Advantage Oil & Gas Ltd (AAV.TO)

Oil outlook Oil is tricky. It's a broken market that may or may not be coming back. Some have returned to gold too early. Over the decades, oil has risen and fallen largely due to spin (i.e. Peak Oil). He picks up a little oil when the stocks get cheap. Oil is a messy space. Of the juniors, WCP is his favourite. SU-T is the senior one he likes. But he really likes Advantage (but they deal in natural gas, not oil).

Energy is setting up for its seasonal rally into October. The technical chart is demonstrating a bullish channel. He would really like to see a rally back above $4.90 for a signal it is really going to move. In the meantime there is resistance near $4.25, so expect some choppiness.

Classic example of a Canadian company that has gas trapped on Alberta. Well ran company. Good asset base. What will trigger interest on the stock is some of the changes from the take-away capacity. Until there is a solution, it is more a wait and see. As the structural reform moves, this would be one of the first stocks to look at.

(A Top Pick Jan 3/17, Down 51%) They have not done anything wrong except to be a natural gas producer. If you have a long enough horizon and want to stick in at what looks like the bottom you will be okay. There is not much downside from here.

He really likes this company. More of a manufacturing company than an oil/gas company. They should be generating gobs of free cash flow. The challenge in Canada is that there are ongoing issues around pipeline availability and egress take away solutions, and we have seen that manifest itself in the past quarter.

He doesn’t own a single Canadian oil/gas producer. As a country, we send 99% of our oil and gas volumes to the US. At the same time, Canada is growing production in excess of pipeline capacity, so because of that, both oil and gas are selling at a discount. Capital has left our market and is not coming back anytime soon. There are better names than this in the US.

This follows the same trend as natural gas, and is pulling back a little. You are probably looking at $8 as a support level. If it goes below that, think about exiting the trade.

It is a gas company. She thinks Gas is bottoming, even if she is not bullish on it. This is one of the best ways to get gas exposure. They have a well laid out plan. They have take-away capacity. She can see growth for the next 3 years. (Analysts’ target: $11.50).

Exposed to gas in Western Canada. A very well-run company. They are sitting on a massive resource play and are developing it in a manner that should be developed in terms of building it in stages. Not particularly expensive. They are going to do well even in a low natural gas environment. He is definitely looking at adding this.

This just continues to get better and better and better. A low cost natural gas producer. They have been doing a great job at really improving production efficiencies, as well as improving the overall productivity of their wells. He struggles with the valuation and the relative growth over the next couple of years. Prefers others.

One of the very low cost gas producers. Gas is very swingy, and is down a fair bit today, and the stock is down which is a really good opportunity. Trading at 8X Cash Flow and has a really good balance sheet with less than 1X debt to cash flow. Under $9 is a great entry point. (Analysts’ price target is $11.86.)

(Market Call Minute.) Recently added this to his portfolio. He really likes it. Low cost gas. A great balance sheet. Internally funded growth.

A small-cap with 25,000 barrels a year equivalent production. He does like it and thinks you could buy it at this point.

He considers this one of the premier gas companies in Western Canada. They have done a great job building a very good resource space. As a result, they have been able to add on production at a fairly easy clip over the last 3-4 years. It has been so hot this year, that we are seeing withdrawals much earlier than usual. It is expected to see an early natural gas cycle this year, and this will be a big beneficiary of that.