Precision Drilling (PD.TO)

Has a lose mean estimate of $.42 this year. It doesn’t pay out anything. They are not going to make any money at all in 2018.

A very solid, well-run company. Trading at a bit of a premium relative to its Canadian peers. They are starting to get a technical edge on their upgrades to their rigs.

Just announced earnings, which were a little light, but nothing to be concerned about. Canadian exploration companies are just starting to ramp up exploration budgets, and this company will benefit. On a valuation basis, it is a little ahead of some of its smaller competitors. A lot of the service companies should do well as companies start to ramp up their budgets, and this company is a natural beneficiary. Good assets.

He likes services, but not drillers. Pricing power is a little more. It trades at a premium because of good trading liquidity. He likes pressure pumpers.

Has gone through a very difficult environment, but he likes what management has done in that environment. This is Canada’s largest tier #1 contract driven company, with growing operations in the Middle East. They’ve spent a fortune in technology in upgrading equipment, and now we are beginning to hear that contracts are being renewed for longer periods and day rates are firming up a little. It has a lot of leverage to an improving environment. (Analysts’ price target is $9.)

Historically this has very strong seasonality from around the end of January through to the beginning of May. This year it is not there. There is still time for this seasonal trade, so far there is no indication that the stock has even tried to bottom. It is still in a downward trend. Be patient. There still could be time to do a seasonal trade, but you are starting to run out of time.

(A Top Pick July 5/16. Up 12%.) *Short* (Pairs trade with a Long on Secure Energy Services (SES-T)). Took the trade off, but would still not want to own the company.

This and the other service names within the oil/gas sector have been quite volatile. It is really hard to dissect, in terms of earnings and giving them a multiple. He would be looking to buy this if it got down to around $6.40. He is bullish on the energy sector overall and thinks that in the next couple of quarters, the companies will come out with much better results versus last year.

(Market Call Minute) It is too cyclical. If the oil price goes up, everybody drills, and if it goes down the drills are retired.

Trades at a premium multiple because it is one of the few actual liquid service names in Canada. We have a big service sector, but so many of them are small companies. He is more bullish on the pumpers than he is on the drillers. On the drillers, there is a lot of excess capacity in equipment.

Historically, oil service stocks as well as Canadian energy stocks, reach a very important low early next week. And then they have a very good seasonal trend right through until at least the middle of April. Next week we start the period of seasonal strength just as the stock is establishing an intermediate upward trend. Continue holding the security, and on a break out, buy some more.

His energy outlook is quite bullish. A lot of the skepticism around OPEC will come to pass, and that is what is really holding back the oil price. Doesn’t think it is unrealistic to see a $60-$65-$70 barrel of oil this year. There is a reason why OPEC wanted to cut production out of left field, as they felt it was really important with non-OPEC members. They want the price to normalize. This is one of the names with more torque. If you think oil prices are going to hit $60-$65, this one is still cheap and has a lot of upside.

Drilling services. As the price of oil rises, exploration companies are going to start drilling again. A lot of service companies’ pricing has been really hurt over the past couple of years. This is now a turnaround time where these companies are going to be able to start increasing their prices. This also has exposure to the US, which will take some of the seasonality out of it.

This stock has done well over the last 6 months. The stock has moved up when they have not come out with great results. People are anticipating something. It is quite liquid so it is easier to trade. He likes to hold things for about 3 years. The recovery in the energy sector will benefit them.

The oil rig count dropped from 1600 down to 400, and even to 300 at one time. We are now down about 70%. It’s a very countercyclical Buy to start looking at a driller here. A signpost on getting constructive on energy service names, particularly the drillers, is the return on pricing power, and he is starting to see that. Feels they have the highest quality rig fleet, and would be the 1^st call if producers are going to accelerate capital programs.