There was a wee-bit of a development in the Canadian energy space earlier this week and, in my opinion, the market hasn't given it nearly the attention it deserves.
In fact, it hasn't given it any attention.
I’m, of course, talking about the announced $40-billion LNG Canada project that was announced Monday evening. Not to mention – but I will – the $6 billion pipeline build by TransCanada Corporation (TO:TRP) to piggy-back on this development.
I don’t care who you are, $40 billion is a big deal.
The thing is, the Canadian energy sector is just about the most unloved sector in our entire market. Well, maybe it and gold.
With all eyes diverted elsewhere, even though its implications are massive, this LNG Canada thing has been schluffed off entirely.
Ignorance, in this case, however, is not bliss.
This is a major-league opportunity, even though it’s likely to take seven or eight years to play out.
That said, there is a collection of companies that is set to benefit right from the early stages of this project all the way through.
More importantly, this is but one project. And with it getting the go-ahead, more could well fall in behind it. Meaning, what appears to be a $40-billion situation could well balloon from here.
These two companies stand to make windfall profits under this kind of scenario.
Even as it is though, we foresee significant benefit from the LNG Canada project alone.
And nobody cares!
That means that you should. So, let’s meet these companies.
Horizon North Logistics Inc (TO:HNL): Horizon North provides workforce accommodations, generally in remote places. And wouldn’t you know it, Horizon owns one of two camps-permitted plots of land in Kitimat. Ground zero for LNG Canada’s facility. This project is going to call for a whole bunch of what Horizon North has to offer.
There was a time when this company (and the next one) were riding rather high on the Canadian energy industry. The oil sands were booming and work camps were needed all over the place. This demand, however, disappeared when the price of oil collapsed.
In our opinion, this LNG situation has oil sands-like potential. Which means, a return to the glory days for Horizon North is not a stretch. And again, these camps are essentially required as soon as construction begins. So unlike, say, a gas production company, which won’t see demand from the project until completion, a company like this is set to benefit in the very near future and for the project’s entire duration.
Black Diamond Group Limited (TO:BDI): As alluded to, a very similar scenario covers Black Diamond, which is another provider of temporary workforce accommodation. And is another that was left holding the bag when the oil sands circus left town.
The thing about Black Diamond, though, is that it’s really diversified the business through acquisition in recent years. Which means, in the face of adversity, it’s probably made itself into a better company. Reducing its more resource-oriented focus and adding a modular space component that’s more focused on things like permanent and temporary buildings for health-care facilities, school portables and storage containers.
The legacy business, however, remains well intact and while the company has become more diverse, it’s not unreasonable to believe a return to the glory days of its legacy business is on the horizon as demand for its offering is set to spike on this LNG development.
Iain Butler
CFA Chief Investment Advisor
Motley Fool Canada
Disclosure: Iain Butler owns shares of Black Diamond Group.