Eric NuttallTrican Well Service Ltd.TCW.TOWATCHApr 15, 2025

He'd look to deploy $$ right here, right now, at today's price. Making higher highs and higher lows. Acquisition last summer very synergistic and strategic. Best-of-breed player in its industry. He expects activity to pick up in Western Canada Sedimentary Basin.

Another idea in the Canadian oil patch. Not a household name, but Canada's largest pressure-pumping and fracking company. Leading market share in Montney and Duvernay Basins. Modernized equipment for slightly better pricing, yet margins still ebb and flow with supply/demand. 

Last year's acquisition piqued his team's interest. Cyclically, and possibly structurally, more constructive environment for well completions in Western Canada from LNG terminals. Undemanding valuation of 10-11x PE. Increased dividend, bought back shares. 

It's on a dip today, so today's the day. Yield is 3.23%.

Lots of the services companies in energy have been shaping up. Volatile stock. Trading above a rising 50-day MA. Generating cash. If the sector can get going, certainly will participate. Other sectors right now are clearly in gear. No sense owning a good company if nobody else cares.

Traded better than about 50% of stocks in the S&P over the past year. So there are a ton of companies performing better. Sector needs a bit more momentum before you want to put $$ to work.

Canada's leading pressure pumper, fracking, oil completions company. Had its ups and downs. New management since 2020, doing a good job. Improved margins and ROIC. Buying back shares prolifically, which he applauds. Reinstated dividend, growing it at a compelling pace. 

He first became interested with the Iron Horse acquisition. Good potential for growing stream of income and meaningful capital appreciation. Major leverage to natural gas. Yield is 3.94%.

Stumbled recently, so it was easy for people to take profits. Services sector is very tough. Homogenized service, and there are always a number of bad actors. You might have pricing power, but at the first whiff of a downturn someone cuts their price and you have to match it, so your margins go near zero.

Only Canadian, pure-play, frack services provider. Leans toward the gas side. Leveraged to increases in Canadian drilling, which drives margins. Next-generation, low-emission fleets attracts a certain type of (large) customer. Key beneficiary of LNG Canada ramping up.

Nice, disciplined approach. Lower capex needs. Very strong FCF. Trading below historic norm. Should benefit from stronger gas prices.

Ask yourself what the opportunity is. We've seen a real change in the oilfields over the last decade. Instead of growth at all costs, companies have decided to get balance sheets in order and pay back capital to shareholders. So this name has fewer opportunities. That said, LNG Canada will be a continued source of new production. 

Made an acquisition, and stock popped, so the market likes it.

Has held up well at 8x PE, even with nat gas prices low. Pristine balance sheet, using it to invest in equipment that reduces carbon footprint, which gives it a marketing advantage. One of the more volatile among the service companies. Yield is 3-4%.

Sees a 12% free cash flow yield, but isn't the confident about it. Likes them buying back shares and long-term companies will ramp up well drilling. Are debt free and doing all the right things. But one of their competitors (a doh-doh head) cut prices to win a job.

Outlook quite strong in terms of well servicing, you can go back in and re-frack to improve productivity. Nice, strong upward bias to fracking services and intensity of services. Nice yield.

Cheap at 8x earnings, 3.3% dividend yield. Clean balance sheet. Has done well in the last year. Even if activity remains flat, probably going higher because of the price of oil.

Good for long term investors at 5-10 years.
Energy services a volatile sector.
Is good for risk adverse investors.
Cash balance very strong. 
Demand for drilling is high given strength in energy prices.

TCW has an impressive shareholder yield, with a dividend yield of 1.7%, a buyback yield of 10.8%, and a debt paydown yield of 3.4%. The company is a $971M company with a forward earnings multiple of 8.1X, a low debt profile, growing margins, and great free cash flows, but it does operate in a cyclical industry. Although the company's balance sheet has shrunk since 2018, its share count has also diminished significantly since that timeframe. If an investor has an optimistic outlook on the price of oil and the energy market, we would feel comfortable with the solid execution and fundamentals of this company. 
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It provides energy services in Alberta as well as some in the U.S. He doesn't own energy services or exploration companies. Sticks to pipelines.This type of company does well when the sector does well.