Savanna Energy Services (SVY.TO) Buy, Sell or…

Savanna Energy Services (SVY.TO)

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COMMENT

Just increased their dividend and any time a company does this, it’s a great thing. Great leadership and good quality assets. Should do well in a good cycle. All the oil service companies, drillers in particular have been challenged by weak natural gas prices. Stock is trading pretty close to its replacement value so he feels there is a good floor here for the company. Once the cycle comes back, this company should do pretty well.

PAST TOP PICK

(A Top Pick Nov 2/11. Up 9.5%.) 7% bonds due May 2018. Covenant on the bonds is really good.

PAST TOP PICK

(A Top Pick July 8/11. Down 20.03%.)

PAST TOP PICK

(Top Pick Apr 22/11, Down 24.09%) The whole sector is coming off. Better to be a year early than a day late. $9.75 Book value. Company is extraordinarily cheap. Moving into Australia, 6 rigs.

PAST TOP PICK

(A Top Pick Feb 18/11. Down 22.69%. (See commentary at beginning.)) Oil service business and he likes it a lot.

TOP PICK

7% bonds due May 2018. Likes the drilling companies. Feels they are in a sweet spot for a number of years. This company has drilling operations in Canada and Australia. Yielding 7.75% for 7 years.

TOP PICK

Oil/gas services. Have over 160 rigs and just made a couple of acquisitions. Operate in Canada, US, Mexico and are moving into Australia.

TOP PICK

(3 Top picks are in the energy services sector.) BV of $9.90. Have 166 rigs, of which 40 to 50 were idle giving them potential operating leverage on the way up. Now supplying rigs to Australia at higher margins. Just acquired Performance Energy and got 17 rigs.

TOP PICK

Drilling services with over 100 rigs. About 40 of them are hybrid rigs which are being converted to working rigs with some of them going to Australia where rates are double Canadian rates. Drilling has been a laggard so this company has fallen between the cracks. Very cheap BV of $8.92.

SELL

One of the most expensive drillers because they have some fantastic rigs, which tend to drill shallow gas. However, the biggest driller of shallow gas is Encana (ECA-T), which will be splitting this off and won't be spending much money on it.

PAST TOP PICK

(A Top Pick June 9/08. Down 71.74%.) Largest coil tubing driller, a technique used for drilling shallow wells. As a driller, a lot of their equipment will be sitting on the sidelines. Just got $110 million, which is encouraging. Consider selling for tax losses.

RISKY

US drilling at all time record levels. Prefers services in the pumping business. Savanna is vulnerable with shallow oilrigs. Well run. Likes Gas potential down the road. Should benefit from prices as we got into the winter. Drilling is taking place on Bay street through M&A vs. in Alberta.

TOP PICK

Natural gas trailer. Picked on the basis that shallow gas will become much more popular given the high price of gas. Relatively undervalued.

DON'T BUY

This is probably the weakest of the group. Has the highest earnings cash flow multiple and is primarily domestic focused. Doesn't see any upside. He would prefer to look at Saxon Energy (SES-T) or Calfrac (CFW-T).

PAST TOP PICK

(A Top Pick Mar 9/07. Down 14.7%.) Got out of his position last June/July.

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Savanna Energy Services (SVY.TO)