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Leader Energy Services research and analysis

Contributed by eResearch

Leader Energy Services Ltd. has published Q4/2011 (ended December 31, 2011) financial guidance along with its 2012 capital spending budget.

The Company expects revenue for the quarter to exceed $11.0 million, an increase of about 25% over the corresponding period of 2010, and about 10% higher than in Q3/2011. The higher revenue is likely due to increased levels of horizontal drilling activity in the WCSB, where Leader is a niche service company almost exclusively focused on this area.

Leader’s Board of Directors has approved an initial capital budget of $4.5 million for 2012, to be financed through operating cash flow. Most of the funds will be used to expand the Company’s deep-coiled tubing and fluid pumping capacity, with deliveries expected in H2/2012.

THE COMPANY

Leader Energy Services Ltd. is based in Alberta and provides well-stimulation services across the WCSB. The Company has three core services lines:

1. Coiled Tubing: a highly versatile product used for a broad range of critical functions during the completion stage of drilling an oil or gas well;

2. Nitrogen Services: used in numerous well-stimulation and workover operations; and

3. Fluid Pumping Services: focused on delivering drilling fluids downhole in conjunction with coiled tubing applications.

Smaller than most of its competitors, Leader Energy has focused on securing a niche position within the industry by pursuing a strategy that combines quick response time with proprietary innovation in order to meet the specialty needs of clients engaged in technically complex drilling activities. Delivering these services rests on a combination of competencies, including operational positioning close to development areas, capabilities for in-house development, and access to a seasoned and technically proficient labour force.

RECOMMENDATION AND TARGET PRICE

We are maintaining our Speculative Buy Recommendation along with our 12-month Target Price of $1.40 per share.

eResearch Analysts:
Eugene Bukoveczky, MBA,CFA
Bob Weir, B.Sc., B. Comm., CFA