Precision Drilling (PD.TO)

One of Canada’s leading drilling companies. It looks like energy is coming back. Pick axe companies really move, and he thinks you are in the early stage. Thinks OPEC is going to move the price higher and this is a good time to be buying energy services.

Oil service companies need the right timing. They have to have solid balance sheets. Over the last couple of weeks there has been a run on these companies so hold on. He does not know how many more rigs will be put to work.

*SHORT* (Pairs trade with a Long on (SES-T). (Top Pick July 5/16, Up 24.70%) With commodity dependant names he feels it always makes sense to pair them. He has taken his short off. He still feels they are in a bit of trouble here.

*SHORT* (Pairs trade with a Long on Secure Energy Services (SES-T). Their debt to EBITDA is north of 6% at the moment, and there is an absolute glut of rigs in North America that are idle. This will lose pricing power, because as rigs come off contract, they are being renewed at much lower rates.

(Market Call Minute.) The best of the drillers. If you don’t own, make sure oil doesn’t retreat to $40 before buying.

Drillers and oil services are the very leveraged part of the oil space. It is the most aggressive and that is reflected in the share price movement. He would prefer CPG-T or CNQ-T, or pipeline & infrastructure names. If you are bullish on oil over the next little while you might want to use PD-T to play it.

He believes they will be a survivor. They spent the last number of years upgrading their drilling rigs. You have the potential to make a great deal of money when this industry changes.

Even if oil increases to $55-$60, the increase in cash flow from producers will all be deployed into the fields and there will be an increase in drilling, but there will still be too much capacity in idle rigs for the service companies to have much purchasing power. This name would have to go to $4 for him to be interested. If it rallied much above its current price, he would consider Shorting it.

(Market Call Minute.) This will be the 1^st driller to move when the drillers eventually move. He would be a buyer at $4.50-$4.75.

(A Top Pick Nov 21/14. Down 41.55%.) This has a lot of potential to recover quite substantially from here. The number of rigs has declined by about 2/3, but production has only come down by about 5%. Recently made an agreement with Kuwait to build 2 large rigs. This is a good Buy at current levels.

They are the last to recover. It will be around for the next cycle, but there are tough quarters over the next year. It is not time to buy yet.

(A Top Pick Aug 25/14. Down 58.97%.) To keep production going in the shale oil area, you have to drill an increasing number of wells to stay even. That has been dropping and it will continue. Drilling will come back, but it is going to take a year or 2.

Drillers are going to be a little late to move. The service companies need the spending from the industry. This group will be the last one to see much of a recovery. Move your money to a producing company.

It might be far too early for this. He wants to see positive transits in the stocks, not negative. Thinks this goes lower.

(A Top Pick July 28/14. Down 62.07%.) This was his favourite in the drilling space. Had always thought that there was a chance of a takeover. Sold his holdings at about $7.33 at the end of 2014 for tax losses. If he were going back into this space, this would probably be his #1 pick.