Trican Well Service Ltd. (TCW.TO)

The industry is in a down turn, the earnings are not doing that well, spending patterns are not very good, and some people are concerned they will have a debt issue going forward. He does not know why you would want to own any energy services companies. Producing companies at least have the cash flow from producing wells.

This really got beat up pretty badly as the drilling industry slowed down. Had a high of $17.56 and is now $3.75. Trading much below BV of $8.63. The drilling industry is not going to recover until the financial healths of companies recover. His bet is that it is probably going to see lower prices. Feels the stocks will get back over BV once the industry turns in Q3-Q4.

It is at a multiyear low and was downgraded today by TD. The underperformers are really underperforming. Some may not survive. Don’t bottom fish here. It is lower than during the financial crisis.

The service companies and frackers & drillers: A good time to dip your toe into them. We need to see some clarity. He prefers Canyon (no debt) and CFW-T over this one, which he has been nibbling at.

Prefers CFW-T. Doesn’t think they have that much down turn so stick with it.

Bearish on the service sector. There are high expectations about west coast LNG and he thinks the contracts will be long term and low margin. He thinks the services sector is overvalued.

3-year chart was compared with its peers through the iShares Capped Energy ETF (XEG-T). He likes the oil services sector. Chart showed an underperformance in 2012, followed by an improvement, with another underperformance in late 2013. It is now “market perform”. This is now becoming a sector perform, which is a good thing. He would say this is bullish and it works higher.

One of 3 large Canadian fracing companies. This is an industry that, over time, is doing nicely. Out of the 3, this would be his least favourite, and would classify this as a “Weak Sell”. If you could get it in the $13 area, it could be very interesting. Prefers Canyon Services (FRC-T) which is also cheaper with a better dividend yield.

This is one of the premier fracers using natural gas production. Obviously all of the fracing companies have been benefiting from shallow gas plays and have done very well. As a result though, a lot of money has gone in and a lot of equipment has been built so there is a bit of equipment oversupply right now. Shorter-term, things are still going to be weak for a couple of quarters. Looking out a little bit, he sees gas prices going up and LNG terminals being built and all these companies are going to do well. This will be one of the leaders.

In the seasonal strength period. Don’t buy now. You want to wait until you seen an overall pickup in Nat Gas activity, which depends on LNG.

An energy company that benefits more into the winter months, from January into May. Not something you want to pursue now. It does have an average increase in the stock price of 30% between January and May.

All of the energy services companies have had revenues that have come down below previous numbers. Also, their day rates have been coming down. His guess is that it is going back down to $12. Expects there will be a multiyear positive story for the service sector. Right now though, with the industry hurting and not having as much cash flow, the service sector is getting beaten up. There probably will be a bounce in Nov/Dec into the drilling season but coming into 2014, the stocks will come into pressure. They will need a start of a multiyear positive cycle.

All the drillers are set up well for the next number of years. It will be choppy and range bound for the sector in the short term. He would be a strong dip buyer as a rule.

In later fall (Oct/Nov) he would look to get out. He took a half position and will add after the quarterly results are released. If they do better than the analysts’ expectations we could get quite a pop.

There is some optimism amongst oil and gas service companies. The balance sheets are healthier than other downturns in the cycle. If you believe in growth in oil, this is a good way to participate in this sector.