  53,049
  58,747
  64,720
  70,965
  77,484
  84,277
  91,348
  98,702
  106,347
  114,293
  122,550
  131,130
Operating income, $m
  -115
  -313
  -441
  -609
  -822
  -1,088
  -1,410
  -1,795
  -2,246
  -2,766
  -3,356
  -4,003
  -4,737
  -5,542
  -6,418
  -7,363
  -8,375
  -9,453
  -10,596
  -11,802
  -13,069
  -14,398
  -15,788
  -17,238
  -18,749
  -20,322
  -21,958
  -23,659
  -25,427
  -27,264
  -29,173
EBITDA, $m
  175
  110
  157
  219
  298
  396
  516
  658
  824
  1,017
  1,235
  1,479
  1,751
  2,048
  2,372
  2,721
  3,096
  3,494
  3,916
  4,362
  4,831
  5,322
  5,835
  6,371
  6,930
  7,511
  8,116
  8,745
  9,398
  10,077
  10,783
Interest expense (income), $m
  103
  96
  152
  228
  327
  453
  610
  800
  1,027
  1,293
  1,599
  1,948
  2,338
  2,771
  3,246
  3,763
  4,321
  4,918
  5,554
  6,228
  6,939
  7,687
  8,471
  9,291
  10,146
  11,038
  11,966
  12,931
  13,934
  14,977
  16,061
Earnings before tax, $m
  -228
  -408
  -593
  -837
  -1,149
  -1,541
  -2,020
  -2,595
  -3,273
  -4,059
  -4,955
  -5,950
  -7,075
  -8,313
  -9,664
  -11,126
  -12,696
  -14,371
  -16,150
  -18,030
  -20,009
  -22,085
  -24,259
  -26,529
  -28,895
  -31,360
  -33,924
  -36,590
  -39,361
  -42,241
  -45,234
Tax expense, $m
  -113
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -115
  -408
  -593
  -837
  -1,149
  -1,541
  -2,020
  -2,595
  -3,273
  -4,059
  -4,955
  -5,950
  -7,075
  -8,313
  -9,664
  -11,126
  -12,696
  -14,371
  -16,150
  -18,030
  -20,009
  -22,085
  -24,259
  -26,529
  -28,895
  -31,360
  -33,924
  -36,590
  -39,361
  -42,241
  -45,234

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  86
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,201
  4,595
  6,582
  9,177
  12,479
  16,582
  21,573
  27,524
  34,495
  42,531
  51,661
  61,899
  73,250
  85,704
  99,248
  113,860
  129,516
  146,192
  163,863
  182,509
  202,113
  222,662
  244,149
  266,575
  289,945
  314,272
  339,574
  365,877
  393,213
  421,620
  451,141
Adjusted assets (=assets-cash), $m
  3,115
  4,595
  6,582
  9,177
  12,479
  16,582
  21,573
  27,524
  34,495
  42,531
  51,661
  61,899
  73,250
  85,704
  99,248
  113,860
  129,516
  146,192
  163,863
  182,509
  202,113
  222,662
  244,149
  266,575
  289,945
  314,272
  339,574
  365,877
  393,213
  421,620
  451,141
Revenue / Adjusted assets
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
Average production assets, $m
  2,787
  4,110
  5,888
  8,209
  11,162
  14,833
  19,297
  24,621
  30,856
  38,044
  46,211
  55,369
  65,522
  76,663
  88,778
  101,849
  115,853
  130,770
  146,577
  163,256
  180,792
  199,173
  218,394
  238,454
  259,358
  281,119
  303,752
  327,280
  351,732
  377,142
  403,549
Working capital, $m
  171
  126
  180
  251
  341
  453
  590
  753
  943
  1,163
  1,413
  1,693
  2,003
  2,344
  2,714
  3,114
  3,542
  3,998
  4,481
  4,991
  5,527
  6,089
  6,677
  7,290
  7,929
  8,594
  9,286
  10,005
  10,753
  11,530
  12,337
Total debt, $m
  1,411
  2,240
  3,354
  4,810
  6,663
