September 17, 2018 - 8:53 AM EDT
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Enterprise Group (TSX:E): Time to Review and Renew

As we approach the time in the far and farther north where ice on a beard or scarf mimics a work of art, companies are gearing up for what is being heralded as a very ugly winter. Ugly is relative as you will see. Whether you subscribe to official weather services or the Farmer’s Almanac; don’t lick any exposed metal. You may be there a while as winter 2018-2019 is going to be, well, ugly.

For oil service companies, the ugly weather is good. The constituents of the sector sell critical heat, power and accommodation solutions for the farm and mine and heat and expertise.

"Ironically, Enterprise's share price is tied to the oil price," states Leonard Jaroszuk, CEO and President. "The reality is that our business of providing specialized industrial rental solutions and technologies should insulate us against that volatility. As well, the fact that we design and build specialty equipment for our clients—15 patents in place with more coming—means that we can be immediately responsive and relevant to address Government customers' unique needs, whether resource-centric or straight public infrastructure." (16.08.17)

Throughout the last year, which remained challenging for oil and oil service companies, Enterprise saw its share price hit a stand-up double moving from C$0.30 to C$0.63 January to June 2018.

The Company also hit some fantastic milestones during the same period:

  • Debt free
  • Raised asset value to C$1.01
  • Shares trading at $0.40
  • $40 million in funds available for growth (developmental, organic, acquisition)
  • Further
  • refinement of its proprietary StarChain technology.

When Enterprise Group acquired Westar Oilfield Rentals in 2014, one of the assets the company was working on was a business management software, known today as ‘STAR.' Enterprise continued to fund and upgrade the project and found itself with a proprietary asset that is critical to the profitability and cost mitigation of all of its subsidiaries.

  • STAR proprietary platform for future development and refinement
  • Task and monitoring capabilities save measurable personnel costs
  • Allows management to plan to deploy company-wide through 3 subs and future acquisitions
  • One of the Company's impressive value propositions over competitors
  • No plans to license; to remain a corporate asset
  • Not aware of any competitive software

The software tracks assets, which in itself cuts costs, utilizing the location and site ID put directly on the invoice. The system always knows where the asset is, and fleet managers confirm that on delivery.

Why Own Enterprise? Salient Points:

• Refocus to grow the lucrative industrial/resource rental business
• Cash flow positive since the beginning of 2015 downturn
• The profitable trend seems intact last three quarters
• Trades at less than half book value (C$1.01)
• Development of StarChain, a revolutionary monitoring and asset management software
• 15 proprietary patents for specialized equipment and processes
• Cost effective custom solutions
• Significant acquisition and capital expenditure
• Significant domestic growth plans


Last year the Company carefully evolved into a focused leader in the industrial rental, tracking software technology development; increasing its patent portfolio to 15.

Enterprise is not just some building with a bunch of old equipment for rent. The material is cutting edge, including a unique series of combo products (combo light/generator) and is keenly focused on the bottom line. The Company is going into, historically its biggest quarters and will, at the end of the year, will change again.

In the first half of 2018, management's efforts more than doubled the stock price. Given the state and plans of the Company and the outlook for large LNG and related contracts, Enterprise may look better now at C$0.40 than it did last year at C$0.30.

Speaking to Joel Bardwell, in charge of Technical Development at Enterprise sub-Hart Oil says that this year feels a lot like 2014 which was just before the energy sector meltdown. That could help with the fact that some snow is already swirling, has the potential to make this a great business year for Enterprise and its subs.

There's another exciting development in the sector. As oil prices rise, the devastation wrought on the oil services companies, particularly small ones appear to be reversing.

From Revenge Of The Oil Services Sector In 2018 - Forbes

Consolidation is rampant across the fragmented sector as firms scramble to keep the lights on and keep drilling.

As this rationalization plays out in 2018, it should become clear that the current producer-contractor relationship is not sustainable. The state of oversupply in the oil-services sector won't last forever. Labor is already tight, and struggling contractors can't afford to hire highly-trained personnel and re-equip without renegotiating their fees. For three years they've been unable to invest because of low oil prices. Producers seeking to ramp up will find that contractor capacity is either insufficient or altogether absent to meet rising demand. The chickens are coming home to roost.

While that quote keys on US companies, the sector is global. Oil services companies are still pretty much at the pricing mercy of their customers, not to mention their peers.

If Enterprise finds itself with all of its equipment deployed, an earlier than normal winter and rising demand, one thing is sure; prices will increase, and the boot will be on the other foot.

The oil service companies have the equipment, expertise, heat and heat systems to keep drills turning and pipelines growing.

Take those away, and it gets dodgy: 'Pay or Don't Play.'

So, what of Enterprise?

As we told you last year: Buy some. Find out.

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Disclaimer: Nothing in this article should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this article is not provided to any individual with a view toward their individual circumstances. Baystreet.ca has been paid a fee of one thousand eight hundred dollars for Enterprise Group advertising. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this article as the basis for any investment decision. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in this article is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.


Source: Livemoney (September 17, 2018 - 8:53 AM EDT)

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