It’s often tempting to cut and run following a big dump in the stock market, but it’s also a good time to take a breather and reset some priorities to take advantage of the next market cycle.

The good news is that if you’re still reading, it means you’re still in the game. Sometimes it’s easy to forget that volatility is our friend — what goes down must surely come back up again and that’s where positioning will be key to cash in on some compelling new buying opportunities that have emerged from the latest market train wreck.

Rule 1: Keep sight of the bigger picture

From an oil and gas perspective, we all know the fundamentals haven’t changed enough to justify the 25%-30% haircut we’ve seen over the past two weeks.

The world still needs oil, and Canada is going to keep producing it no matter what the futures markets do. That’s when it’s a good idea to turn off the TV and think about what’s going to happen six months to a year from now… instead of what’s on the news later tonite.

The answer? Probably not a lot, given where things sit today. Is the global economy any better than it was a week ago? Maybe not, but it certainly isn’t any worse than it was in 2008-09. It’s important to keep some perspective.

Which is all to say that there are plenty of bargains to be had, even if share prices fall into a lower trading range, presenting good opportunities to accumulate some of the names you already own and maybe broaden the portfolio with some new picks. Hopefully you kept a nice little stash of cash, because now’s the time to put it to use.

Battered service sector outlook remains bright

Not all corrections are created equal, and some sectors took it harder on the chin than others. Service stocks were already at a seasonal low even before the latest market rout — it’s just the nature of the business. The spring quarter is always characterized by down time due to weather delays and mud so thick it’ll literally swallow trucks and bulldozers (no lie) before picking up again in the drier fall months.

Yet, all the big service providers reported relatively decent Q2 numbers that beat or exceed what were admittedly low expectations, given a prolonged break-up followed by forest fires and then floods. Even so, it’s not entirely clear why expectations should be so low, given that big pressure pumpers like Calfrac (CFW-TSX) and Trican (TCW) are having a field day, so to speak, with all the new unconventional shale drilling.

But it’s a trickle-down economy that’s flowing through all sectors of the sevice industry. Precision Drilling (PD-TSX) increased its capital program for the second time in as many months to build new purpose-built shale rigs, so it’s clear that the demand for specialized equipment and services will remain strong at least through this winter.

New drilling opportunities on tap

Several new plays are on the horizon in both Canada and the US — and there’s no sign this trend is going to reverse itself anytime soon.

Ohio’s Utica shales are the latest liquids-rich rocks to be touted south of the border, with producers like Chesapeake staking out billions of dollars worth of new acreage in yet another potential Eagle Ford, or Marcellus. There’s already talk of Shell relocating petrochemical plants back to the US to take up all the liquids, which will really light a fire under what is already a hot play.

In Canada, Alberta’s Duvernay is the latest potential blockbuster, after Talisman and Encana both snapped up huge land positions and announced plans to start drilling test wells later this year.

Also, Crescent Point Energy (CPG-TSX) said this week it is plunging ahead with the Beaverhill Lake oil play — another blast from the geologic past that’s already produced two billion barrels since the 1950s, and is set to gush even more with new technology. Crescent Point increased its 2011 capital budget by 25% to $2 billion, with most of the additional monies going to the Beaverhill Lake.

If the new plays prove successful, there’s little doubt drilling levels are going to pick up in a big way, possibly returning to pre-2006 levels when some 25,000 new wells were drilled in Western Canada alone.

According to Macquarie Securities, the Duvernay may be the most prolific example yet of a widespread resource play to benefit from hydraulic fracturing. In fact, this may be an ideal time to load up on anything to do with fracking because it’s unquestionably the silver bullet that makes these plays happen.

Producers also stand to gain from Duvernay

Then there are the producers who also stand to benefit, and some offer compelling — make that irresistible — upside after the pull back.

In the same Macquarie report, the brokerage identified several names with prominent exposure to the play:

Athabasca (ATH-TSX), Daylight (DAY-TSX), Celtic (CLT-TSX), Vero (VRO-TSX), Chinook (CKE-TSX), Bellatrix (BXE-TSX) and Angle Energy (NGL-TSX) have the best exposure. On the smaller cap side, Macquarie says Delphi (DEE-TSX) has the highest leverage relative to its size, though its lands are in the unproven ‘oil window’ of the play.

As you can see the field is ripe for consolidation…

Potential acquisitors include Trilogy (TET-TSX), Sonde Resources (SOQ-TSX), Longview (LNV-TSX), Galleon (GO-TSX), Yoho (YO-TSX) and Terra (TT-TSX). As a group, these are the guys who want to take it to the next level. Last week Galleon appointed former Penn West boss Bill Andrew as its CEO, a sign things are getting competitive. Penn West pioneered the Cardium, so Andrew is a natural fit for Galleon, and intermediate producers that have struggled to regain traction over the past couple years.

Believe it or not, some big majors like Chevron are accidental tourists in this thing too, given the large historical land blocks they’ve owned since the 1950s or haven’t got around to selling off. All eyes are on Chevron’s latest Duvernay test well to see if it justifies further development. If it does, look out because this could take off fast. When did majors ever want a smaller piece of the pie?

Macquarie expects Duvernay to be a major producing play by the end of the decade but that seems to us to be conservative given all the existing infrastructure already in place. Alberta has enough capacity to move a quarter of all the oil and gas produced in North America although Macquarie notes producers will probably want to install ‘deep-cut’ processing facilities to get full value for the liquids. It may take a year or two to get moving, but it’s the right thing at the right time as far as getting it out of the ground which is what matters most right now.

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Taking steps to bulletproof your portfolio

Investors who go long tend to focus on the speculative gains that come when everything is going right. But it’s even more important to be able to play the market when it goes down even if it means being a little more defensive.

Believe it or not, there are still oil and gas stocks that provide excellent dividend yields — Enbridge (ENB-TSX) or TransCanada Corp. (TRP-TSX) fit the bill — that are less exposed to daily oil price gyrations. Sure, they’re more expensive, but blue chips tend to outperform during a downturn. In fact, they benefit from a downturn because it reduces the costs associated with big mega-projects, especially in the oil sands.

Or, risk takers can go even longer, because the speculative upside is probably even bigger today than it was two weeks ago. (When times are good, they’re really good; when they’re bad they’re better.) For momentum takers, the rollercoaster ride is what’s it’s all about. With markets bouncing 500 points on any given day, it’s all about catching the right wave.

If you think we’ve already hit bottom, then the only choice is to double down, dollar cost average, and hang on for the ride because it can only get better from here.

As always, keep at least a little cash on hand to take advantage of some bargains or to top off some of the names you already own.

Happy hunting!