  8,965
  11,764
  15,103
  19,014
  23,522
  28,644
  34,387
  40,755
  47,742
  55,340
  63,538
  72,321
  81,676
  91,589
  102,050
  113,047
  124,575
  136,630
  149,211
  162,321
  175,968
  190,163
  204,919
  220,255
  236,191
  252,752
Total liabilities, $m
  1,748
  2,578
  3,692
  5,148
  7,001
  9,303
  12,102
  15,441
  19,352
  23,860
  28,982
  34,725
  41,093
  48,080
  55,678
  63,876
  72,659
  82,014
  91,927
  102,388
  113,385
  124,913
  136,968
  149,549
  162,659
  176,306
  190,501
  205,257
  220,593
  236,529
  253,090
Total equity, $m
  1,452
  2,017
  2,889
  4,029
  5,478
  7,280
  9,471
  12,083
  15,144
  18,671
  22,679
  27,174
  32,157
  37,624
  43,570
  49,985
  56,858
  64,178
  71,936
  80,122
  88,728
  97,749
  107,182
  117,026
  127,286
  137,965
  149,073
  160,620
  172,621
  185,091
  198,051
Total liabilities and equity, $m
  3,200
  4,595
  6,581
  9,177
  12,479
  16,583
  21,573
  27,524
  34,496
  42,531
  51,661
  61,899
  73,250
  85,704
  99,248
  113,861
  129,517
  146,192
  163,863
  182,510
  202,113
  222,662
  244,150
  266,575
  289,945
  314,271
  339,574
  365,877
  393,214
  421,620
  451,141
Debt-to-equity ratio
  0.972
  1.110
  1.160
  1.190
  1.220
  1.230
  1.240
  1.250
  1.260
  1.260
  1.260
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
Adjusted equity ratio
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -115
  -408
  -593
  -837
  -1,149
  -1,541
  -2,020
  -2,595
  -3,273
  -4,059
  -4,955
  -5,950
  -7,075
  -8,313
  -9,664
  -11,126
  -12,696
  -14,371
  -16,150
  -18,030
  -20,009
  -22,085
  -24,259
  -26,529
  -28,895
  -31,360
  -33,924
  -36,590
  -39,361
  -42,241
  -45,234
Depreciation, amort., depletion, $m
  290
  422
  598
  828
  1,121
  1,484
  1,926
  2,453
  3,070
  3,782
  4,591
  5,482
  6,487
  7,590
  8,790
  10,084
  11,471
  12,948
  14,513
  16,164
  17,900
  19,720
  21,623
  23,609
  25,679
  27,834
  30,074
  32,404
  34,825
  37,341
  39,955
Funds from operations, $m
  -7
  14
  5
  -9
  -29
  -57
  -94
  -142
  -203
  -276
  -365
  -468
  -588
  -723
  -874
  -1,042
  -1,225
  -1,424
  -1,637
  -1,866
  -2,109
  -2,365
  -2,636
  -2,919
  -3,216
  -3,526
  -3,850
  -4,186
  -4,536
  -4,900
  -5,278
Change in working capital, $m
  -98
  40
  54
  71
  90
  112
  136
  163
  191
  220
  250
  280
  310
  341
  370
  400
  428
  456
  483
  510
  536
  562
  588
  613
  639
  665
  692
  719
  748
  777
  807
Cash from operations, $m
  91
  -27
  -49
  -80
  -119
  -169
  -230
  -305
  -393
  -496
  -614
  -748
  -898
  -1,064
  -1,245
  -1,441
  -1,653
  -1,880
  -2,121
  -2,376
  -2,645
  -2,927
  -3,223
  -3,533
  -3,855
  -4,192
  -4,542
  -4,906
  -5,284
  -5,677
  -6,086
Maintenance CAPEX, $m
  0
  -276
  -407
  -583
  -813
  -1,105
  -1,469
  -1,911
  -2,438
  -3,055
  -3,767
  -4,575
  -5,482
  -6,487
  -7,590
  -8,790
  -10,084
  -11,471
  -12,948
  -14,513
  -16,164
  -17,900
  -19,720
  -21,623
  -23,609
  -25,679
  -27,834
  -30,074
  -32,404
  -34,825
