James Keller is an analyst with Thermopolis Partners, a hedge fund specializing in commodity stocks, and is located in Jackson Hole Wyoming. Thermopolis Partners is an infrequent contributor to Oil and Gas Investments Bulletin.

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.

Trinidad Drilling Ltd.'s (TDGCF.PK) decision to buy back a percentage of its convertible debentures should give shareholders a much needed boost but any reduction in company debt from the plan will be minimal if at all.

That's the prognosis from analysts following the announcement Monday that Trinidad will acquire and cancel up to 10% or C$35.4-million of its C$354-million face-value convertible debenture issue.

Trinidad Drilling Ltd.'s (TDGCF.PK) high debt load has been a focus of concern for investors over the past few weeks, but now that solid fourth quarter results suggest the company is is holding its own, some analysts are confident the debt won't derail Trinidad as it navigates through the economic downturn.

On Thursday, Trinidad reported a year-over-year increase in profit, thanks to an expansion of rigs and higher utilization rates. For the fourth quarter, net earnings were C$21.8-million, or C$.23 per share, versus C$17.9-million, or C$.21 a share, a year earlier.

Trinidad Drilling Ltd. (TDGCF.PK) was hit hard by the global economic crisis in 2008, falling more than 58% from start to finish, but over the past few weeks, with oil on a rally due to the Gaza Strip conflict, the stock is showing show signs of life. Including 10% jump on Tuesday morning, the stock has climbed more than 33% since Dec. 24, 2008.

For Raymond James analyst Andrew Bradford, the rebound in Trinidad shares is overdue, particularly when considering the company's fundamentals in relation to its oilfield services peers.

As 2008 comes to an end, investors are turning their sites on 2009, hoping the new year will erase the worst 12 months on equity markets in recent memory.

To that end, Raymond James has published their best picks for 2009, in what is surely the first of many "best of" lists that Canada's brokerage houses will provide to clients in the next few weeks.

Canaccord Adams has unveiled its top stock market picks for the current volatile market conditions. All firms have fallen more than 50% from their peak, offer good growth potential, have at least two years of cash funding availability on hand, have or are about to have a positive cash flow and are large and liquid.

Among the top picks is EnCana Corp. (ECA), Cannacord says is positioned in several emerging natural gas resource plays that will support long-term growth. Others include Fairborne Energy (FAIRF.PK), which is able to fund its capital program and is expecting growth from emerging resource plays; and Suncor Energy (SU), which is the most experienced oilsands operator and based on current commodity prices, is expected to generate C$5-billion in cash flow in 2009. Canaccord say Potash Corp. (POT), which is down 65% from its peak in mid June, is another good buy because it is a solid company and does not require funding.

It is pretty simple math: If North America’s oil and gas exploration and production companies pullback on spending as the economy and energy prices go splat, the companies that help them explore and produce are going to get nailed. But sorting out which service companies will be hit hardest isn’t as straight forward.

But before we get to that, a little mood lighting is in order. UBS Securities Inc. has changed its mind on how much cash North America’s oil and gas players are going to spend in 2009.  It now guesstimates a 2% decrease in spending, down from an earlier forecast of a 14% increase. This assumes $105 per barrel of oil, $8.50/Mcfe gas, with credit issues easing “somewhat.” Canada’s 2009 rig count in this scenario will average 398.

More and more attention these days is being focused on unconventional resources plays, such as the Montney and Horn River in British Columbia, the Bakken in Saskatchewan and the Utica in Quebec. Advances in completion technology and horizontal drilling techniques are making it easier and more profitable for operators to exploit these shale formations.

In recent weeks, EnCana Corp. (ECA) and Talisman Energy Inc. (TLM) have noted growing commitments to their unconventional assets and on Monday, Shell Canada Ltd. [SHL.BE] said it had entered into an agreement to buy Montney-rich Duvernay Oil Corp. (DVNLF.PK) for C$5.9-billion.

Blackmont Capital analyst Roy Ma increased his price target on Trinidad Drilling Ltd. (TDGCF.PK) after the company announced it will construct seven additional drill rigs in 2008 and 2009.

The seven new rigs are part of contracts signed with two major North American oil and gas exploration and production companies operating at the Haynesville shale development in Louisiana, one of the key emerging unconventional gas plays in the U.S. 

Activity levels in the oil sands are poised for an earlier-than-expected recovery putting to an end almost two years of weakness in the oilfield services sector, says CIBC World Markets analyst Jeff Fetterly.

In a note to clients he wrote:

While the magnitude and length of a recovery remain uncertain, we believe the outlook for the oilfield services sector has improved significantly in recent months.