Oil Stocks: Peter Hodson, Mike Mazar
Peter Hodson, senior portfolio manager, Sprott Asset Management
REAL RESOURCES (TSE:RER): been pretty quiet, a lot of people scared to have liquidity trapped..solid company, I do not own it..supply-demand situation will correct itself pretty quickly..it is a premium company that will do well when it happens but right now there is sector rotation
PETROBANK ENERGY (TSE:PBG): I have very big position in company, does move with price of oil but more intriguied with THAI technology..exceptional price momentum, market is giving them more credit for technology..I think it could get up to $40 a year later..everything so far appears that it is working well
FALCON OIL & GAS (CVE:FO): operators of deep basin gas in Hungary, Sprott has large position, I do not own in my fund..we still own stock, still like upside..been disappointing in stock action but still multibagger potential..not as soon as investors want..this year is all I am going to say
OILEXCO (CVE:OIL): I like company a lot, my fourth largest position..2X cash flow and ½ of NAV, exceptional job of growing asset base..ultimately I think they will sell the company..management team used to be disregarded, if they sell at $12-13, walk away with a bang, get chip off the shoulder..takeover would be bonus..$11 target this year doable, no balance sheet issues, cheap valuation, decent growth, nothing not to like
Mike Mazar, analyst, BMO Capital Markets
Early Oil Patch Breakup
The winter drilling season was not that great, demand was not there as in the past, supposed to be the busiest around this time, utilization in the low-70%s, previous years was low-90%s..spring breakup occurs when temperature starts getting warmer, ground becomes muddier, softer, more difficult more energy service equipment to move around, prohibitively expensive..typically bring equipment down, stack for 4-8 weeks, wait for ground to harden then get back to it..this year we are starting to come down already, happening for the last week, certainly shortened busiest time of the year..when you are drilling shallow wells, drill for a day then moving, spring breakup impedes movement..
Impact on Energy Service Stocks
if you are deep driller, that is fine, but it is shallow guys that get impacted..most impacted Savannah (TSE:SVY), Ensign (TSE:ESI) with their Canadian operations..mitigated somewhat because US operations do not have spring breakup..deeper wells impacted to some degree but much lesser extent..Trinidad (TSE:TDG.UN), Stoneham (TSE:SDG.UN) examples of deeper well drillers..Calfrac (TSE:CFW) impacted because of concentration in Southern Alberta..them and Trican (TSE:TCW) are non-drillers, take much less time, moving more and more often, disproportionately impacted..
REAL RESOURCES (TSE:RER): been pretty quiet, a lot of people scared to have liquidity trapped..solid company, I do not own it..supply-demand situation will correct itself pretty quickly..it is a premium company that will do well when it happens but right now there is sector rotation
PETROBANK ENERGY (TSE:PBG): I have very big position in company, does move with price of oil but more intriguied with THAI technology..exceptional price momentum, market is giving them more credit for technology..I think it could get up to $40 a year later..everything so far appears that it is working well
FALCON OIL & GAS (CVE:FO): operators of deep basin gas in Hungary, Sprott has large position, I do not own in my fund..we still own stock, still like upside..been disappointing in stock action but still multibagger potential..not as soon as investors want..this year is all I am going to say
OILEXCO (CVE:OIL): I like company a lot, my fourth largest position..2X cash flow and ½ of NAV, exceptional job of growing asset base..ultimately I think they will sell the company..management team used to be disregarded, if they sell at $12-13, walk away with a bang, get chip off the shoulder..takeover would be bonus..$11 target this year doable, no balance sheet issues, cheap valuation, decent growth, nothing not to like
Mike Mazar, analyst, BMO Capital Markets
Early Oil Patch Breakup
The winter drilling season was not that great, demand was not there as in the past, supposed to be the busiest around this time, utilization in the low-70%s, previous years was low-90%s..spring breakup occurs when temperature starts getting warmer, ground becomes muddier, softer, more difficult more energy service equipment to move around, prohibitively expensive..typically bring equipment down, stack for 4-8 weeks, wait for ground to harden then get back to it..this year we are starting to come down already, happening for the last week, certainly shortened busiest time of the year..when you are drilling shallow wells, drill for a day then moving, spring breakup impedes movement..
Impact on Energy Service Stocks
if you are deep driller, that is fine, but it is shallow guys that get impacted..most impacted Savannah (TSE:SVY), Ensign (TSE:ESI) with their Canadian operations..mitigated somewhat because US operations do not have spring breakup..deeper wells impacted to some degree but much lesser extent..Trinidad (TSE:TDG.UN), Stoneham (TSE:SDG.UN) examples of deeper well drillers..Calfrac (TSE:CFW) impacted because of concentration in Southern Alberta..them and Trican (TSE:TCW) are non-drillers, take much less time, moving more and more often, disproportionately impacted..
posted by Spelunca at 5:42 PM
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