  -37,341
New CAPEX, $m
  -151
  -1,323
  -1,778
  -2,321
  -2,954
  -3,671
  -4,464
  -5,323
  -6,236
  -7,188
  -8,166
  -9,158
  -10,153
  -11,141
  -12,115
  -13,071
  -14,005
  -14,917
  -15,807
  -16,679
  -17,536
  -18,381
  -19,221
  -20,060
  -20,905
  -21,760
  -22,633
  -23,528
  -24,452
  -25,410
  -26,407
Cash from investing activities, $m
  -158
  -1,599
  -2,185
  -2,904
  -3,767
  -4,776
  -5,933
  -7,234
  -8,674
  -10,243
  -11,933
  -13,733
  -15,635
  -17,628
  -19,705
  -21,861
  -24,089
  -26,388
  -28,755
  -31,192
  -33,700
  -36,281
  -38,941
  -41,683
  -44,514
  -47,439
  -50,467
  -53,602
  -56,856
  -60,235
  -63,748
Free cash flow, $m
  -67
  -1,626
  -2,234
  -2,984
  -3,886
  -4,945
  -6,163
  -7,539
  -9,067
  -10,739
  -12,548
  -14,482
  -16,533
  -18,692
  -20,950
  -23,302
  -25,742
  -28,267
  -30,875
  -33,567
  -36,344
  -39,209
  -42,164
  -45,216
  -48,369
  -51,631
  -55,008
  -58,508
  -62,140
  -65,912
  -69,833
Issuance/(repayment) of debt, $m
  -154
  829
  1,115
  1,456
  1,852
  2,302
  2,800
  3,339
  3,911
  4,508
  5,122
  5,744
  6,368
  6,987
  7,598
  8,197
  8,783
  9,355
  9,914
  10,460
  10,998
  11,528
  12,055
  12,581
  13,111
  13,647
  14,195
  14,756
  15,336
  15,936
  16,561
Issuance/(repurchase) of shares, $m
  1
  1,060
  1,466
  1,976
  2,599
  3,342
  4,211
  5,208
  6,333
  7,586
  8,963
  10,445
  12,058
  13,781
  15,610
  17,540
  19,569
  21,692
  23,908
  26,216
  28,615
  31,106
  33,692
  36,374
  39,155
  42,039
  45,032
  48,137
  51,362
  54,712
  58,193
Cash from financing (excl. dividends), $m  
  -162
  1,889
  2,581
  3,432
  4,451
  5,644
  7,011
  8,547
  10,244
  12,094
  14,085
  16,189
  18,426
  20,768
  23,208
  25,737
  28,352
  31,047
  33,822
  36,676
  39,613
  42,634
  45,747
  48,955
  52,266
  55,686
  59,227
  62,893
  66,698
  70,648
  74,754
Total cash flow (excl. dividends), $m
  -244
  262
  347
  448
  566
  700
  847
  1,008
  1,178
  1,355
  1,537
  1,707
  1,892
  2,076
  2,258
  2,436
  2,610
  2,780
  2,946
  3,109
  3,268
  3,426
  3,582
  3,739
  3,896
  4,056
  4,218
  4,385
  4,557
  4,736
  4,921
Retained Cash Flow (-), $m
  118
  -1,060
  -1,466
  -1,976
  -2,599
  -3,342
  -4,211
  -5,208
  -6,333
  -7,586
  -8,963
  -10,445
  -12,058
  -13,781
  -15,610
  -17,540
  -19,569
  -21,692
  -23,908
  -26,216
  -28,615
  -31,106
  -33,692
  -36,374
  -39,155
  -42,039
  -45,032
  -48,137
  -51,362
  -54,712
  -58,193
Prev. year cash balance distribution, $m
 
  86
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -711
  -1,119
  -1,528
  -2,033
  -2,643
  -3,363
  -4,200
  -5,156
  -6,231
  -7,426
  -8,738
  -10,166
  -11,705
  -13,352
  -15,104
  -16,959
  -18,912
  -20,962
  -23,107
  -25,347
  -27,681
  -30,110
  -32,635
  -35,259
  -37,984
  -40,814
  -43,752
  -46,805
  -49,976
  -53,272
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  -657
  -949
  -1,179
  -1,415
  -1,643
  -1,851
  -2,025
  -2,152
  -2,226
  -2,242
  -2,200
  -2,104
  -1,962
  -1,784
