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The rising price of oil and a recovering commodities market has UBS excited about a return to investments in the Canadian oilfields.

"Since establishing a bottom in early March our coverage list has risen 113%, defying market fundamentals as investors look beyond the cycle and position for the rebound," UBS analyst Chad Friess said in a note Thursday.

Mr. Friess expects the recovery to get into full swing in 2010, and valuations will continue to grow in anticipation.

With that in mind, he's recommending several oilfield companies with an eye towards substantial upside and acceptable downside.

Trinidad Drilling (OTCPK:TDGCF)(TSE:TDG) and Precision Drilling Trust (PDS) top the list, but are riskier due to their leveraged balance sheets. If the recovery is delayed, debt levels for these companies could become a concern for investors.

Trinidad in particular holds a compelling risk-return profile, with Mr. Friess seeing a potential 158% price target increase to C$14 at peak upside activity. He has raised the company's rating to Buy from Neutral and bumped his 12-month price target to C$7 from C$5.50.

Elsewhere, Ensign Energy Services (OTCPK:ESVIF) is considered the "lowest-risk play" due to its clean balance sheet and low fixed cost structure, Mr. Friess said.

And while Savanna Energy Services (OTC:SVGYF) has substantial upside, its focus on the shallow drilling market puts it in a "poor competitive position" in a weaker-for-longer market, he said.

Overall, UBS has increased its 12-month target prices for all companies in the sector. Precision goes to C$9 from C$7.50 on a Buy, while Ensign gets a bump to C$16 from C$18 on Neutral. Savanna, also Neutral, gets a target price move to C$6.50 from C$6.25.

Source: Canadian Oilfields Set for a Rebound - UBS