$TCW - Trican - Almost no debt and the leading frac fleet in Canada - take advantage of the rebound

(TSE: TCW) (OTC:TOLWF) Summary Oil is rebounding the demand will pick up as the economy starts to grow again. As demand and price of oil rebounds there will be an increase well servicing activity – particularly hydraulic fracturing Trican has almost no debt, the largest fleet of hydraulic fracturing equipment in Western Canada, has leading technology to improve efficiency and reduce customer costs, and is primed to take advantage of the rebound in well servicing activity Analysts have recently raised their price targets for Trican to $2.50 (~25% upside)   Market Outlook Global Perspective Hydraulic Fracturing Market to Hit $37.51 Billion by 2027; Increasing Demand for Exploration of Multiple Wells in Single Operation to Boost Market Growth: Fortune Business Insights™ here Current market value in 2019 is $28 Billion so expected to increase 32% This is a positive sign as older wells and existing wells will require workovers or fracturing to increase production capacity. How does this relate to Canada? The global report includes growth in North America and Canada. With growth in hydraulic fracturing there is also the intensity of servicing to consider.  The amount of proppant used in fracturing has been steadily increasing in the Western Canadian Sedimentary Basin (WCSB). More proppant used per frac means greater service intensity (horsepower) to conduct the frac. Increases in service intensity result in more equipment required per well and therefore more revenue for Trican News Feb 24, 2021 - Trican Well Service Ltd Given New C$2.50 Price Target at Royal Bank of Canada here March 1, 2021 - Cormark Comments on Trican Well Service Ltd. Q2 2021 Earnings here “A number of other research analysts have also weighed in on the stock. Stifel Firstegy reissued a "buy" rating on shares of Trican Well Service Ltd. (TCW.TO) in a report on Monday, November 2nd. Royal Bank of Canada raised their price target on Trican Well Service Ltd. (TCW.TO) from C$2.00 to C$2.50 and gave the stock a "sector perform" rating in a research report on Thursday. BMO Capital Markets raised their price target on Trican Well Service Ltd. (TCW.TO) from C$2.25 to C$2.50” Trican Well Services Highlights from Recent Investor Presentation (February 2021) Market Leaders 70% of their business in 2020 was from Hydraulic Fracturing. This will continue to be their main book of business moving forward. Canadian market leader in fracturing services (based on horsepower) Canadian market leader in cementing services (based on drilling rigs serviced) Efficient Technology Large natural gas dual fuel fleet (170,000 HHP) helps reduce well costs and emissions Introducing new technology to reduce tractors on location which will provide fuel savings, result in fewer engine hours and reduce emissions Reduced fracturing product costs through implementation of new fluid systems reducing customer freshwater use: Link here Financials Tough start to 2020 but they are beginning to turn it around. If they can capture the growth and rebound of well servicing in Canada then this should put them in a strong position. Positive Highlights Short Term Liabilities: TCW's short term assets $122.5M exceed its short-term liabilities ($60.6). and its long-term liabilities $10.3M. Quick Ratio (MRQ) 1.6636 – which is a healthy position Debt to Equity Ratio (MRQ) 0.0280 – this is great, they have very little debt. Negative Highlights High ROE: TCW has a negative Return on Equity -47.4% as it is currently unprofitable. They are turning this around as indicated Risks The increased demand for oil and gas does not impact the Canadian market as much and the projected growth of servicing requirements is less then anticipated There will likely be tough competition between hydraulic fracturing service providers to win work with production companies. This could result in reduced margins for Trican, and other service providers, when bidding for and winning contracts Demand for well service is increasing as oil rebounds. Trican has almost no debt and a leading hydraulics fracturing equipment fleet in term of size and technology. They are in a strong position to take advantage of a rebounding market.