  -1,581
  -1,367
  -1,151
  -944
  -754
  -586
  -443
  -326
  -232
  -161
  -108
  -70
  -44
  -26
  -15
  -9
Current shareholders' claim on cash, %
  100
  49.6
  25.4
  13.4
  7.3
  4.0
  2.3
  1.3
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Precision Drilling Corporation (Precision) is an oilfield services company. The Company provides onshore drilling and completion and production services to exploration and production companies in the oil and natural gas industry. The Company operates through two segments: Contract Drilling Services, and Completion and Production Services. The Contract Drilling Services segment operates its rigs in Canada, the United States and internationally. The Completion and Production Services segment provides completion and workover services and ancillary services to oil and natural gas exploration and production companies in Canada and the United States. As of December 31, 2016, the Contract Drilling Services segment consisted of 255 land drilling rigs, including 135 in Canada, 103 in the United States, five in Mexico, four in Saudi Arabia, five in Kuwait, two in the Kurdistan region of Iraq and one in the country of Georgia.

FINANCIAL RATIOS  of  Precision Drilling (PDS)

Valuation Ratios
P/E Ratio -9.6
Price to Sales 1.6
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow -18.3
Growth Rates
Sales Growth Rate -38.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55.6%
Cap. Spend. - 3 Yr. Gr. Rate -17.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 97.2%
Total Debt to Equity 97.2%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.9%
Ret/ On Assets - 3 Yr. Avg. -1.1%
Return On Total Capital -3.8%
Ret/ On T. Cap. - 3 Yr. Avg. -3.8%
Return On Equity -7.6%
Return On Equity - 3 Yr. Avg. -7.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 36.2%
Gross Margin - 3 Yr. Avg. 39%
EBITDA Margin 23.4%
EBITDA Margin - 3 Yr. Avg. 17%
Operating Margin -16.5%
Oper. Margin - 3 Yr. Avg. -13.9%
Pre-Tax Margin -32.4%
Pre-Tax Margin - 3 Yr. Avg. -22.6%
Net Profit Margin -16.3%
Net Profit Margin - 3 Yr. Avg. -12.8%
Effective Tax Rate 49.6%
Eff/ Tax Rate - 3 Yr. Avg. 9.7%
Payout Ratio 0%

PDS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PDS stock intrinsic value calculation we used $704 million for the last fiscal year's total revenue generated by Precision Drilling. The default revenue input number comes from 2016 income statement of Precision Drilling. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PDS stock valuation model: a) initial revenue growth rate of 47.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.2%, whose default value for PDS is calculated based on our internal credit rating of Precision Drilling, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Precision Drilling.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PDS stock the variable cost ratio is equal to 130.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PDS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.8% for Precision Drilling.

