Stavely Minerals Ltd T.SVY

RBC Summary (by request)

[beckalodeon]

No problem; here's the report summary: ------------ Savanna Energy Services Corp. (TSX: SVY) TOP PICK Positioned To Be The Premier Land Driller Post Western Lakota Merger; Resuming Coverage With Top Pick Rating Event Resuming coverage post merger with a Top Pick Rating Investment Opinion: • Emergence of the strongest competitor with the best drilling asset base in Canada. Savanna’s shallow hybrid coiled tubing drilling rigs and Western Lakota’s deep conventional rigs have completed their well matched union to create the third largest drilling contractor in Canada. Savanna will now operate the newest and best performing fleet consisting of 103 drilling rigs, 37 wireline units, 22 service rigs and 8 coil tubing service rigs once their $240 million combined 2006 capex programs wrap up and will have the flexibility to match equipment for 93% of the wells drilled in the basin. We believe the combined fleet’s young age (less than 5 years compared to industry averages of 20-30 years), superior efficiency performance and relationship with the Aboriginal communities will make it a top choice contractor for both customers and employees alike. • Terms of the deal. The merger was accomplished through a plan of arrangement, which closed August 24, 2006 after receiving 99%+ approval from votes cast by WLE shareholders. With an exchange ratio of 0.64 share of Savanna for each share of Western Lakota, a total of 27.86 million SVY shares were issued and the new shareholder mix will be 51.5% Savanna and 48.5% Western Lakota. • Rating upgrade and target. We are resuming coverage of Savanna with a rating upgrade from Outperform to Top Pick. Target price of $36 and risk qualifier of Above Average remain unchanged. The Top Pick rating reflects our views that, (1) The combination of the superior efficiency advantage of SVY’s coiled tubing hybrid technology and WLE’s strong relationship in the aboriginal communities should afford the merged company with greater growth opportunities than on a stand-alone basis and than any other competitors; (2) Savanna is one of the most defensive names in a potentially more competitive market with over 50% of its combine fleet covered by long-term contracts and best-in-class efficiency performances with a leading-edge fleet; and (3) attractive valuation level that does not reflect the inherent value of the company. We believe SVY stock is oversold on its exposure to weakness in the shallow drilling market as we expect its 2H/06 utilization rate to be solid compared to its Q2/06 and peers due to the support of its long-term contracts.