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Western Canadian Patch about to take Flight

Good day to all from the within the castle walls of Vic General.. This will be part one of a two or perhaps three parter about the state of the union of Enterprise Oilfield Group…TSX big board…’E’.. I shall only know for sure after speaking with company co founder Des O’Kell either today or by the weekend.. This is what may be termed a ‘Laymans Stock Analysis’

Historically, 5 years ago, the stock price was almost $3.00…Today it trades at about 6% (@ 17c)of that value . To put it mildly, the oil and gas service sector is out of favour.

I shall attempt to enlighten you all as to the reasons and signs of a coming turnaround in this sector and how Enterprise has positioned itself and is poised for a surge in the price of the stock. Number crunchers and CFAs are going to follow the leader (that’s me!!!) and jump all over this one when the herd begins to form. Presently, the company shows sales in the 40m range annually. Profits are not what they could be due to the fact that they are paying down long term debt rather than dividend it out to shareholders.Best to check the Financial Statements and do your own interpretation. Beancounting is not my strong suit…I am a trader first, ex-broker/advisor next..

You could argue that the stock price was way overbought, as were all in that sector…and be right. The price was based on industry average multiples. Today , with conservative break up value of @ 65c per share..we have hit bottom on the cycle. Soon, the scramble will be on to acquire small to mid size companies , and their cheap cheap stock with similar infrastructure. Enterprise is ranked behing Precision Drilling and on or two others in western Canada in sales and NAV… If the stock continues to dwell, even in the high 30s after mid March..expect a run based solely on rumours of takeover.

Approximately a third of competitors have dropped out of the landscape since the 2004/06 boom period. A company such as Leader, one of our major rivals is a prime example. It was $6.50 at the peak. It traded down to a nickel before it was rolled back.In my estimation, leader today is not in good shape and lacks working capital to re-emerge as a force again. In industry terms…’the competitive landscape populace has been thinned’….how is that for a mouthful???lol

The industry by and large I have learned in a crashcourse, survives off contracts with major oil corporations such as Encana. Apache Oil and the likes. It is when these guys take an aggressive stand as to expansion that causes a rush to oil services and their stock. Marketcents, last week prepped you with an arcticle from the Edmonton Journal regarding Precicion Drilling, the dominant oil service company in Canada..This provides good insight to whats going on,. I have more timely and insightful articles from Canadas patch….Houston Alberta if you will, to follow as well.

Just as a side note before going further….Why don’t I recommend Precision?

The answer is simple. I have a situation with ‘e’ that if and when the sector turns and returns to a MINIMUM of break up value…royrogers Marketcents followers would make 4 times their money. I expect much more than that in a 12 to 16 month span.. My forte is penny stocks and their ability to lever your money in the best way possible with the smallest amount of risk. My royism saying is..’bet a little…win a lot”

I am particularily confident of ‘e’ because of its very limited downside risk, coupled with the fact it has a full TSX listing and a following among junior hedge funds. With the funds wall being broken down already. Managers will line up in an orderly queque to buy this one when more significant announcements from the senior oils appear as to awarding of capital expenditure contracts..

In my upcoming Marketcents blog, part 2 will be about bid flow and more on the spending spree we are about to witness in the western Canadian patch. One company official at Enterprise , in an optmistic state of euphoria on his way to a requested show and tell at a major brokerage firm in Calagry said that E could experience a 30m dollar winter . The emphasis is on could, but ….more the next time

See ya on the flip side

royrogers