This article was first distributed to Ticker Trax paying subscribers Thursday June 4, 2009.
A tiny Alberta oilfield services company appears poised to double and triple its business in the coming nine months.
The keys to Enterprise Oilfield Group’s pending coup is a secular trend toward directional drilling of fields, underground utilities, wellhead tie-ins, carbon dioxide injection projects and (as wide as 16-inch) pipeline repairs.
The tiny company’s Enterprise Energy Services unit is, I am informed by customers, signing new clients via a widespread net of contacts the company’s two grizzled principals have cast across Alberta and a small part of British Columbia. Enterprise Oilfield came across my own radar thanks to some of those customers and a neighborhood friend in Tiburon, Calif., who gave me the thumbs-up. (I own no shares of Enterprise Oilfield but insiders are approaching 40 percent ownership of the battered shares, market cap: $10 million Canadian.)
Leonard D. Jaroszuk, CEO of Enterprise Oilfield Group (E in Canada), explained to me the other day (over breakfast at the Mandarin Hotel in San Francisco), that the new signings have come for at least four reasons: local governments’ stimulus spending on frayed infrastructure; well-timed and crafty purchases of reputable pop-mom service companies in and around Red Earth, Peace River, Fox Creek, St. Albert and Edmonton; extended contracts with a client base that includes EnCana, Telus, Shaw, ConocoPhillips and so on; a primed fleet of prized vehicles, such as amphibious tractors, Kenworth trucks packed with hydro-vacs, backhoes and directional drills.
“We are a terrain specialist with about $20 million of equipment at present,” Len’s No. 1 lieutenant, Desmond O’Kell, says.
There are other reasons, some of which will be revealed in Ticker Trax (I can’t give away all of the good stuff), why sales for Len and Des’s Western Canadian company easily will top the $40 million of sales it notched in 2008.
“If you look at, say, pipeline and facilities construction, and a typical job for us would be the last link – a half-mile -- we are good to clear $300,000 or more on a $1 million job, not just because of our equipment, which is darned hard to find these days, but the people we have working these gathering stations, or the pump houses, or the wellhead tie-ins,” Mr. Jaroszuk said.
The CEO, in his early-50s, says the past month alone has seen about $4 million of stimulus spending contracts on bridges, culverts and other local government projects and rights-of-way.
His goal is to gather into the Enterprise fold several more specialty drillers in Western Canada, perhaps around the booming natural gas fields surrounding Peace River and in part of eastern British Columbia. “There are 30-year-old companies that know every nook and cranny of the terrain but do not have the capital to continue,” he says.
One directional driller that Enterprise signed to an exclusive management contract had been in business 27 years. Des O’Kell, in his early-40s and VP of corporate development, tells me Enterprise was able to quadruple business in the greater Edmonton area because of the strategic maneuver.
I’ll have more on Enterprise Oilfield Group in Ticker Trax. Needless to say, I rarely get this pumped about a pumper and a driller. But the tiny company is scrappy, and its CEO says he can take this company to $200 million of sales in three years and perhaps less. Especially with natural gas discoveries in and around Horn River, way up there.
Sounds big but with risk, like everything. Des O’Kell tells me the company has zero commodities risk and is re-signing contracts that drillers and cable companies and you-name-it dropped in the dark days of this past November 2008.
Debt is about $4 million. The shares actually trade on the Toronto big board. Len tells me the company has been profitable for four years now. So why is it so dirt-cheap?
Like most CEOs, Len Jaroszuk answers it with a twist, “Well, for how long do you think this thing trades for a quarter? Executives own almost 40 percent. Americans own about 20 percent. If I could speak to why the market does what it does, would you believe me?”
Vancouver, Saskatchewan and stuff
That is all for now. This weekend, I will be in Vancouver at the World Resource Investment Conference., and then off to Saskatchewan with Tom MacNeill of Forty Nine Resource (FNR in Canada), Doug Casey, Bob Bishop and several others who know more than I do about potash and trout and big black ugly flies.
In Vancouver, Ticker Trax and I will be giving a free workshop Sunday – and all questions are welcome. Bring your pencils. I also will be appearing on several panels and making a guest showing on Al Korelin’s radio show at the Vancouver conference. Please ping me if you plan to attend.
Ticker Trax™
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THOM CALANDRA of Ticker Traxhelps his audience find value in a quagmire of investment choices. Thom co-founded CBS MarketWatch andMarketWatch.com. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom pegged $300-ounce gold as a long-term hold.
HOLDINGS: Thom’s holdings are listed for all Stockhouse members on www.Stockhouse.com under the “portfolio setting” for user TCALANDRA. It is public and free to view. He and his family own recently minted gold and silver coins.
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