High Arctic Energy Services Inc. may need to retest support at $3.75

Oct 6th, 2014 – 1 Comment

The dividend yield of 4.09% may provide an inducement to hold the shares but you need to take into account the trend that is in place.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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HWO LOGO

Hi Lou,

Long-time listener and reader, first time writer.

I would appreciate your comments on High Arctic Energy Services. It has a had a great run over the last several years, but recently did a share offering to raise $25MM (was oversubscribed, but I despise dilution) to complete $40MM in capital expenditures on two new drilling rigs – increasing their rig count to 5. One of the drilling rigs has been leased, but the other has not yet found a customer. The company operates out of Papua New Guinea to assist large oil co’s (Oil Search International & Exxon Mobil) in producing NG feed stock for the new $20B LNG terminal that is just about to be completed.

Thanks for your input,

Rob

 

Hey Rob

 

Thanks for writing and for your support over these many years. High Arctic Energy Services Inc. (HWO TSX) provides specialized technical oilfield services including drilling, snubbing, N2, and equipment rentals. As you mentioned the company has operations in Papua New Guinea which provides heli- portable drill rigs and other gear for use in remote areas or those with limited access. The greater portion of corporate revenue is generated in Papua New Guinea. In the first six-months of 2014 operations in Papua New Guinea resulted in revenue of $61.3 million while operations in Canada rang up $23 million in revenue.

An inspection of the charts will help identify the trend, support, and resistance that are evident regarding the trading in HWO.

 

 

HWO

The three-year chart details the uptrend line that started in July of 2013 and was breached eleven months later in June of 2014. Since then the shares have been labouring under a downtrend that has taken the price down from a 52-week high of $5.95 to $4.36. The MACD and the RSI generated sell signals in April and August of 2014 that would have helped the astute investor preserve their hard earned capital. The break below the thin ledge of support at $4.50 has to call into question if we could see a retest of another thin ledge of support near $4.25 or worse yet $3.75 where is there evidence of a past buyer interest.

 

 

 

 

 

 

HWO2

The six-month chart puts a spotlight on the downtrend that has formed and the break below the 50 and 200-day moving averages. Volume has thinned out with only six of the last thirty days seeing better than average volume. A stock needs increased volume to drive the price higher and right now the buyers are on the sidelines. From the evidence at hand there are no indications that we can expect a trend reversal in the short term.

The next flex point on the calendar is the release of Q3 results in November. The dividend yield of 4.09% may provide an inducement to hold the shares but you need to take into account the trend that is in place.

Make it a profitable day and happy capitalism!

 

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