Enterprise Group: Subsidiary Westar Oilfield Rentals Sees Sustained Growth Through 2018

Speaking to George Bergen, General Manager of Fort St. John-based, BC’s Westar Oilfield Rentals, “All is not lost in the Western Canada Resource market.” Westar was acquired by Enterprise Group (E: TSX) in 2014.

“The best indicator of business health is how empty our rental yard is,” states Bergen. Not only is it pretty much empty of our 400-piece fleet of Oil and Gas support equipment, we have a waiting list for equipment once returned. Westar had an exceptional summer and we see the trend continuing through 2018 at the least.”

As a result of the 2014-2015 downturn, infrastructure prices fell to maintain competitive. It is unlikely prices will rise to old levels anytime soon, but it has forced companies to either close, sell out or manage their way through.

Bloomberg puts the major oil market in perspective:

"The five biggest oil producers generated about $34-billion of cash from operations in the third quarter, according to estimates from Jefferies LLC. That puts each of them at least on a par with tech giant Facebook Inc., a welcome return to the top tier of global business after three years on the skids"

That said, investors may have driven the majors to new heights. The primary Infrastructure ETF (IGF: NASDAQ) is up to $45 from $35 over the past year: The chart is pretty much a steady climb.

Although decisive for the industry as a whole, well-run junior infrastructure companies that have survived and prospered seem to still be under the radar.

If investors’ look at what is actually happening as the industry adapts and try not to merely fixate on the oil price, they might make more informed decisions. As mentioned before, Enterprise is trading at roughly C$0.33 a share, with a breakup value of approximately C$0.85. All divisions are working flat out and having trouble hiring people to meet demand.

Here are links to the other 3 Enterprise subsidiaries—Hart Oilfield, Calgary Tunnelling, and Artic Therm, which all tell a similar story to Westar, albeit in different areas of infrastructure.

Companies are adapting to the new reality and instead of making stringent plans to benefit should the market rise, they are ensuring viability with acceptable profit should the oil price weaken.

“Companies that did not use the downturn—or prior-- to quickly and strategically plan for survival are now owned by stronger peers and likely for parts,” states Enterprise’s Des O’Kell, Senior VP. “Our consistent growth in business is due to several factors; cutting management and corporate costs. Providing ongoing service to viable clients. Continuing with our aggressive program of specialty tool/system development, we are now leaner than pre-2015. Our main challenge now is meeting the ever-growing demand.”

O’Kell also noted that the majors had already had a good move, midrange stocks were performing well so the time for the quality small players such as Enterprise was likely at hand.

The innovation and expertise of the operating companies have distinguished them as “best in class” to their blue-chip client base. Monthly trade volumes for Enterprise almost tripled in September against each of the previous two months.

Salient Points for Enterprise Investors;

- Aggressive Corporate growth plans for 2018-2019

- Enterprise Group provides specialized equipment and services in the build out of infrastructure for the energy, utility, pipeline, and transportation industries

- Strong presence across Western Canada with a concentration in Alberta and Northeastern British Columbia.

- Total assets of $84.2 million with equipment/property assets at nearly $58 million which includes a fleet of well-site modular/combo equipment, specialized heating units, tunneling equipment, and other heavy equipment pieces.

- Responding to an uncertain resource environment through proactive cost reductions and a disciplined capital deployment strategy.

Investors get a unique basket of assets with Enterprise (E: TSX). As well, proprietary technology portfolio adds a competitive advantage over other companies, even larger ones.

Bottom Line

Through aggressive management and by taking strategic sale decisions, the Company now finds itself in better shape than prior to the 2014-2015 ditch. Enterprise management looks forward to maintaining its reputation for innovation, profitability and growth.

Now would be the time for investors to take note.

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