10 stock picks in the Canadian oil field services sector

Stockhouse Editorial
4 Comments| January 8, 2014


The following is an excerpt from Canaccord Genuity’s Morning Coffee newsletter.
 
Canaccord Genuity Oilfield Services analyst John Bereznicki has initiated coverage of the Canadian oilfield service sector with 10 names, including:
 
Contract drillers:
 
Trinidad Drilling Ltd. (TSX: T.TDG, Stock Forum), CanElson Drilling Inc. (TSX: T.CDI, Stock Forum) and Western Energy Services Corp. (TSX: T.WRG, Stock Forum).
 
 Pressure pumpers:
 
Trican Well Services Ltd. (TSX: T.TCW, Stock Forum), Calfrac Well Service Ltd. (TSX: T.CFW, Stock Forum) and Canyon Services Group Inc. (TSX: T.FRC, Stock Forum).
 
Providers of various oilfield products and services in Canada and abroad:
 
Total Energy Services Inc.  (TSX: T.TOT, Stock Forum), Essential Energy Services Ltd. (TSX: T.ESN, Stock Forum), ENTREC Corp. (TSX: V.ENT, Stock Forum) and McCoy Corp. (TSX: T.MCB, Stock Forum).
 
In the initiation report, Bereznicki highlighted several key themes. 
  1. Investing in the Canadian oilfield sector has become increasingly challenging as activity shifts to deeper pockets and public market value creation undergoes significant upheaval;
  2. We expect a single-digit increase in Western Canadian Sedimentary Basin (WCSB) producer spending this year, although foreign-joint venture spending, improving equity market conditions and a falling C$ provide upside potential.
  3. We estimate a one billion cubic foot per day liquid natural gas export facility could generate an incremental 3% in WCSB producer spending. This would drive continued re-tooling of the WCSB rig fleet and help rebalance the domestic pressure pumping market;
  4. The Canadian oilfield sector is trading near its historic mid-point based on consensus EV/EBITDA. The sector is trading at or below a mid-cycle P/Book valuation, and Bereznicki believes there is significant upside potential should LNG export become reality. Bereznicki sees selective opportunity among contract drillers and expects the pressure pumpers to remain volatile, but range-bound for the near to medium-term.
 
His top picks are Trinidad Drilling, ENTREC and McCoy.
 
On Wednesday, McCoy shares were off 2% to $7.10, leaving a market cap of $194.6 million, based on 27.4 million shares outstanding. The 52-week range is $7.31 and $4.11.
 
ENTREC was unchanged at $1.75, leaving a market cap of $202.4 million, based on 115.7 million shares outstanding. The 52-week range is $1.95 and $1.05.
 
Trinidad Drilling was up 0.31% to $9.65, leaving a market cap of $1.3 billion, based on 138.1 million shares outstanding. The 52-week range is $10.84 and $6.46.

Tags: OIL & GAS EQUIPMENT & SERVICES ENERGY OIL & GAS DRILLING

Rate this article
0 stars
v
Usefulness

Clarity

Credibility

Comments

perdikaoilgas
I believe he misses the stock with the highest potential reward. This is Tuscany International Drilling (TID). TID can give triple digit return in 2014.
2.5 stars
January 8, 2014
Rate this comment
3 stars
v
Usefulness

Clarity

Credibility

Samdm
Or you could lock in the safest near term growth with a decent dividend PRECISION DRILLING (PD)
3 stars
January 8, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

skinnywallet
Look for OTS to make some big moves in this sector soon. Great management, great connections with a perfect storm in Mexico. Huge upside potential here. V.OTS
2.5 stars
January 9, 2014
Rate this comment
5 stars
v
Usefulness

Clarity

Credibility

Phonse47
What is your opinion on forent energy
4.5 stars
January 8, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

Leave a Message

You must be logged in to access this feature.