CALGARY, Alta. - The companies behind the high-tech rock fracturing techniques that have revolutionized the oil and gas industry have seen their shares stall after eye-popping gains in 2010.
They may just be taking a breather.
There are three Canadian companies listed on the Toronto Stock Exchange that offer the multistage fracturing that has made tapping vast shale reserves economic for energy companies and boosted production from conventional oil reserves for the first time in a decade.
Trican Well Service Ltd (TCW.TO), Calfrac Well Services Ltd >CFW.TO< and Canyon Services Group Inc (FRC.TO) are in the business of providing the fracturing - or fracking - services that oil companies are increasingly relying on to tap new reserves.
Shares in all three handily beat the 14 per cent rise in the Toronto Stock Exchange's benchmark index last year. Trican, the largest operator, rose 45 per cent, while Calfrac was up 52 per cent and Canyon, the smallest of the three, saw its share quadruple.
But 2011 hasn't been quite as kind. Though they've outperformed a year-to-date rise in the TSX of less than one per cent, the three pressure pumpers, as they're known in the oil and gas industry, have underperformed other companies in the oil and gas drilling sector that compete for investor dollars.
So far this year, Trican is up 9.2 per cent, while Calfrac has posted a 2.6 per cent gain. Canyon, whose C$927 million ($946 million) market capitalization is just 28 per cent of Trican's, has offered the greatest reward, with a 34 per cent rise.
But those gains are looking paltry next to the drilling companies. Shares in Precision Drilling Corp. (PD.TO) and smaller rival Trinidad Drilling Ltd. (TDG.TO) are up by more than half this year as the industry recovers from the recession and their energy industry customers rush to boost oil production while crude prices are high.
"Year to date, the pumpers haven't done all that well while the drillers have outperformed," said Kevin Lo, an analyst with FirstEnergy Capital.
The performance of the pressure-pumpers' shares relative to the drillers isn't because the environment has turned against them. Their services are in high demand and the growth in earnings - Trican's first quarter profit rose 48 per cent - isn't expected to abate.
Analysts say the fracking companies' stock growth began to falter late in 2010 on concerns from U.S. investors that the industry there would soon have too much capacity.
But demand for fracturing services in Canada is strong and may get stronger. Earlier this week the Canadian Association of Oilwell Drilling Contractors raised its estimate for the number of wells drilled in Canada this year by 11 per cent to 13,128.
"As long as we are seeing oil prices in the $85 to $100 a barrel range there's going to be demand for these resources," said John Tasdemir, an analyst with Canaccord Genuity.
