Eric Nuttall Western Energy Services WRG-T COMMENT Nov 20, 2015

(Top Pick Apr 6/15, Down 64.70%) Same as TDG-T. There won’t be any margin expansion going forward.

They did $18.6 million EBITDA in the 1^st quarter. They’re involved in contract drilling in Canada and the US, with 51 rigs in Canada and 5 in the US. They have 66 well servicing rigs. Under $2, this is a Buy, but under $1.90, it is a table pounding buy. He has a one-year target of $4.80. (Analysts’ price target is $3.50.)

This is a driller. 51 rigs in Canada and 5 in the US. They also have 66 service rigs. A lot of ownership by management. This could potentially be a double-digit stock. If you are able to buy this at $1.40 or less, it is going to be a great one for the next cycle. (Analysts’ price target is $2.50.)

It is a very cheap driller. $5.53 book value at the end of last year. They are in a break even situation. He sees it doing much better. He likes the stock and covers it. There will be a great opportunity to buy it likely later in the year.

Mostly in Canada, but trading significantly below $4, so it is a tax loss situation. It is cheap here. It is smaller cap than the others.

(A Top Pick Jun 12/17, Down 32%) This was a top pick to buy some time after the show. It did quite well after the weakness he was looking for in order to buy. They are a Canadian driller.

(A Top Pick June 12, 2017. Down 48.76%). This is a driller. Oil service stocks are always more volatile. The drillers are all cheap now. This is on his Action Alert buy list. The company’s book value is $4.19. He has a $2.50 one-year target. This stock traded at $11 in 2014. In bull markets these stocks have a high beta. Western doesn’t have a debt problem. It owes $265 debt compared to $386 in equity. This is lower than Calfrac and Precision. Western’s biggest lender is AIMCO, which knows the oil industry well. AIMCO is also an investor in Western.

(A Top Pick July 28, 2017. Down 23%). This is quiet money. It’s a driller. Its book value is $4.15, which is much higher than its trading price. This is a Canadian driller with only 3 rigs in the United States. Its price hasn’t improved because it is locked in Canada. The AECO price (http://www.gasalberta.com/gas-market/market-prices?p=pricing-market.htm) is about $2 but will be $2.75 to $3.00 by Q4. Similarly, the NYMEX price (https://www.eia.gov/dnav/ng/NG_PRI_FUT_S1_D.htm) was up a nickel today even as oil went down, could by $4 by Q4.

He would not own this company, because the market cap is too small for the liquidity. Their leverage is higher than their peers – 3.4 times EBITA.

The company is very cheap in terms of price to book. Their book value was $4 at the end of June. However, they have a debt problem: $211 million of debt compared to an equity value of $369 million. He sees this as a takeover candidate especially now because he is seeing consolidation in the rig industry. When the industry turns around, this company will be very profitable. Utilizations rates go from 20% to 70% or 80% and much of the increased cash is profit. In addition, when rigs are busy, rig suppliers have pricing power. So, there can be an increase of 10x in profitability.