Opinions
David Burrows
Arc Resources Ltd
ARX-T
TOP PICK
Jun 11, 2025
Stock price when the opinion was issued
You might be interested:
He likes the idea of adding on weakness, that's what he's been doing. He uses a lot of optionality in his portfolios. So he's writing puts in the energy sector to acquire companies; if they don't go to those prices, he just earns the income. He's perfectly happy with a strategy like that at this point.
If we get a harder economic landing at some point, then oil has some more downside. The US outlook for crude oil demand was just downgraded. We're in a trading range, and he's accumulating into weakness.
Attachie, a growth project, has superb economics. They have about 4 or 5 more buried in their portfolio. Exposure to condensates, but it's really a gas play. Outlook for Canadian nat gas is meaningfully improving as LNG Canada comes on. (This is as long as producers show discipline and don't flood the market.) Conservative management, which is what you want in this climate.
Stands out as a really good value proposition, which he thinks will attract US investors when they realize there's nothing left to buy in the USA. Believes embedded resource value will be realized by somebody down the road. Yield is 2.96%.
Is a long-term hold. It's focused on gas and natural gas, which boasts great fundamentals. Arc is the top nat gas developer in Canada and owns a lot of its infrastructure, so are vertically integrated. The 2.93% dividend and cash flow are growing. Buy below $25, if you can.
(Analysts’ price target is $32.42)ARX has been showing nice momentum recently, and it trades at a decent valuation of 11X forward earnings. Its recent acquisition of Montney assets in Kakwa from Strathcona Resources is a significant strategic move, and it is expected to enhance ARX's production capacity and extend its inventory duration. To finance this acquisition, it plans to use a combination of a new $1.0B two-year term loan and existing credit facilities. After the acquisition, it is expected to have a net debt around $2.8B or more. We like the acquisition and for a long-term position, we would be comfortable buying here.
Unlock Premium - Try 5i Free
He's sort of like an inventory manager with the 20-30 stocks in client portfolios. His job is to own inventory that people care about today. He focuses on themes that he thinks are in the process of being revalued favourably, and perhaps in sectors that are less owned but showing something changing for the better. He's looking for the best company he can find, with no fundamental risks if it doesn't happen immediately, but where the multiple will start to expand if people look more closely at the group.
(Analysts’ price target is $34.04)Leading Montney operator and low-price producer for natural gas. Great balance sheet, especially important because he thinks financing costs are going to keep rising. Great 3-year dividend growth of over 35%. Catalyst is the opening up of the LNG markets globally. Another positive change is the ramping up of Attachie over the next 4 years. Demand for power will fuel demand for nat gas. Rising price for nat gas + increased multiple could = significantly higher share price. Yield is 2.58%.