This from Taipan Daily:

Key Energy Services (NYSE:KEG) is the largest rig-based well service company in the world.

You could say the main job for a company like Key is to “keep the oil & gas flowing.” Once a well is drilled, that well has to be maintained and serviced throughout its life. This is what Key does.

It’s a great business because you always have clients and you always get paid. The world is not going to give up its oil and gas addiction any time soon… and as long as we need fossil fuels, we’ll need companies like Key.

Being the largest well service company in the world, Key also has one of the most attractive client rosters in the world. The company’s client list is populated with blue-chip names like BP, ExxonMobil, ConocoPhillips, and others.

Key’s operations are primarily in the U.S., but the company is also expanding in energy-rich places like Russia and Mexico. The rising trend of NOCs – nationalized oil and gas companies – is good news for a player like Key.

While oil rich governments are happy to take over the means of production and shut out the oil majors, it’s often the case that the host country is short on technology and expertise. So they invite in savvy outsiders like Key to come service the wells (and to provide other high-margin services on the side while they’re at it, like equipment rental).

An Undisputed Market Leader

It’s also important to note that Key Energy Services is the undisputed market leader in its field. In a challenging oil and gas environment like the one we’re now in, being the market leader carries a number of advantages. For example:

Key has a higher class of customer due to its focus on top-notch service, training and equipment (and its willingness to invest in all three areas). Because Key’s customer base runs more to the “big boys” – supermajors, large independents and so on – Key is less likely than smaller competitors to take a revenue hit from reduced customer spending.

Key is able to charge a premium for its services because of its position as a market leader (and reputation for quality levels above and beyond the competition).

Key’s balance sheet is secure; the company’s long-term debt doesn’t mature until 2012, and cash levels and credit lines are healthy. This is a BIG edge in comparison to Key’s smaller competitors, many of whom are seeing their liquidity dry up.

Key Energy Services has a little bit of leverage on its balance sheet – long-term debt closes in on $600 million – but that’s forgivable because the debt has years to maturity, and as a well service company, Key’s cash flow comes in like clockwork.

Key’s Powerful Growth Rate

One of the truly unbelievable things about Key right now is the valuation. As of this writing, Key trades for 3.73 times earnings.

This is amazing because of the powerful growth rate Key has booked in recent years. The slide below is from a recent Key presentation at the 2008 Bank of America Energy Conference.

As the chart shows, Key has kept up a better than 15% compound annual growth rate (CAGR) for the past four to five years. If that pace continues, revenues will double in the next five years. And even if Key’s growth rate were to fall by half, revenues would still double in a decade. Higher revenues mean fatter profit margins for a well service company like Key, by way of cost efficiencies and greater operating leverage.

And yet, in spite of all that, Key now trades for three to five times earnings due to the panic. Three to five times earnings!

That means somebody with a big enough chunk of cash (or the right financing) could hypothetically buy this healthy, vital, steadily growing, blue-chip-plated business for a song… and have the earnings stream pay for their whole purchase in three to five years!

For a rock-solid business with steady cash flow and blue-chip customers, that kind of value is unheard of.

The only reason we are seeing opportunities like this is because small investors are panicked and the big institutions are tapped out. All the asset managers who would normally be backing up the truck for companies like Key have instead been forced into a defensive crouch.

These types of bargains won’t last forever. When sanity returns to markets and oil resumes its long-term rising uptrend (as it certainly will do), Key could again become a $20 stock. That would be a more than 300% gain from today’s levels.

Action to take: Buy Key Energy Services (NYSE:KEG) up to $6 per share.

PS. This is the first of a five-part free report “Five Stocks To Grow Rich On” from the Taipan Publishing Group. Follow the link below to find out more.

Source: A Deep Well Of Profits

The farms are well tended, and the agricultural productivity is awe inspiring. There are wind farms up, and going up, on many a hillside. Power lines crisscross the landscape. There are dams and impoundments on many of the rivers. And the trains of the Canadian Pacific Railway are rolling in both directions, hauling grain, ag products, coal, phosphate and so much else.

North Dakota Oil Rush

In Saskatchewan and North Dakota, the big story is the Bakken Shale formation. I’ve seen over a dozen working rigs and dozens of brand-new oil wells. The pump jacks are still in the break-in period. Heck, the paint on some of them is still drying.

[Stories like this are also popping up.]

It’s a mixture of old and new. There are old farm buildings, and all of the traditional agricultural effort of the region. Right next to the buildings, you might see a new oil well. And in the distance, there might be a wind farm going up.

The highways are crowded with working trucks. Trucks are hauling pipe and equipment to well sites. The motels are crowded with oil field workers. In some small towns, real estate prices and rents are actually rising. People around here have seen nothing like it in many years.

Or if the trucks are not hauling drilling equipment, they are hauling agricultural products. Or there is farm equipment driving down the roads from one area to another. It’s all just plain busy.

At the customs station at Noonan, N.D., the U.S. agent told me that the traffic in energy-related commerce is just burning up the roads in both directions. There are simply not enough skilled workers. Some companies are poaching staff from others.

At the same time, I can almost feel the slowdown that is afflicting the North American energy sector. Costs for everything have risen too far, too fast. Now the whole sector is starting to feel the pinch.

Couple the rising costs with a serious difficulty in obtaining financing. The banks have cut back on lending, even to the best of energy projects. It’s not for lack of investment merit of the energy projects. It’s because the banks are struggling with their own solvency.

So the mess in the financial sector has infected the rest of the economy. Just when the U.S. and Canada need to be investing in energy projects, the financial system is letting us down.

It reminds me of what I heard from an old rancher a long time ago: “Out here in the prairies, we farmers work hard and raise the cows. Back East on Wall Street, they milk us farmers.”

I’ll be out in the field for the next few days, looking at other points of energy and geological interest. All of this travel helps my perspective in coming up with better advice for you, dear reader.

Until we meet again…

Byron W. King

Source: North Dakota Oil Is “Burning Up The Roads”