Precision Drilling (PD.TO)

Has a very strong balance sheet, so she thinks that the dividend is safe enough. It hasn’t really gone through the hurt that the oil/gas producers have yet. Just reported quite healthy, because Q4 was not too bad. Once Q1 rolls off, you are going to see a lot of these oil service companies are going to be hurt quite badly. If she were interested in a driller, this would be a name to go to because it is very liquid with a good balance sheet and good management.

In a low oil price environment, drilling companies are sometimes being asked to take large price cuts, anywhere from 15% to 30%. Generally speaking the drilling rigs are usually one of the first service companies to take price cuts. On the optimistic side, this is trading below BV, so if you have a longer-term horizon of 5 years, and you can stomach the volatility over the next 6-9 months, it might not be a bad time. On the other hand, you might need a five-year window. He owns some of their bonds.

A name he would choose as a dividend paying driller would be Canelson Drilling (CDI-T). Precision is going to be a survivor. If this cycle persists much longer, drillers are going to continue to see further weakness. His sense is that when energy prices start to bounce, you are going to get the 1^st response in the exploration/production companies, and there will be a delayed response in the drillers. Company has quite a bit of debt, and if he were them he would reduce the dividend.

On the service companies in general, this is a little too early to be buying right now. Very dependent on producer cash flows, which he feels is lacking.

Took about half of his position off at around $15. Oil service companies are going to be hit hard in this environment. When companies don’t put out new wells or take options they have on increasing production, the drillers are going to be among the first to feel those effects. They are not likely to see any precipitous increase until there are signs that things have definitely bottomed and there is more activity in terms of profitability turning around for the industry. If your outlook is long-term, you can buy into this as this company will be one of the survivors. If you have a five-year view, you should do extremely well. They have a good balance sheet.

Has a good balance sheet and good upside potential. However, in the very short term, a lot of the oil companies are massively cutting back on their commitments to doing drilling and development work. There will be some pressure on the stock for a while. Longer-term however, it is good value.

Thinks the service sector is going to be under pressure. However, if you have to be in the service name, this would probably be one of the better names.

Likes it. Drillers will move higher before anything else moves higher. If LNG plants start in BC and only half the companies secure projects, then half the business will go to PD-T.

A lot of the service related companies were sort of leading the charge downwards. This one has been under a tremendous amount of pressure for quite some time. Thinks that in the early part of 2015, there is going to be a reckoning with some of the over levered players in the upstream space. Service companies are going to have very little activity in the early part of the year. The 2^nd half of next year is going to be a lot brighter for some of the service companies.

This has had a significant parabolic move lower and has seen some bottom picking. It looks like it potentially could fill the gap. This would be a Trade as we have reached the seasonal low for the price of oil. The selling pressures on a seasonal basis come to an end at this time of year. (See Comments on Oil.)

Drillers are the 1^st ones, other than the oil companies, to really feel the impact of low oil prices. This stock had a 52% decline since the summer. The drilling sector is notoriously volatile. There will be fewer wells drilled over the next little while, because there is not enough money to spend. This is one that you can wait for a turn, because when they do turn, they do turn quite strongly.

(A Top Pick Dec 16/13. Down 23.74%.) Drillers are activity oil related obviously. This one is primarily Canada and the US, with a little bit in the Middle East. Pays a nice dividend. There is a pretty decent chance that in 6 months it will be back over his costs, and he’ll think about what to do then.

The next quarter will be good and you will get a false sense of optimism. It takes time for this kind of company to lose pricing power. The erosion in the profitability happens very quickly. Don’t buy into an attractive Q4 pull back.

There is still a lot of tax loss selling that will happen between now and the 15^th or 16^th. As liquidity starts to dry up as we get closer to Christmas, a lot of investors will try to have their tax loss selling done around 15^th or 16^th, so if there is a chance for some stink bids for some bargains on really inexpensive stocks, do it between the 15^th and the 23^rd or 24^th. This is a pretty high-quality name, and he would do a quarter or a 3^rd at that time.

Global company. Last year the company had an overhang related to a single shareholder selling their holding. They broke their fleet up into three categories. The oldest were sold and capital was re-deployed. Saudi Arabia is drilling very aggressively and PD-T is there. Excellent balance sheet.