(BE) Today, we are speaking with Desmond O'Kell, senior VP and director of Enterprise Group Inc… Congratulations – I took a peek at the latest financials, and they are quite impressive. Do you mind providing a summary for our audience?
(DO) Yeah, it was a nice quarter. Obviously, the energy sector here in Canada that we service is at a good pace. It's a nice change. Just short of a couple of years ago, we finished a sevenyear downturn. So it's been markedly better over the last couple of years as evidenced by our quarterly financials. This Q1 was a combination of a number of things taking place. We have some innovative equipment offerings that we brought to the market here in the last three years. It is developing some terrific momentum. We have seen two consecutive years now where our clients have been increasing their cap-ex (capital expenditure) budgets for development in the field. The more they do in the field, the more they are looking for our equipment to be on their sites.
So we had a terrific quarter. It was markedly up in revenues, margins increased, and, of course, we are publicly traded, so the measuring stick is earnings – and the earnings were terrific. We are looking forward to continuing that trend. The energy sector in Canada has been improving from about Q3 of 2021 to where we are today. If you are tracking our financials quarterly from that point, you will see it is quite the trajectory we are on.
(BE) To what do you attribute that uptake?
(DO) Well, after 2014, we had the situation where Saudi Arabia really stepped on the gas pedal and purposefully crashed prices worldwide. Those commodity prices really never repaired themselves till about two years ago. So what's been happening is that during that seven-year downturn, our clients, the producers and service providers – we had to right-size our businesses over that down time.
Anybody who has made it out the other end is a finely tuned instrument with respect to expenditures and operating efficiency. Then when our producers start working with better commodity prices, all of a sudden their activity levels increase, they are spending more on cap-ex, and developing their field projects. Of course, when you mix higher activity levels and we are able to increase our pricing a bit, the result is higher revenues and terrific margins.
(BE) A lot of companies feel that their stock is undervalued, but I really believe that to be the case with Enterprise Group. Even just looking at the value of your assets suggests that your group of four companies should have a much higher share price. Can you just speak to that?
(DO) Yeah, it's a combination of things. Our clients, the producers, have seen recognition in the market. Tourmaline, Canadian Natural Resources, ConocoPhillips, Shell – they have all seen their share prices accelerate over the last two years as those commodity prices improved. And their earnings were rich for the last couple of years. The services always lag – the producers get the recognition first, and the services follow. We are small-cap services, so we know the recognition will come. We think this year is going to be an inflection point for services.
But there is no doubt. I mean, if you read our financial statements and our management discussion analysis document, we outline that our equipment assets – our whole positive assets – are worth about 75 cents a share. We are currently trading in the mid $.40s at the moment, so we are still a deep discount to true value. And that's without any consideration for what we built up, which is a terrific business. We are leading edge on a number of different fronts in the class of equipment that we bring to clients. So we love our positioning.