High Arctic Energy Services Inc (HWO.TO)

He hasn't looked at this in years and it's a forgotten name. But he expects demand for oil to rise so there will be demand for energy services.

(A Past Top Pick Jan 18/17, Down 24%) They have a big drill program in New Guinea. They look very good from a financial point of view. You can’t fight the tape in the energy sector. They have no debt.

The key question is if the energy market turns around. If it did, this would be on the top of his list for stocks to own. They are in great shape on the balance sheet. It scores in the top 1% of valuation. This company will be a survivor. The problem is, he wants a stock that isn’t continually going lower every day.

She does not tend to look at PE ratios in oil services companies. They have assets in New Guinea and Canada. They are looking at an LNG project. There may be some downside risk on contract negotiations. It is generally a well run business.

You could nibble away at it. He is not a real big fan of the sector as it is rolling over a bit. He likes their dividend, balance sheet and management team.

They have Papua New Guinea operations and Canadian operations. All through the energy downturn, this company kept a clean balance sheet, and most years they had an excess cash position. Last year, they took advantage of it and bought 68 new rigs in Canada. Now the cycle starts to turn. Trading at 8X earnings. Dividend yield of 3.65%. (Analysts’ price target is $6.29.)

Probably a little too early to get excited about the drilling services sector. You need to see better sustained oil prices before a company starts spending more money. This company kept its balance sheet clean right through the cycle. They pay a nice dividend. They are survivors, and are using their strong balance sheet to pick away at acquisitions. They are getting iron at very, very discounted prices. Adding rigs very, very cheaply.

This has been on his radar screen. It is involved in the service side of things in Papua New Guinea. The 2 rigs they have are on longer-term contracts. The growth will be if they get into other businesses. There are lots of rumours floating around that they are looking to make acquisitions in Canada. That is where the opportunities lie. The stock is thinly and can be pushed around with institutional orders.

He likes it. They made an acquisition a couple of weeks ago. They bought assets at 15-20 cents on the dollar. He has been picking away on it. It is still early with a lot of the service companies. They are at the bottom of the cycle. When they move it will be quick and be tough to get in.

They never experienced the low return on capital due to oil pricing. It is due to their location. They are a rare provider to China in that area. He saw no downturn in the return on capital so this is a great company.