Canada’s Oilfield Services Companies Are Facing Hard Times

Trican Well Service Ltd. (TSX: TCW), Precision Drilling Corporation (TSX:PD) and Ensign Energy Services Inc. (TSX:ESI) all look shaky in the short term.

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The oil price downturn has been particularly tough on Canada’s oilfield services companies, with sluggish industry activity prompting at least one firm to cast doubt on its ability to continue as a going concern. Trican Well Service Ltd. (TSX: TCW) suspended its dividend on Wednesday, cut 2,000 jobs, and said it’s seeking relaxed terms on debt agreements and is in negotiations to sell its Russian and Kazakhstan pressure-pumping business. Trican shares fell 14%, its biggest single-day decline since the financial crisis of 2008.

In a conference call, Chief Executive Dale Dusterhoft said he doesn’t expect any relief, at least in the short term. “Canadian industry activity is expected to be down substantially during the second quarter of 2015 compared to the same period in 2014. April and May activity will be down considerably with increases from June onward,” Dusterhoft said on a conference call. “This material uncertainty may cast significant doubt with respect to the ability of the corporation to continue as a going concern.”

Raymond James analyst Andrew Bradford said lenders are expected to provide debt relief to Trican and that as much as $200 million could be generated with the sale of the pressure-pumping business, though the company has provided no details on the unsolicited purchase offer.

Trican is expected to survive, but the services industry is facing a difficult summer, said Dan MacDonald, an analyst at RBC Dominion Securities. “The full impact of throttled back exploration and production spending was felt in April, with wells drilled and completions down 62% and 74% year on year, respectively,” he said.

Meanwhile, Precision Drilling Corporation (TSX:PD) is relying on cost-cutting measures to ride out the downturn. The country’s largest drilling contractor shed 2,200 jobs in the first quarter, leading to better-than-expected quarterly profits, despite a decline in drilling activities.

“During the first quarter, demand for North American land drilling services failed to meet even the most pessimistic forecasts as our customers continue to seek ways to reduce spending and budgets in this low commodity price environment,” Chief Executive Kevin Neveu said in a statement.

Ensign Energy Services Inc.’s (TSX:ESI) first-quarter profit fell 74% and revenue fell 28%, due to weaker demand for its services. The Calgary-based driller cut executive and director pay and reduced capital spending in January.

“We are entering a cyclical downturn that will parallel 2009 and in some cases, will be worse than 2009,” Jon Morrison, analyst at CIBC World Markets, told the Financial Post. “First quarter was the start and Q2 will be much worse, while Q3 and Q4 will depend on commodity prices getting better.”

It’s clear that in the short term, oilfield services stocks should likely be avoided. In the long term, the companies may rebound, but like everything else in the energy sector, that will depend on the price of oil.

Should you invest $1,000 in Mda right now?

Before you buy stock in Mda, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Mda wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Doug Watt has no position in any stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Energy Stocks

Investor wonders if it's safe to buy stocks now
Energy Stocks

Billionaires Might Sell U.S. Stocks and Buy This Canadian Stock to Avoid Tariff Risks

Billionaires might be worried about the future of U.S. stocks with the markets the way they are, and looking for…

Read more »

Offshore wind turbine farm at sunset
Energy Stocks

Got $500? Where I’d Invest it in This Green Energy Stock for Long-Term Sustainable Returns

This green energy company’s growing scale and focus on rewarding investors make it a top bet for investors looking for…

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

TC Energy: Buy, Sell, or Hold in 2025?

TC Energy is up 30% in the past year. Are more gains on the way?

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

Is Enbridge Stock (TSX:ENB) a Buy for its 5.9% Dividend Yield?

This solid dividend payer has the potential to help investors generate reliable passive income for decades.

Read more »

nugget gold
Dividend Stocks

Recession Stocks Are Back: Consider Buying the Dip This April

Recession stocks are back, and this one could be a solid winner.

Read more »

Person holds banknotes of Canadian dollars
Energy Stocks

Best Stock to Buy Right Now: Suncor vs Cenovus?

Suncor stock's 4.2% dividend yield vs Cenovus Energy's growth potential: Tariff-proof safety or growth gamble?

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Earn $500/Month in Tax-Free Income With Your TFSA

Canadians can earn $500 or a desired tax-free income every month by saving and investing through the TFSA.

Read more »

how to save money
Energy Stocks

1 Canadian Stock Ready to Surge in 2025 and Beyond

This Canadian stock has seen significant growth, but more could come for 2025 and beyond.

Read more »