Canadian oil service shares soar on forecasts
CALGARY, Oct 12 (Reuters) - Share prices of Canadian oil-well drilling companies and related service firms soared on Tuesday as investors got over gold and refocused on the busy energy sector, analysts said.
Precision Drilling Corp. (Toronto:PD.TO - news) gained 13 percent or C$3.70 a share to C$32.70; Ensign Resource Service Group Inc. (Toronto:ESI.TO - news) climbed C$2.70 to C$30.00 and Prudential Steel Ltd. (Toronto:PTS.TO - news) added C$1.10 to C$14.00.
Precision Drilling had fallen from a high of C$40.60 a share in the past month in part because money managers had rotated some of their equity holdings from the oil and gas industry to the suddenly-hot gold sector.
Also, an agreement by the world's largest oil-producing countries to boost prices by curbing output came under investor scrutiny when reports surfaced indicating compliance to the pact fell in September. That caused a fall in oil prices from their recent highs of US$25 a barrel to about US$22.
Further weighing on Canadian energy service stocks was the earnings warning announcement by Halliburton Co. (NYSE:HAL - news) , the world's largest oil services company, a week ago. Dallas-based Halliburton shares fell 14 percent after warning that its third-quarter earnings would fall short of analysts' estimates and that dragged down prices of all other North American oil services companies.
``Those three factors resulted in the Canadian energy services stocks being oversold with regard to their fundamentals,' said John McAleer who follows the companies for Calgary-based brokerage FirstEnergy Capital Corp.
Those fundamentals continue to indicate at least two more years of feverish activity in the Canadian oil and gas sector, he said.
The oil and gas producing sector is forecast to generate a record amount of cash flow, about C$17 billion, some 5 percent higher than in 1996, the previous record year. Cash flow is considered a key indicator of an oil company's ability to fund future exploration and development projects.
The companies which benefit from those spending plans include drillers such as Precision and Ensign and service companies including Prudential Steel.
``If the high natural gas and oil prices are maintained, the cash flows over the next few years will be fantastic and that will translate into very busy activity levels in the energy services sector,' said McAleer.
($1=C$1.47)
biz.yahoo.com
ps Forget about B..t stocks....Drillers is a real goldmine..You have 2-3 more months than double..
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