Precision Drilling (PD.TO)

(Top Pick Oct 30’13, Down 16.53%) They beat analysts’ estimates last Monday. Their payout ratio is extremely low. 10% is from international, which they built rather than buy. He is still excited about the company. He would buy it here.

Sees upside of nearly 70%. This is one of North America’s leading drillers. They are really 2 separate businesses in Canada. The drilling associated with the potential LNG pipelines along with the rest of the western sedimentary basin. Rigs required to drill for LNG are very much more sophisticated than traditional. Yield of 3.07%.

The problem with drillers is that they are dependent on the cash flow of the oil/gas industry, so when oil/gas stocks are coming down and their cash flows are getting impaired everyone worries that the drillers are going to take the first heat on that. Thinks the drillers are still a great long-term story. Valuations in Canada are much cheaper than they are in the US. The drillers generate very good cash flows. (See Top Picks.)

You want to stand aside on the energy services side. It had a big pullback and he does not know where support is. He wants to see things change.

Longer term the trend is up and it could be coming down to that. There was a head and shoulders put in over the summer and it broke it. If the previous low is not taken out it could be okay. Make sure the longer term trend line holds also.

4-6% gain in 4-6 months. The big plus for them is the North American exposure. They signed a deal with SCL-T. This will be one of the major positives going forward. President said that if LNG projects go forward this one is the best positioned to benefit going forward.

Doesn’t see much more downside. Now would be a good entry point. Prefers Trinidad Drilling (TRI-T) which has potential to move more. This company has very good rigs that can do more complicated drilling, including horizontal drilling.

We need fewer gas drilling rigs for the number of holes because of horizontal drilling. They can produce far more per well than on the conventional vertical. However, on the whole natural gas picture, there is a lot of supply. We are coming into winter right now and storage currently is 20% less than last year. We’ll see better pricing on natural gas and more exploration. However, you get through the winter and you are into the 1^st year of LNG exporting. Because of this, she thinks we are in a bottoming phase for natural gas prices over the next few years.

He sold it higher. It is pulling back. It is getting interesting at these levels. They are a deep driller and doing better now. In the short term you have to look around at other factors. $90 oil prices leave less cash to be spent on drilling. But he does not see a problem in starting to step into it. He would not sell it. There is a little more room on the downside on oil.

(Market Call Minute.) Likes this. It has pulled back with the energy, but price related, it is activity related. Thinks this is an out and out Buy.

They drill and others frack wells. Share price driven by activity. There will still be a lot of activity in Canada for them. There is money to be spent in the industry. As LNG expands over the next decade you will get more wells drilled. The pullback in energy gives you the opportunity to buy. It is a pretty good entry point.

(A Top Pick Sept 12/13. Up 28.49%.) This is absolutely a “go to” play. There is plenty of room to grow. They’ve won a number of contracts. Pricing and utilization have been moving up. Notwithstanding the volatility in the price of gas and oil, they have been getting market share in the US and in key plays. Taking market share from US competition and smaller players. Yield of 1.78%.

Chart looks like it is trying to form a 2^nd shoulder. $13 is a pretty good risk/reward.

Largest driller in Western Canada and 4^th largest onshore driller in the US. It is expanding beyond those borders. On a macro basis, he likes the energy field, and because of the outlook for global growth we will see more drilling and more activity in the various oil areas. Recently did a deal with Schlumberger (SLB-N) where they will use their technical expertise and marketing assistance to reach a broader list of customers in the US. He sees a 40%-50% gain at least, over the next year or so. Yields of 1.84%.

Just bought it a couple of months ago. Drilling stocks had strong performance year to date. We are getting a little bit of pull back here.