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The energy services sector is showing signs of life following a pair of decent-size financings, both led by Peters & Co. Ltd., despite an uncertain outlook for commodity prices.
The companies, PHX Energy Services Corp. and CanElson Drilling Inc., are raising nearly $60-million in total as service sector stocks outperform the exploration and production companies, partly on expectations of a big ramp-up in activity tied to Canada's liquefied natural gas prospects, according to industry sources.
The deals come against a backdrop of a slow market for energy-related equity.
As the theory goes, a host of new LNG plants on the West Coast are tied to supplies from such gas-rich formations as the Montney in British Columbia and Duvernay in Alberta. Developing those reserves will require an armada of the largest-size drilling rigs and all of the other hardware needed for hydraulic fracturing.
Some of the world's biggest energy companies with interests in such projects, such as Chevron Corp., Royal Dutch Shell PLC and Petronas will be hiring domestic contractors and suppliers. Of course, LNG remains a massive proposal for Canada, as no developer has given a plant a green light yet. That means it is not clear when a big increase in gas spending will occur.
Still, the energy services stocks are up about 20 per cent on the year. That compares with a 6 per cent gain in the TSX S&P capped energy index.
On Friday, PHX Energy Services Corp. uncorked a bought deal worth $27-million before overallotments along with a $14.6-million increase in its capital program to $45-million.
The company, known for directional and horizontal drilling, is issuing 2.6 million common shares at $10.40 apiece.
The stock issue follows a friendly share-exchange bid, also announced last week, for the 60 per cent of information and data management firm RMS Systems Inc. that it did not already own.
Peters also led CanElson Drilling Inc.'s $30.4-million bought deal for 4.9 million shares, priced at $6.20 each.
CanElson Chief Executive Randy Hawkings said the proceeds would be used to "respond to customer requests and capitalize on potential acquisition opportunities." Opportunities may be in West Texas, the Deep Basin of Alberta and B.C. or in Mexico, the company said.
At least one financial source predicted the deals could open the door to more and larger ones in the services sector.
(Jeffrey Jones is a Globe and Mail Business Reporter.)
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