Tag Archives: AVE

Energy Services Bets – Postmortem

So I made some bets on energy services company’s over the last 18-24 months or so. I thought now might be a time to do some sort of postmortem on the trades and see how they have performed. Full disclosure: recently I have added to some, sold some and continue to hold some of the company’s mentioned. See the Portfolio page for current holdings.

This post will be structured in 4 parts:

  1. Was it wise to bet on Energy Services sector relative to the overall market for the given time period? This should provide an indication of whether looking at the sector from a top down standpoint was a wise decision.
  2. Within the sector, did I pick stocks that outperformed? This should help me understand my stock picking abilities on an individual company basis for the time frame.
  3. Did the stocks that I chose outperform the market?
  4. Did the stocks chosen produce a positive total return?

Before getting started, below are the 4 companies I bought shares in. The first 3 are based in Canada, with the last one being Nasdaq listed.

Ticker Purchase Price Purchase Date Dividends Current Total Return Hold Time (yr)
psd.to $2.30 22/11/2016 $0.20 $3.10 43.5% 1.22
hwo.to $4.75 11/05/2017 $0.12 $4.01 -13.1% 0.76
ave.v $0.49 16/10/2017 $0.00 $0.53 8.2% 0.33
pfie $1.26 20/07/2017 $0.00 $2.19 73.8% 0.57

*Note the average hold time is 0.75 years (or 9 months)

Was it wise to bet on Energy Services sector relative to the overall market for the given time period?

When grading the bet on energy services vs. the overall market I chose the XIU.to (iShares S&P/TSX 60 Index Fund) and SPY (SPDR S&P 500 ETF Trust) for the overall market. For the energy services sector I chose the XEG.to (iShares S&P TSX Capped Energy Index Fund) and IYE (iShares Dow Jones US Energy Sector (ETF)) for the energy services sector.

Here’s how the bets have panned out:

Date Energy Services Market
22/11/2016 -17.6% 5.0%
11/05/2017 1.9% 2.5%
16/10/2017 -7.1% -2.4%
20/07/2017 4.5% 7.8%
Average -4.6% 3.2%

The results show that buying this sector because it was depressed may not have been the wisest strategy.

Within the sector, did I pick stocks that outperformed?

Using the same dates, how did the stocks that I chose do against their peers in the sector? This is definitely a nuanced question. Especially if you look at all the names in the ETF. Not sure it’s fair to grade a 50mil market cap Canadian company against a much larger company. Regardless, the results are below:

Date Energy Sector Stocks
22/11/2016 -17.7% 43.5%
11/05/2017 1.8% -13.1%
16/10/2017 -7.2% 8.2%
20/07/2017 4.5% 72.2%
Average -4.7% 27.7%

As you can see, on average I did better than the energy services sector during the time frame.

Did the stocks that I chose outperform the market?

When you stack up my picks against the market, you get the following results.

Date Market Dean
22/11/2016 5.0% 43.5%
11/05/2017 2.5% -13.1%
16/10/2017 -2.4% 8.2%
20/07/2017 7.9% 72.2%
Average 3.2% 27.7%

This is with the most recent pullback in the markets.

Did the stocks chosen produce a positive total return?

The results showed an average return of 28% over a 9 month time frame. No complaints here. Not sure I can really draw much of a conclusion over a 9 month period and with only 4 stocks being chosen.

Regardless, I wanted to share the results and invite any feedback readers may have.




Disclosure: See portfolio tab for current holdings.

Leave a comment

Filed under Portfolio Performance

Aveda Transportation and Energy Services $AVE.v

Another energy related name….

I own things that aren’t energy related, but the recent downturn has brought some interesting opportunities forward. The market seems to be fixated on when Tesla will be able to remove all fossil fuels from our transportation needs and when machine learning will replace everyone’s job.

In the meantime, the broader oil and gas market has stabilized and activity is returning to more normal levels. Costs have been rationalized from contractors, service company’s and producers and the cost per barrel has dropped. While the rig count has bottomed, it remains well off historic highs. Many WCSB companies are once again complaining about crew shortages going into the drilling season.

Enter Aveda

Aveda Transportation and Energy Services Inc. is a Canada-based company engaged in the transportation of products, materials, and equipment required for the exploration, development and production of petroleum resources, including rig moving, heavy haul and hot shot services, and the rental of equipment associated with oilfields operations. The Company carries on its oilfield hauling activities in Canada and the United States under the name, Aveda Transportation and Energy Services; carries on its rental operations under the name, Aveda Rentals, and carries on specialized transportation services under Aveda Heavy Haul. Its rental operations include the rental of tanks, mats, pickers, light towers, well-site shacks and other equipment necessary for oilfield operations. It has presence in the Western Canadian Sedimentary Basin and in the United States, principally in and across the states of Texas, North Dakota, Pennsylvania, Oklahoma and West Virginia.

Their operations are strongly tied to oil and gas activity, particularly in the US. Entering the recession the company was able to do over $150 mil in revenue. They have recently eclipsed that with their Q3 2017 numbers.

See the income statement charts below…

Why I like it

  1. The idea is simple (like the author)
    1. The company is a cyclical and I believe the bottom is in for this cycle.
    2. Recent mention of higher opex in Q3 is indicative of activity levels.
      1. the company believes that many of the increased costs (example lodging) will be passed onto end users as budgets refresh in 2018.
  2. Easy capital allocation decisions
    1. Aveda will use 3rd party contractors to service the customer if they are unable to get some of their equipment to the site.
      1. this represents over 30% of consolidated revenue for Aveda and is very low margin (typically 1-3% gross margin). Aveda has equipment that was previously idled during the downturn to bring back online to capture some of this lost opportunity. See chart below.
      2. It should be noted that 3rd party contractors will always play a role in Aveda’s value proposition to customers, just a smaller role moving forward.
    2. They have also identified gaps in their equipment portfolio to dedicate capital towards, this being hoisting equipment.
    3. They have a pretty levered balance sheet, which means paying off debt with cash generated by the business will help derisk the thesis and improve the valuation.
  3. Recent addition to the management team.
    1. Ronnie Witherspoon recently joined the team and my impression is that he is a strong operator. The company has used the recent downturn to capture more market share.


As with any cyclical in transition, current earnings are depressed and the valuation looks high. There are estimates of north of 20mil in EBITDA in 2018. Current market cap is just under 30mil and enterprise value is a shade over 100mil.

If the rebound materializes then I believe $0.50/share will be way too cheap for Aveda.

Other Items

Recent financing was subscribed heavily by the chairman.

AGM was held in October in Calgary and only 1 shareholder attended.




Disclosure: the author is long at time of writing.

Leave a comment

Filed under Company Analysis