Total was severely hit by the fact that it operates exclusively in Canada, where cash flows are more seasonal and the business is more cyclical than in the US or internationally. Despite this worrisome weakness, Total isn't in the emergency room yet. It has still a debt-free balance sheet, a decent cash tank and positive cash flow to fund its operations during the remainder of 2013.
Many oilfield service companies go looking for international business to smooth out their business cycle in Canada, where busy winters are followed by the lull of spring breakup. There are select oilfield markets with year-round activity that help these companies plan better for their equipment and grow their revenue stream. The drilling activity in these markets is less volatile than in Canada and doesn't incur persistently low gas prices or wide oil differentials.
Precision Drilling isn't alone in taking the international expansion pill. Schlumberger (NYSE:SLB) is soaring on global drilling activity, which is at a three-decade high. Schlumberger's strength in international markets insulates it from the uncertain oilfield market in the home country of rivals Halliburton and Baker Hughes over the rest of 2013.
The low natural gas prices, along with competitive pressures and weather-related delays in the post break-up season, are significant headwinds for any oilfield service company that focuses in Canada. Meanwhile, the booming drilling activity internationally, in conjunction with low competition and a favorable operating environment with lower seasonality and cyclicality, can help Total turn its ship around before it is too late.
Nathan Kirykos has no position in any stocks mentioned. The Motley Fool owns shares of Precision Drilling Trust. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.