Adding Canyon after a wet Spring

By Travis Johnson, Stock Gumshoe, August 24, 2011

A stock that I’ve owned for a while reported a weak quarter due to the terrible conditions in the Western Canada Sedimentary Basin oilfields where they do the bulk of their work — and the stock is down a bit as a result. I think that’s an opportunity to buy more, so I’ve added to my holdings in Canyon Services Group (FRC Toronto, CYSVF pink sheets).

The company’s quarter was obviously bad, but that seems to have been true for pretty much every company in that region — and though companies often blame the weather for bad quarters, it seems apt in this case. They did about half as many jobs in the second quarter as they did the year before due to the weather delays, but they still booked roughly the same revenue as last year because the rates were higher and the jobs longer … and they clearly state that demand is still very high for their high-capacity fracking crews and equipment, particularly because E&P companies are trying to complete the work they couldn’t do during the wet Spring, so they expect to make up for this shortfall in the second half of the year.

I’ll re-evaluate based on how things look next quarter, but I see no reason to doubt that they’ll return to high utilization after this brief setback — and if they do, with demand very high and their big capital investment in increasing the fleet over the past year, then revenues and earnings should take an abrupt jump over the next couple quarters.

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