'Man-camps' Emerge Strong Picks on LNG Potential

Oilfield camp providers banking on the long-term prospects of liquid natural gas export terminals in British Columbia are emerging as hot stock picks as their shares slump.

Shares of Civeo Corp, Horizon North Logistics Inc and Black Diamond Group Ltd, which provide temporary lodging - "man camps" - for oilmen, have tanked in the past two months, as a sharp drop in crude prices compounds short-term problems at the companies.

This offers investors an attractive long-term opportunity, as more than a dozen Canadian LNG terminals are expected to clear regulatory and tax hurdles in a few years, setting up the camp providers for potential windfalls.

Canada's National Energy Board has so far approved nine LNG export projects in British Columbia and more companies are negotiating with regulators.

Analysts expect this will fuel demand for an additional 40,000 beds over the next four to five years.

"Our belief is that we will see at least one, likely two, LNG projects proceed. In that eventuality, these companies all the way (through) 2016, 2017 and 2018 are likely going to be fairly busy," Raymond James analyst Andrew Bradford said.

Black Diamond shares, which ended Friday at C$19.13, should be trading nearly 63 percent higher, according to StarMine's Intrinsic Valuation model, which projects how much a stock should be worth based on expected earnings growth over the next five years.

Horizon North should be trading at more than double its Friday close of C$3.23 a share.

"Bid log remains very strong, supported by ongoing oilsands development, unconventional (oil and gas) activity, infrastructure projects, and LNG development," Black Diamond Chief Executive Trevor Haynes told Reuters.

The companies, however, are in a rough patch now as several oilsands projects in Canada are being deferred because of regulatory problems and cost overruns, affecting demand for their camps.

The oilsands projects also seem less viable now as a 32 percent slump in Brent crude futures since June pushes returns from these projects close to the break-even point.

These worries are not scaring away investors such as Greenlight Capital Inc.

The hedge fund has raised its stake in Civeo, which was spun off from Oil States International earlier this year, to nearly 10 percent from 5.8 percent, and Fidelity Investments has acquired an 11 percent stake.

Franklin Resources Inc has raised its stake in Horizon North to 18.69 percent from 12.60 percent in August.

(Additional reporting by Shounak Dasgupta in Bangalore; Editing by Feroze Jamal)