Parker Drilling Company (PKD)

In particular, the stock currently has no rigs in Canada per their latest Investor Presentation, so they’re shielded from the steepest rig count decline and drop in activity in the Energy world today. We know Canada has suffered a heavy blow in the past 12 months with unfavorable regulatory proposals w/r/t income trusts, the extended break-up season for drilling activity, and the steep decline in rig count. PKD has absolutely ZERO exposure to this troubled market.

In particular, the stock currently has no rigs in Canada per their latest Investor Presentation, so they’re shielded from the steepest rig count decline and drop in activity in the Energy world today. We know Canada has suffered a heavy blow in the past 12 months with unfavorable regulatory proposals w/r/t income trusts, the extended break-up season for drilling activity, and the steep decline in rig count. PKD has absolutely ZERO exposure to this troubled market.

We’re not taking out enough from the ground to meet growing demand for our precious natural resources, fueled in large part by exponentially increasing energy consumption patterns of developing countries like China and India.

There’s going to be a short squeeze. 7% of PKD is owned by short sellers, and they’ve rode this stock down far enough. At the next uptick in the stock, those short-sellers who don’t understand the industry fundamentals will help squeeze the stock into the $9+ share price territory, where it’s intrinsically ought to be valued.

The reaction to the stock has more to do with SHORT TERM volatility in natural gas inventory levels, than anything else. But we all know that the near-term NG depression will correct itself. The present NG surplus cannot exist for long. An unusually hot last leg of summer and / or an unusually cold winter will easily correct the inventory surplus, driving natural gas prices well above current levels. There simply cannot be a long-term reduction in natural gas prices – a high commodity price regime is here to stay, and the days of $40 oil and $3 natural gas are over.

The reaction to the stock has more to do with SHORT TERM volatility in natural gas inventory levels, than anything else. But we all know that the near-term NG depression will correct itself. The present NG surplus cannot exist for long. An unusually hot last leg of summer and / or an unusually cold winter will easily correct the inventory surplus, driving natural gas prices well above current levels. There simply cannot be a long-term reduction in natural gas prices – a high commodity price regime is here to stay, and the days of $40 oil and $3 natural gas are over.

The only news that can come of it will be either bad news which would not move the stock down anymore than it is now, or good news, which entails a correction upward in valuation.

Not only is there a long-term supply / demand imbalance in play, but also Oil Exploration and Production companies and drilling contractors are working harder, drilling deeper, doing expensive horizontal and unconventional plays to extract less and less out of the ground. Both land and offshore drilling companies will benefit, and Parker is perhaps best-positioned strategically given its international footprint.

In particular, the stock currently has no rigs in Canada per their latest Investor Presentation, so they’re shielded from the steepest rig count decline and drop in activity in the Energy world today. We know Canada has suffered a heavy blow in the past 12 months with unfavorable regulatory proposals w/r/t income trusts, the extended break-up season for drilling activity, and the steep decline in rig count. PKD has absolutely ZERO exposure to this troubled market.

Energy stocks with an international footprint have done well as we saw in the past 24 months. Parker Drilling truly has a global footprint, and is not overly leveraged to North American natural gas activity.

Energy stocks with an international footprint have done well as we saw in the past 24 months. Parker Drilling truly has a global footprint, and is not overly leveraged to North American natural gas activity.

Depletion rates are notoriously high for our existing fields, which fuels the present rat race: work harder, drill more wells, get less out of the ground. Oilfields service stocks benefit in the long-term on that principle alone.

And if the fundamentals don’t convince you, this stock trades at least at a 25% discount to the comps, despite steady performance and strong cash flow capabilities. This stock is easily worth north of $10 per share within 12 months from now, which would represent a sizeable gain from recent prices.