Stavely Minerals Ord Shs T.SVY

RE:Surprised

[OilBetaPro]

Market still sees SVY fleet as too shallow for the first leg of a drilling turnaround.  This is a misconception both in respect of the fleet, which while lacking in high-spec triples has significant deep double capability, and the market; much of the recent increased activity has been focused in the deep doubles and high-spec singles markets (Cardium, Deep Basin, Viking, Upper Shaunovon). There is a growning awareness that operators in these basins will have to turn back to the drill-bit sooner than some of the deeper players;  the wells are also substantially cheaper for those operators who are trying to maintian production while still paying down debt.

Savanna has done a very good job in cutting costs, and is now taking advantage of the very smart capital and geographic investments made by the prior management team.  The key question coming out of all this is whether the cuts were too deep, and does SVY have the key people needed too take advantage of the rising market.  The other burning question is the status of the CEO.  He was parachuted in to cut costs, but spends virtually no time in Canada, and very little time with the street.  His track record is spotty in respect of turnarounds; he has done very well in cutting costs, but does not seem to have been able to turn to active mode when the market turns back up. Time will tell, but pretty much no management skill will be required to turn a double on this stock from these levels.