Currently, the largest challenges facing the Canadian oilfield-services industry are producer spending constraints, pricing differentials on Canadian crude oil, historically low natural gas prices, and the challenge to attract and retain skilled labor. To offset these headwinds, Western has pursued an acquisition spree since 2011. Western has acquired a total of six small players, boosting its top and bottom lines.
Thanks to this buying spree, Western has expanded its business lines, which currently include contract drilling, well servicing, and rental services. Meanwhile, it retains a high-quality customer base that eliminates writedowns, providing a predictable revenue stream.
Trinidad currently has approximately 50% of its fleet under long-term, take-or-pay contracts with an average term remaining of approximately one and a half years. This high percentage of long-term contracts and the technologically advanced rigs have helped Trinidad mitigate the impact of the headwinds in this industry.
The growth opportunities for Western and Trinidad don't appear as though they will wane anytime soon. Several international majors are deeply embedded in Canada's shale industry through a string of deals, targeting the deep Montney and Duvernay plays. PetroChina formed a JV with EnCana (NYSE:ECA) last year and gained a 49.9% interest in Encana's 445,000 acres in the Duvernay play for total consideration of approximately C$2.2 billion. Petronas acquired Progress Energy in late 2012, and is gearing up its drilling program by going from five to 25 rigs in the Montney play this year.
Western and Trinidad have a strategic position in the drilling market, and look poised to exploit the flow of capital coming from the international energy investors in Canada.
Nathan Kirykos has no position in any stocks mentioned. The Motley Fool recommends Chevron and Halliburton. 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.