Opinions
Alex Ruus
Cathedral Energy Services
CET-T
DON'T BUY
Dec 05, 2016
Stock price when the opinion was issued
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He holds this in the President’s portfolio. It sells now for half of what he paid for it, it had a near-death experience but they have recapitalized, gotten rid of their high debt, and he likes the management. It has a great balance sheet in this sector. He thinks it could double or triple from here.
Revenues have gone up 82% last year and they have a new line of credit. The rig count is rising and the payment per day has gone up dramatically. He thinks this could trade back into the double-digits. He doesn’t know where oil prices will go, but it seems reasonably priced. Yield 0%. (Analysts’ price target is $2.38 )
He paid a price higher than this stock’s current level but he thinks it is recovering. He likes current management. They eliminated their debt, but they might be on the verge of taking on some debt now. The company used to pay a dividend and he thinks they might reinstate it. He sees tremendous upside. The rising price of oil is good for Cathedral. A drag on their business is the difficulty in finding new employees and the likely higher cost of their wages.
There is starting to be some interest in oilfield services. His initial reaction is to continue to stay away. A lot of these companies are continuing to lose a fair bit of cash. A lot of stocks are starting to turn in anticipation of improving conditions. While drilling activity has started to pick up, and there are talks of potential price increases at the field level, it will be a muted approach and a muted response in pricing, which will restrain profitability for quite a while. Essential Services (ESN-T) would be a more substantial, safer pick in this area.