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Why Pacific Drilling SA's Stock Climbed Almost 20% Today

By Tyler Crowe – May 5, 2015 at 12:04PM

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Surging oil prices and a decent quarterly earnings release will do that.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Pacific Drilling (PACD) jumped as much as 19% in early trading and is currently trading up over 11% at the time of this publication following yesterday's after market earnings announcement that beat Wall Street estimates as well as a bump from climbing crude prices.

PACD Price Chart

PACD Price data by YCharts

So What: Pacific's first-quarter earnings came in at $0.24 on an earnings per share basis, soundly beating Wall Street estimates of $0.18 per share. Revenue come in just under estimates, but the addition of drillship Pacific Sharav and its contract with Chevron significantly improved revenue and earnings numbers on a year-over-year basis. Considering how much analysts have been saying that offshore rig companies would remain in the doldrums for a while, this was very welcomed news. 

To add a cherry on top of this news, the price for a barrel of Brent crude -- the oil price that matters when it comes to offshore drilling -- hit $67, a significant improvement from the less than $50 per barrel prices we saw back in January. As the price per barrel of crude improves, it should incentivize producers to go out and explore more offshore fields, employing Pacific's drillhips in the process.

Now What: This quarter was a nice surprise for Pacific, and the chance that oil prices continue to improve will help to pad its stock price. However, one of its drillships came off contract at the end of the quarter and has not yet found a new client. If that rig and the other one on Pacific's books doesn't find a new employer soon all the euphoria of today could quickly go in the other direction. 

Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google+, or on Twitter @TylerCroweFool.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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