Chris Fernyc Savanna Energy Services SVY-T TOP PICK Apr 25, 2005

Energy service sector is going through a boom and this one has been going through a rework. Had a lot of older rigs that were really great for dry gas and shallower gas drilling. Have also been moving down to Australia. Well-run company and the balance sheet is in pretty good shape. They’ve all had a pretty big move. Would prefer CanElson (CDI-T) which has a strong, strong balance sheet, good sustainable dividend and good management team. Very cyclical business, so keep a very, very tight eye on the long-term pricing environment.

Has owned in the past. Trimmed recently because of expected sell-off which has happened. Trading at a multiple of businesses with a better business model. Prefers those others.

Doesn’t follow this one super close. There is so much activity in the North American energy sector that probably a rising tide is going to lift all boats. He likes a number of names in this sector. 4.5% dividend yield.

Had liked the energy services sector, but it is coming off and coming off hard. His model price is $15.07, 106% upside, but it is coming down to a level of $7.07, and if it had a negative transit, it is going to go all the way back to $6.

He is looking for someone to know where the bottom is in oil. Buying this one depends on oil prices. These oil service stocks will be one of the first to move. Perhaps stick your toe in the bottom here and get a partial position.

On his watch list. Has noticed that insiders are buying like crazy. It does have a big debt load, which is a major problem, and which continues to scare him. This is one that he has been kicking the tires more closely on. The insider buyers generally know more than an outsider. He will continue to watch.

SHORT. The biggest problem is the quality and type of rigs it has. Very few long-term contracts to the rigs. Shallow rigs. Oil/gas drilling in Western Canada is largely deeper and more complex. They only have 2 of the triple type rigs, which are the most popular. Their fleet is just not purpose ready and the market is drying up. In a downward market, these are the first guys to get axed.

Does not have the highest quality rigs and they are not located in the best possible places. There is still a business there so if the market rebounds this one should bounce back. But he prefers others in the same industry.

(A Top Pick Jan 2/15. Up 66.61%.) *SHORT*. A decent company, but they just don’t have quite the same size of balance sheet and are also less contracted than some of their peers. They have good deep drilling rigs which is attractive.

(A Top Pick Jan 2/15. Up 66.03%.) *SHORT* Not as much ability to participate in the deep drilling market.