A comparison of two Oil Service companies
This blog usually sticks to reporting and forecasting company revenues and earnings.The more structural analysis is usually done in the other of my two blogs called Workathon .This article is not strictly reporting.It compares the short term outlook for two oil service companies;one is Petrowest and one is High Arctic Energy.And it looks at a possible small percentage combination with another company called Armtec.
High Arctic Energy
High Arctic does more drilling than other services.Also it does not limit itself to drilling in Canada;it also drills in Papua New Guinea.High Arctic just completed the purchase of two new drilling rigs;one of which is heli-portable.It is the only heli-portable drilling rig working in Papua New Guinea (PNG).High Arctic has these two rigs under contract until 2016 and one until 2017.Presently three rigs are working in PNG with backup equipment as well.High Arctic also has a presence in north-east British Columbia but is probably waiting for activity levels to pick up in the tar sands.
Petrowest
Petrowest handles a variety of pre-drilling and post completion services but it now does other services that are not connected to the oilfield.Services such as handling hazardous waste and hauling logs and forestry equipment as well as gravel and pipe hauling. Now it rents heavy equipment for logging and mining and oil and gas companies.It's services expanded when in 2014 it made three acquisitions;it bought Enviro Mulch and Clearing and Trans Carrier and Trans Carrier Rentals plus CJM trucking.This has increased their offerings and revenue base.Petrowest already has more revenue at $206 million than High Arctic and will grow faster with it's new services.But it's EBITDA is less and it definitely has services with lower profit margins than High Arctic.Petrowest also is more affected by weather as it cannot work on days with heavy snow.
Short term forecast
Petrowest has $206 million in revenues for 9 months and is ontrack to hit $300 to $325 million in revenues;it has $28 million in EBITDA for 9 months and is ontrack to hit $38 to $44 million in EBITDA for 2014.With weather problems we should count on the low end of this range.Expect $305 million in revenues and $40 million in EBITDA.It has earnings per share (e.p.s.) of about $.05 per share now and this could bring e.ps to about $.19 to $.23 per share.That means that it is now at a quite a low multiple of e.ps.So this blog expects Petrowest to bounce back to the $.80 to $.90 price range by January and maybe with good weather back to the $1.25 to $1.40 area in 2015.
High Arctic has some underutilized equipment but much of it's equipment is under contract until at least 2016.But it will need small or non-contract business for at least one rig in 2014 and early 2015.One more two year contract in PNG and it's revenues might hit $175 million in 2014 and $200 to $220 million in 2015.As already stated High Arctic has high profit margin business and this might bring EBITDA of $47 to $50 million in 2014 and $55 to $60 million in 2015.This would put High Arctic e.ps at $.50 to $55 per share and move the stock up into the $4.25 to $4.75 range But High Arctic needs one more long term contract in the PNG area or a couple of small ones.
Some cheaper assets
Both companies are looking for new assets and one place to look is at a company called Armtec Infrastucrture.Its' share price has been considerably higher in the past.Now it 's price is about $.27 to $.30 per share.It has about $360 million of assets on it's books.It handles infrastructure products such as drainage equipment and concrete products and septic tanks.It also does a lot of civil engineering.This is not as likely to be of interest to High Arctic, especially with Armtec's low profit margins and falling revenues but Petrowest might like to look at Armtec down the road somewhere.
High Arctic Energy
High Arctic does more drilling than other services.Also it does not limit itself to drilling in Canada;it also drills in Papua New Guinea.High Arctic just completed the purchase of two new drilling rigs;one of which is heli-portable.It is the only heli-portable drilling rig working in Papua New Guinea (PNG).High Arctic has these two rigs under contract until 2016 and one until 2017.Presently three rigs are working in PNG with backup equipment as well.High Arctic also has a presence in north-east British Columbia but is probably waiting for activity levels to pick up in the tar sands.
Petrowest
Petrowest handles a variety of pre-drilling and post completion services but it now does other services that are not connected to the oilfield.Services such as handling hazardous waste and hauling logs and forestry equipment as well as gravel and pipe hauling. Now it rents heavy equipment for logging and mining and oil and gas companies.It's services expanded when in 2014 it made three acquisitions;it bought Enviro Mulch and Clearing and Trans Carrier and Trans Carrier Rentals plus CJM trucking.This has increased their offerings and revenue base.Petrowest already has more revenue at $206 million than High Arctic and will grow faster with it's new services.But it's EBITDA is less and it definitely has services with lower profit margins than High Arctic.Petrowest also is more affected by weather as it cannot work on days with heavy snow.
Short term forecast
Petrowest has $206 million in revenues for 9 months and is ontrack to hit $300 to $325 million in revenues;it has $28 million in EBITDA for 9 months and is ontrack to hit $38 to $44 million in EBITDA for 2014.With weather problems we should count on the low end of this range.Expect $305 million in revenues and $40 million in EBITDA.It has earnings per share (e.p.s.) of about $.05 per share now and this could bring e.ps to about $.19 to $.23 per share.That means that it is now at a quite a low multiple of e.ps.So this blog expects Petrowest to bounce back to the $.80 to $.90 price range by January and maybe with good weather back to the $1.25 to $1.40 area in 2015.
High Arctic has some underutilized equipment but much of it's equipment is under contract until at least 2016.But it will need small or non-contract business for at least one rig in 2014 and early 2015.One more two year contract in PNG and it's revenues might hit $175 million in 2014 and $200 to $220 million in 2015.As already stated High Arctic has high profit margin business and this might bring EBITDA of $47 to $50 million in 2014 and $55 to $60 million in 2015.This would put High Arctic e.ps at $.50 to $55 per share and move the stock up into the $4.25 to $4.75 range But High Arctic needs one more long term contract in the PNG area or a couple of small ones.
Some cheaper assets
Both companies are looking for new assets and one place to look is at a company called Armtec Infrastucrture.Its' share price has been considerably higher in the past.Now it 's price is about $.27 to $.30 per share.It has about $360 million of assets on it's books.It handles infrastructure products such as drainage equipment and concrete products and septic tanks.It also does a lot of civil engineering.This is not as likely to be of interest to High Arctic, especially with Armtec's low profit margins and falling revenues but Petrowest might like to look at Armtec down the road somewhere.
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