Canyon Services Group (FRC-T)

(A Top Pick Oct 7/16. Up 19%.) This was acquired by Trican.

He made a fortune on fracers and thinks there is still more to go. This is his top pick because of the lack of debt. It is only going to have about $35 million in net debt at the end of this year, because they are rehabilitating some of their equipment. There are signs that pricing is improving in the frac market in Canada. Demand for fracing is increasing much faster than people believe. He is looking for about 35% upside.

How would you evaluate their Board of Directors, and what impact does corporate governance have on this? It is probably more important for these companies to have a good set of governance aspects, to different parts of diversified type of board with a variety of different experiences, different industries and a good compensation system. This company’s board and management have a fairly large investment of their after-tax dollars in this company.

(Market Call Minute.) He wouldn’t necessarily buy this, but if he had a gun to his head, he would buy it over the other 2.

He doesn’t think oil services is the right sector to be focused in. Their margins are all being compressed. They’re cutting jobs and there are more cuts to come.

The energy services sector is probably the sector that is the most susceptible to a decline in commodity prices. You have companies having to cut production budgets. The brunt of it will happen in the 1^st quarter of 2015. If production budgets get cut, that means less demand for energy services companies. This is why this stock went from $20-$8. If you are looking at playing a recovery in oil or natural gas, you are probably better off looking at something that is a little bit more stable if you can’t stomach the volatility. This means buy a producer, as they tend to bottom before the commodity price.

This is very specific to the Canadian horizontal drilling, especially on the gas side of things. If we have the financial gas announcement come in on the 1^st quarter by Pertronas, it would be a boost to Canadian companies and, therefore, to the fractures as well. Very well-run company and clean balance sheet. One of the top names he would own.

(A Top Pick Feb 20/14. Down 0.99%.) His cost base for this is just a shade over $10. Very well-run company. 4th largest pressure pumping fleet in Canada. They have the heavy horsepower that delivers fluids at high pressure, that break up reservoirs. Something that is very much in demand and growing going forward. Very little debt. 5.5% dividend yield.

Longer term you would believe that there would be more wells drilled/fracked. We are in a down trend right now so it will go down some more. Their CEO rattled their cage regarding the tax situation on LNG. This called into question how many wells would be fracked if we don’t get an LNG facility built there. He would hold and stay the course, riding it out.

All Canadian and little debt. Remaining exposure is North eastern BC and North Western Alberta. The BC government will finally come out with their tax rules for LNG in October to make Canada complete internationally.

His model price is $25.86. This is a small cap energy services company and creates a huge valuation in his calculations. Doesn’t think this is sustainable. Feels that all of these companies are coming back to a reasonable value.

The reason for owning this is the promise and hope that we are going to do some LNG exports to Asia, some time in the next decade. This has to be decided, based on what the BC government’s tax policy ultimately is along with other competitive factors. Had looked at this, but missed it. If he were going into the fracing area today, he would be looking at Halliburton (HAL-N).

(Top Pick July 23/13, Up 60.37%) Continues to be quite positive on them and their interest in developing unconventional gas sources.

One of 3 large Canadian fracing companies. This is an industry that, over time, is doing nicely.