Saxon Energy Services: Profiting from oil

Saxon Energy Services (TSE:SES)
Calgary, Alberta
http://www.saxonservices.com/

52-week low / high: $3.85 / $6.50
Shares Outstanding: 8.3 million
Market Capitalization: $473.13 million

Saxon Energy Services (TSE:SES) is an oilfield services company that has a growing contract drilling and well servicing business in North and South America. Consider this: in 2005 the company had just nine rigs in one country – Ecuador. At the end of 2007, it had a rig fleet of 58, spread out across seven countries.

It is perhaps not surprising that revenues for the full year 2007 increased 42.11% to a record $242.3 million from $170.5 million in 2006. Earnings also hit a record, climbing to $26.8 million, or $0.32 per share, compared with a profit of $15.7 million, or $0.19 per share, in 2006. Analyst estimates were not available.

The numbers for the fourth quarter ended Dec. 31, 2007, the most recent three-month period for which data is available, show a fourteenth consecutive quarterly increase in revenue.

Significantly, Saxon Energy is seeing revenue grow in both South and North America. In South America, where the company has operations in Colombia, Peru, Ecuador and Venezuela, revenue for the fourth quarter of 2007 jumped 37% on a year-over-year basis, with rigs fully utilized in all countries except Ecuador.

In North America, Saxon Energy increased its fourth-quarter revenue 27% due to the deployment of three new rigs in Mexico and six in the United States over the course of 2007. The result more than offset a decline in operating days in Canada due to continuing soft market conditions.

The company projects that utilization of its fleet of drilling and workover rigs will remain strong in 2008.

“While the Canadian market has been and should remain challenging for 2008, and Ecuador has some uncertainties, [our] broader geographical presence has more than compensated and will provide a platform for further expansion,” Saxon Energy said in a statement.

Specifically, the company stated in its 2007 corporate presentation that the Canadian market downturn presents acquisition opportunities. In June 2006, Saxon Energy paid $61.5 million to purchase all the assets, which included seven drilling rigs, of Kinnell Drilling Ltd. and Kinnell Resource Consultants Ltd.

Looking ahead, the company is mulling an expansion into Brazil and Argentina, as well as North Africa and countries of the former Soviet Union.

Note: Saxon Energy Services (TSE:SES) is on the "Watch List" of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, Saxon displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.

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