Trican Well Service Ltd. (TCW.TO)

Trican Well vs. Birchcliff (BIR-T) Be wary of Trican fracking right now, how much extra do you need. Tough to be a fracker up north, with most of the activity in the 48 states.

He is bullish on natural gas and in the future he will be bullish on oil. Differentials are a problem, as is egress of the commodity. They are buying back stock right now. They have really no debt. He I warming up to the story.

(A Top Pick Nov 15/17, Down 32%) The concern was around the level of dry gas spending. He still thinks there is an opportunity for an upward revision later this year. Everyone seems to forget the uplift from the change in currency. This one has been a target of shorts but it unwound last Friday. You will be the recipient of a lot of free cash flow in forms like share buybacks.

Not a great looking chart. It is in a sideways trend and the highs are lower. He would prefer Calfrac, due to its better up trend. He could see this drop to $2.80 and would not be a buyer until it moved back above $3.50. (Analysts’ price target is $5)

He would favour shifting into a much bigger company than this one. Technically it is in a downtrend and it is not a peak period for the energy sector. He would not buy this one.

It's unlikely he'll buy this in the near future. It's wildly cyclical, so it's a trader's stock, not an investor's one. Profitability can swing a lot. He's a long-term, conservative investor. He can't buy-and-hold this.

The perception of weak natural gas pricing has held this stock back. If they report weak Q1 earnings, it may not be until the fall that they will be able to prove themselves. He thinks there is better opportunity trading E&P companies. In the services sector he has picked other horses.

He really likes this but has not moved it to his Action Alert list yet. Book value is $3.40, which is about where the stock is trading. It has a fabulous balance sheet. They have a little bit of debt, $83 million, but they own a position in Keane Energy which is worth much more than that, so this is effectively a debt-free company. They are the largest fracker in Canada. The stock is up about 20% from its lows of the last month because of the bounce. Wait until the stock drops again; he thinks it will go below $3.

(A Top Pick June 19, 2017. Down 16%). The entire pressure-pumping sector, including Trican, is completely undervalued. This company trades at 3x next year’s EBITDA. Mid-cycle valuations are closer to 4 or 4.5. The company has been spitting out high free cash flow, which has let them do $54 million in buybacks. When Shell makes its positive decision on an LNG terminal, which he expects this year, it will be very positive for Trican. He projects their free cash flow yield next year at 20%. He sold his position even though he likes the stock because he thinks that US pumpers are even more cheap than Trican. He can buy the US peers nearer 2.2 times EBITDA, compared to Trican’s 3x and they generate even better cash flow.

This stock has been a source of frustration for many investors. Recent earnings guidance has disappointed the market. Their margins have been eroded and they hold a lot of debt. He thinks this is getting closer to an entry.

This is on his coverage list but not yet on his recommended list. Book value is $3.47 compared to its price today of $2.85. The balance sheet is in good shape, their debts are relatively low ($83 million compared to 1.17 billion of equity, which he calls a “non-debt company”). They’re coming to their lows of the year. He likes the company a lot and he expects it to do much better than it did last year. However, if oil drops below $60, Trican will probably be hit a little more. He expects to add it to his action alert buy list in Q2. This company has traded on 2x book value a few times, during bull markets for oil. He thinks it can more than double over the next two years.

He likes the leadership and the balance sheet. They are doing stock buy-backs. Below $3 this is a great buy. They are the biggest fracker in Canada. Book value is $3.47 and it has traded 2.6 times book value. Be patient. He has a $12 target for 3-5 years.

(A Top Pick May 23/17, Down 27%) A pure play in Canadian pressure pumping. Still a big holding for him. Got penalized for concerns to their exposure to dry natural gas. But the market ignored their play in East Duvernay. This has been the poster child to Americans selling or shorting Canadian oil. A major plus: This company is buying back $54 million of stock with their net cash.

A very volatile industry. They are in fracking. A lot of their cost structure is labor. As the labor market becomes tighter it gets into their margins. Very difficult for these companies to get pricing pressure because it is an undifferentiated commodity.

They have a fabulous balance sheet. The debt is offset by their investment in a fracker. $3.40 book value.