RE:Future of the Drilling Sector....The Canadian Drilling Sector is basically this:
2 Big Boys
Precision Drilling - Customer variety isnt as good as Ensign in my view. But PD is large and still always going to have a large market share.
Ensign Drilling - Best customer list out of any company. They have work for both Tourmaline and Cenovus and Suncor and CNRL and that is such a key. All of those companies have such capex spend.
I personally am avoiding Ensign stock as they have too much debt...better investments out there like Total which I suspect will start paying a divy soon. In my view Total can start returning capital to shareholders in a more meaningful way faster then Ensign can due to the balancesheets.
Total has a crazy good balancesheet. Very impressive.
But once Ensign got Nabors...they are drilling for big boys.
Mid Tier
Savanna Drilling - Total Energy - very strong with the mid tier type companies that are private like Hammerhead, Bonavista, Ridgeback, Spur, PacficCanbrain out in BC and Mid tier Public like Peyto, Baytex.This is a good thing as these type of companies are likely to drill more in 2022 and the private companies will want to drill while prices pay wells off fast.
Savanna has a strong precense in Viking play which sucks when oil is low but in 2022 the Viking drilling should pick up. Baytex recently seems to have gotten a Savanna rig rollin on Viking.
Horizon Drilling - Western Energy-kinda similar operating areas to Savanna. And service rigs as well. I would rate them lower right now then Savanna on hitting all the hot plays in Western Canada. But they have custumers like Encana, Advantage, Deltastream. Competing for most of same type companies as Savanna.
Akita Drilling-I almost moved them out of this tier as they don't have utilization in all the major hot plays in Western Canada. But they are sized more like mid tier. Seem USA side is doing better. I don't think they are doing that great right now in Canada
In my view, still too many in mid tier. Something has to happen with Western Energy Services.
Total and Western stratgically merging makes alot of sense. Both in clearwater play with rigs and montney in Northern Alberta. And a merged company could focus on mid tier oil companies fully. I don't think Ensign would be interested in Western..be no benefit to Ensign.
And it likely has not happened for a few reasons...number 1 be such a massive headache for Total to integrate a merger that it would have to make really crazy good financial return Totals way. Total has the time leverage. The debt at Western Energy is ticking and judging by the lack of capex spent at Western...Western could be forced at some point into hard decisions.
And Total probably knows they would be the only bidder lol.
The other problem is likely on valuation. I dont think it even would make financial sense to take over even Westerns debt in a merger offer as a price. Rig have went down in value alot
I suspect at some point in time Total will get some or all of Westerns rigs. And it would be healthy for the industry...be only 3 companies bidding for some of the montney work versus 4...day rates in the industry would impove.
Total has such a good balancehseet that they may want to restart the divy before doing anything.
Then a bunch of smaller drillers both public and private:
Ironhand Drilling - Cwc public listed - they have extemley good utilization right now...they have most of the cardium drilling right now. Look very busy.
Stampede Drilling- Public - similar fleet to Ironhand...doubles for the Cardium. I think they are just okay busy.
Beaver, Excaliber, Twilight, Bonaza, Lasso, etc.
Still too many companies in this space. Hard to say what will happen here. I don't think any of the big tier or even mid teir public companies would be interested in any of the fleets in the smaller tier of companies I listed here. I suspect disagreements on valuations on rig is what is stop the mergers here but it will happen. Ironhand probably will take another small driller out.
Isn't enough oil and gas producers left in Alberta for the amount of small companies all with doubles and singles basically.
kavern23 wrote: I will start to post on this board as I think this is the best positioned energy service stock to be in.