Josef Schachter Western Energy Services WRG-T PAST TOP PICK Apr 03, 2018

(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 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.