Canada's LNG Build-Out

10/25/2013 8:00 am EST


David Dittman

Chief Investment Strategist, Australian Edge, Canadian Edge, & Utility Forecaster


Key to Canada's success in the global build-out of liquefied natural gas (LNG) capacity will be its ability to move gas from British Columbia across the Pacific Ocean to Asian customers, writes David Dittman, editor of Canadian Edge.

The amount of spending contemplated has significant implications for oilfield services companies, which will build rigs and provide essential support services, surrounding the build-out of infrastructure, to support the eventual export of LNG from British Columbia to Asia.

Oilfield services is a solid way to play Canadian LNG; demand for specialized rigs and pumping gear is on the rise. This favors drillers with Tier 1, high-horsepower equipment that specialize in deep drilling, including Trinidad Drilling Ltd. (TSX:TDG) (OTC:TDGCF).

Precision Drilling Corp. (TSX:PD) (NYSE:PDS) will also play a significant part in this story, as two recent contract wins could tie-in to providing feedstock for liquefaction facilities. Trinidad Drilling is a buy under USD9.50. Precision Drilling is a buy under USD11.

And for every Tier 1 rig that goes to work, there's a multiplier effect of well completions, whether it be pressure pumping (or hydraulic fracturing), or coil tubing.

Essential Energy Services (TSX:ESN) (OTC:EEYUF) operates Canada's biggest deep-coil tubing service well fleet. Essential also has experience with, and has earned the trust of, many of the super majors venturing into the Canadian LNG market. Essential Energy, which is yielding 4.4, is a buy under USD2.65.

Mullen Group Ltd. (TSX:MTL) (OTC:MLLGF) is a solid play on long-term growth in Canadian oilfield services with or without the upside potential of LNG-related activity.

The company consistently ranks among the very best oilfield services companies in terms of return on invested capital.

Mullen is the dominant oilfield hauling and logistics services provider in Western Canada, and the proposed LNG projects won't come to fruition without a tremendous amount of transportation and logistics support in all the operating areas. Mullen Group, which is yielding 4.8%, is a buy under USD25.

ShawCor Ltd. (TSX:SCL) (OTC:SAWLF) specializes in products and services for the pipeline and pipe services industries, and the petrochemical and industrial segments of the oil and gas industry.

North America remains its primary market, and it's well positioned to benefit from many facets of the LNG build-out.

ShawCor's pipecoating division, Bredero Shaw, has extensive experience providing coatings, and related products and services for flowlines and tie-in tools for LNG projects around the world. ShawCor is a buy under USD45.

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