Corporate tax rate of 27% is the nominal tax rate for Precision Drilling. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PDS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PDS are equal to 395.8%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Precision Drilling operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PDS is equal to 12.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1452 million for Precision Drilling - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 295.689 million for Precision Drilling is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Precision Drilling at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

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▶ Hows Halliburton Reacting to the Change in Crude Oil Prices?   [Dec-26-17 03:25PM  Market Realist]
▶ How Schlumberger Reacted to Crude Oil Prices Last Week   [Dec-18-17 03:55PM  Market Realist]
▶ How Did Schlumberger React to Price of Crude Oil Last Week?   [Nov-20-17 03:30PM  Market Realist]
▶ How Weatherford Reacted to Crude Oil Prices   [07:32AM  Market Realist]
▶ How Weatherford Reacted to Crude Oil Price Changes   [Oct-30-17 06:00PM  Market Realist]
▶ Precision Drilling reports 3Q loss   [06:11AM  Associated Press]
▶ Precision Drilling Reports Smaller-Than-Expected Loss   [Oct-26-17 08:00PM  Rigzone.com]
▶ How Flotek Industries Reacted to Crude Oils Changes   [Oct-23-17 07:37AM  Market Realist]
▶ Halliburton Reacts to the Change in Crude Oil Prices   [Oct-11-17 07:38AM  Market Realist]
▶ Weatherford Reacted to Crude Oil Price Changes   [Oct-09-17 04:06PM  Market Realist]
▶ How Is Weatherford Reacting to Crude Oils Price Changes?   [Oct-03-17 10:41AM  Market Realist]
▶ How Bearish Are Investors on Basic Energy Services?   [Sep-27-17 10:38AM  Market Realist]
▶ Hows Weatherford Reacting to Crude Oil Price Changes?   [Sep-26-17 03:06PM  Market Realist]
▶ Will the Rise in Crude Oil Take Haliburton Higher?   [Sep-19-17 08:09AM  Market Realist]
▶ Weatherfords 7-Day Stock Price Forecast   [Sep-15-17 10:39AM  Market Realist]
▶ How Schlumberger Stock Correlates with Crude Oil   [Sep-12-17 09:07AM  Market Realist]
▶ Correlation between Crude Oil and Schlumberger on August 25   [Aug-29-17 07:39AM  Market Realist]
▶ Behind Baker Hughess Correlation with Crude in Mid-August   [Aug-22-17 09:07AM  Market Realist]
▶ How Schlumberger Correlates with Crude Oil   [Aug-08-17 08:10AM  Market Realist]
▶ Precision Drilling reports 2Q loss   [Jul-31-17 11:02PM  Associated Press]
▶ Correlation between Weatherford and Crude Oil on July 21   [Jul-25-17 07:39AM  Market Realist]
▶ Halliburtons Correlation with Crude Oil on July 14   [Jul-17-17 03:06PM  Market Realist]
▶ Schlumbergers 7-Day Stock Forecast as of June 16   [Jun-20-17 07:37AM  Market Realist]
▶ Whats NOVs Correlation with Crude Oil in June 2017?   [Jun-13-17 07:36AM  Market Realist]
▶ Schlumbergers 7-Day Stock Price Forecast on May 26   [May-30-17 12:06PM  Market Realist]
▶ What Was Schlumbergers Correlation with Crude Oil on May 22?   [May-23-17 02:36PM  Market Realist]
▶ Schlumbergers Correlation with Crude Oil on May 12   [May-15-17 04:35PM  Market Realist]
▶ Inside Halliburtons Correlation with Crude Oil on April 28   [May-02-17 07:40AM  Market Realist]
▶ Schlumbergers Correlation with Crude Oil on April 21   [Apr-25-17 09:09AM  Market Realist]
▶ Precision Drilling reports 1Q loss   [06:12AM  Associated Press]
▶ Whats NOVs Correlation with Crude Oil as of April 17?   [Apr-20-17 09:06AM  Market Realist]
▶ Whats NOVs 7-Day Stock Price Forecast as of April 17?   [Apr-19-17 10:37AM  Market Realist]
Financial statements of PDS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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