Matt Baillie Phoenix Energy Services PHX-T BUY ON WEAKNESS Sep 08, 2005

(Top Pick Nov 5/12, Up 50.80%) You have to run with the stocks that are doing what you want them to do. These guys have a very good team. The stock is not expensive yet. Has known the company for 15 years.

It does its own a thing within its own industry. Almost 7% yield. They distributed about $25 million in dividends but make $50 million soon to become $70-80 million. He thinks commodity prices are low because people are drilling like crazy. This will do well if the industry stabilizes.

Directional drilling is very interesting because we are going more towards pad drilling. However, you have to think about the placement of those vertical sections of the horizontal wells, which have to be distinct from each other. Valuation on this company seems to be reasonably okay. He tends to like this company. Dividend yield of over 5%.

(Top Pick Nov 19/13, Up 4.37%) It got very expensive so he sold it in the spring. Part of their growth strategy was in Russia. If it got under $10, he would consider going back in.

A high quality company that has been beaten up but has low fixed costs and high variable costs, so they can get through this and come out the other side. Directional driller. The problem is with the oil price and efficiencies in drilling on shale, he might like the oil price to come back to $80, but what if it is $65-$70. The one thing he can figure on is that wells are going to get drilled, so you will need drilling at some point.

An oil/gas servicing company. A drilling company with a technology bent. They have technology that goes into a drill bit which allows them to send data back, giving live data constantly. They cut their dividend and brought down their debt. Dividend yield of 12%.

A horizontal drilling company. Have some great technology for the drilling side, which is really their key business. Trades at 18X earnings and pays a yield of 5.35%. Their technology allows them to get data back to the main place where they can analyse and see where the drilling is all going. Management is doing all the right things.

(A Top Pick March 4/15. Down 67.75%.) Last year was horrific for energy. He was being very defensive, and this one had the ability to stay solvent. He got stopped out. It looks like it is probably time now, from a cost-benefit, that you could really get some leverage buying one of the service companies with a 1-2 year outlook.

(A Top Pick April 16/15. Down 70.71%.) Sold his holdings. It was a difficult story. As a supplier to the oil/gas industry, they really got squeezed.

PHX has had very strong momentum over the last year and is also cheap at 6.5x forward earnings. Most recent quarterly earnings results were very good, recording a large beat on revenue and EPS. Outlook for 2024 forecasts a drawdown while 2025 will bounce back with good growth. It pays a high yield at 8.7% and the balance sheet is fine. It did stop dividends in 2016 however. The business is highly cyclical but with its customers (energy companies) holding high cash things look good right now. PHX's performance will be heavily tied to the energy sector, so investor sentiment regarding the sector will be the main factor influencing the decision to buy.
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