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No. of Recommendations: 6
Well, I'm not sure overall how I feel about PDS at this point, but I wouldn't sell it just based on natural gas price. For one thing, prices have been rising significantly since last spring, more than doubling since then, from below $2.00 to $4.24 on the spot market now. It's taken a major jump just in the last 2-3 months. See the spot price graph, the second one down:

http://www.eia.gov/naturalgas/weekly/#tabs-prices-1

Also, PDS rigs are used for both oil and natural gas, so their business is basically dependent on total drilling activity for either. I wouldn't focus just on natural gas.

PDS saw demand for both oil and natural gas drilling decline last year, so the question is whether that will continue. Meanwhile they have been upgrading their fleet by retiring Tier 2 and 3 rigs and adding Tier 1 rigs, resulting in an ability to charge more. So they are investing in better margins and dayrates down the road.

I guess the question is whether you want exposure to overall drilling activity (oil and gas) in North America. If you think drilling is in decline, you'll want to stay away. If you think drilling is on a long term up-trend, PDS is probably a good way to invest in that trend.

Jim
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