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$TCW - Trican - Almost no debt and the leading frac fleet in Canada - take advantage of the rebound

Mar 18, 2021

bullish

fundamentals Analysis

[3 min Read]

(TSE: TCW) (OTC:TOLWF)

Summary

  • Oil is rebounding the demand will pick up as the economy starts to grow again. As demand and price of oil rebounds there will be an increase well servicing activity - particularly hydraulic fracturing
  • Trican has almost no debt, the largest fleet of hydraulic fracturing equipment in Western Canada, has leading technology to improve efficiency and reduce customer costs, and is primed to take advantage of the rebound in well servicing activity
  • Analysts have recently raised their price targets for Trican to $2.50 (~25% upside)

Market Outlook

Global Perspective

Hydraulic Fracturing Market to Hit $37.51 Billion by 2027; Increasing Demand for Exploration of Multiple Wells in Single Operation to Boost Market Growth: Fortune Business Insights™ here

  • Current market value in 2019 is $28 Billion so expected to increase 32%
  • This is a positive sign as older wells and existing wells will require workovers or fracturing to increase production capacity.

How does this relate to Canada?

The global report includes growth in North America and Canada. With growth in hydraulic fracturing there is also the intensity of servicing to consider. The amount of proppant used in fracturing has been steadily increasing in the Western Canadian Sedimentary Basin (WCSB). More proppant used per frac means greater service intensity (horsepower) to conduct the frac. Increases in service intensity result in more equipment required per well and therefore more revenue for Trican

News

  • Feb 24, 2021 - Trican Well Service Ltd Given New C$2.50 Price Target at Royal Bank of Canada here

  • March 1, 2021 - Cormark Comments on Trican Well Service Ltd. Q2 2021 Earnings here

“A number of other research analysts have also weighed in on the stock. Stifel Firstegy reissued a "buy" rating on shares of Trican Well Service Ltd. (TCW.TO) in a report on Monday, November 2nd. Royal Bank of Canada raised their price target on Trican Well Service Ltd. (TCW.TO) from C$2.00 to C$2.50 and gave the stock a "sector perform" rating in a research report on Thursday. BMO Capital Markets raised their price target on Trican Well Service Ltd. (TCW.TO) from C$2.25 to C$2.50”

Trican Well Services

Highlights from Recent Investor Presentation (February 2021)

Market Leaders

  • 70% of their business in 2020 was from Hydraulic Fracturing. This will continue to be their main book of business moving forward.
  • Canadian market leader in fracturing services (based on horsepower)
  • Canadian market leader in cementing services (based on drilling rigs serviced)

Efficient Technology

  • Large natural gas dual fuel fleet (170,000 HHP) helps reduce well costs and emissions
  • Introducing new technology to reduce tractors on location which will provide fuel savings, result in fewer engine hours and reduce emissions
  • Reduced fracturing product costs through implementation of new fluid systems reducing customer freshwater use:

Link here

Financials
Tough start to 2020 but they are beginning to turn it around. If they can capture the growth and rebound of well servicing in Canada then this should put them in a strong position.

Positive Highlights

  • Short Term Liabilities: TCW's short term assets $122.5M exceed its short-term liabilities ($60.6). and its long-term liabilities $10.3M.
  • Quick Ratio (MRQ) 1.6636 - which is a healthy position
  • Debt to Equity Ratio (MRQ) 0.0280 - this is great, they have very little debt.

Negative Highlights

  • High ROE: TCW has a negative Return on Equity -47.4% as it is currently unprofitable. They are turning this around as indicated

Risks

  • The increased demand for oil and gas does not impact the Canadian market as much and the projected growth of servicing requirements is less then anticipated
  • There will likely be tough competition between hydraulic fracturing service providers to win work with production companies. This could result in reduced margins for Trican, and other service providers, when bidding for and winning contracts

Demand for well service is increasing as oil rebounds. Trican has almost no debt and a leading hydraulics fracturing equipment fleet in term of size and technology. They are in a strong position to take advantage of a rebounding market.

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TCW.TO

Trican Well Service Ltd.

3.69

-0.04
-1.07%

Return

-
Position Return %
0.00
Position Return
2.12
Price When Posted

Metrics

2.65
Target Price
7/ 10
Confidence
2-6 Months
Timeframe
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Earnings Per Share
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Financials
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Management
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Price to Earnings Ratio
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Dividend
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