Calfrac Well Services Ltd (CFW.TO)

(Market Call Minute.) Traded out of this one in recent months, but may be looking to get back in.

An industry leader and have tentacles in all the plays that he sees growth in such as the Duvernay, Montney, and even some of the Horizon areas in northern BC. Stock has had a great run but he still sees a 20% return in the next 2 years.

The service sector will get hurt by lower oil prices. Industry has been focused on drilling all these horizontal wells and using Fracing services because of the high oil price. If oil prices come down, cash flows will come down and budgets will come down.

(A Top Pick Aug 17/12. Up 28.57%.) He switched out of fracing companies into the deep drillers in the spring, which has worked out fairly well.

Reported a really good quarter, double what estimates were. Have operations in both Canada and US. Likes it because of all the upside from the LNG drilling that is going to happen in the next few years. Because of their contract with Petronos they have good leverage. Have some pretty good shale plays in the US. If you can pick this up in the low $30’s, you should do well. Q3 and Q4 will be strong quarters for the energy services companies.

(Market Call Minute.) Likes the pressure pumping space and more multinationals coming into Canada is going to benefit them.

Service sector is very hot right now. There are 2 key plays that are highly service intensive, Montney and Duvernay which is bringing brand-new capital and is translating into very strong demand for both drillers and fracers. In Canada there are 3 fracers, Trican (TCW-T), Canyon (FRC-T) and this one. This one benefits from very strong relationships with Petronas (?), so it is expected they will be able to announce a contract in the coming weeks as they wrap up activity. Reporting tonight and it is expected it will be poor quarter because of wet conditions in Q2 but their forward looking guidance is going to be very strong, which should be a catalyst for the entire fracing space.

Likes the area very much. Of the 3 companies operating, this would be his 2^nd choice because of its global exposure. 3.2% yield. Can see $35 in the next 12 months.

(Top Pick Aug 17/12, Up 26.18%) He switched out to the land drillers. Likes the sector, though. Looks fine and you could buy it now.

(A Top Pick Aug 17/12. Up 17.62%.) Sold his holdings recently and switched to the land drillers. Fracing looked like it was a little bit oversupplied in the short term.

Fracking story has years and years to play out, providing a surplus in supply at the moment. We are seeing a base pattern. Very nice price action. Major support at $20, so if you buy at $26 you have a lot of risk. Most it could get to is $35 on the upside. So if this starts to pull back then the risk reward improves.

Energy services are a big group in Canada but have been underperforming over the last 12 months. There has been some small improvement in some of the producers but he thinks it is early stages. The big risk right now is with low gas prices and the big differentials between Canadian crude and WTI.

Thinks the oil price could roll over a little bit. Doesn’t see much upside because the additional supplies coming from the US are ample to supply the market. However, he feels oil stocks are cheap because they haven’t participated to the upside. Oil service companies look exceptionally good. Valuations are well below replacement costs.

(Top Pick Dec 23/11, Down 12.97%)

In a pretty good position now after a pretty dismal year. Had cut backs on capital spending. We are not out of the woods, but with a 4% yield, it is not a bad entry point. Seasonality has a big impact as winter drilling goes on. Canyon is his favourite in the sector.