Precision Drilling (PD.TO)

Big selloff yesterday was from Aimco selling their holdings of about 56 million shares. After this drop, she is definitely looking at getting into it again.

Aimco just sold their holdings of about 56 million shares and the stock dropped about 9.5%. He participated in buying part of this. This is a go to name for US investors when they start looking at buying drilling companies out in Canada. Well diversified and has a lot of torque in it. With natural gas over $4 and crude up around $90 or so, there will be more drilling. He would buy CanElson Drilling (CDI-T) as a holding, but would buy this one as a trading position.

The biggest drilling contractor in Canada. In the short term, they are facing a soft drilling environment because gas prices are still $3.50. You will see huge earnings in the next 3 or 4 quarters, so it looks expensive, but looking beyond that, the picture is improving because of the LNG development that may very well come sometime in 2015-2018. This company will benefit a lot more in the next couple of years. If you are patient, you could buy it here or you could wait until the middle of 2014.

Drillers are very cyclical and very seasonal. She likes to think of these as borrowing not owning, for the long run. You own them for the strong seasonal period, which is what we are going into now. 1^st quarter and 4^th quarter are the strongest quarters. She prefers Trinidad (TDG-T), which has a newer fleet and can drill deeper.

He decided to go a slightly different route. If you look at the potential demand for natural gas liquids, he is looking at companies that are working the north western part of Alberta and the north eastern part of BC, which will be drilling to prove up reserves of natural gas, mainly with a high liquids content, that can be shipped to BC eventually and converted to LNG.

Does not own the drillers and plays this part of the sector through Shawcor (SCL-T). Drillers in general are doing pretty well. This one has big projects, buying equipment and rig rates are running pretty well.

(Market Call Minute.) Feels drilling will be weak in a mid-price gas environment.

Loves the whole oil infrastructure. International energy agency came out about a year ago and said that in 2017 the US will be the world’s largest oil producer. It is imperative that if you buy a driller, it has to have some US operations. Recently raised its dividend, not on earnings, but on the company looking down the road.

Thinks we are early in recovery and we’re moving more towards US valuations.

Got cheap several months ago. LNG is the long term factor with these stocks. In 2014 the people expect better drilling in the US. We have to see increased drilling in the US and increased utilization numbers. Holding but not adding.

Exposed to uranium. A bunch of company specific issues. You need more positivity in the uranium market. Things will continue to struggle because Japan is having delays in restarting reactors. Long term he is positive on Uranium with Russia winding down their decommissioning plan. Prefers CCO-T.

LNG Development is a fundamental change in the gas industry in Canada. As long as there are no political hurtles it will be important to Canada – drillers, pressure companies and lodging companies. A lot more space to go. 70% linked to oil but kicker is Nat. Gas. They are having a very good second half of the year. Some pricing power going into 2014. A cash flow growth story. 1.8% dividend and they could increase it over time.

He would like to see a pullback. Has had a great run since April and he feels it is due to pull back.

Have done all the right things. Have managed the CapX very well and have restated the dividend. The last 12 months have been a dismal drilling season for Canadian drillers. If you are going to get any sort of a pickup next year, it will be very good comparisons.

Has been off his list for a while. Now he is following it again. Has been way up there ($38 in ’06). The servicing guys are doing better, but they have big interests south of the border. They do a good job and but had a tough time, so they are a turn-around. It can get better.