Athabasca Oil Sands Corp (ATH.TO)

Since 2015, this has been in a very gentle downtrend. He wouldn’t buy this until it breaks out of that pattern and starts to show some actual new highs and new lows to the upside.

Has a $475 million deal pending with Murphy Oil (MUR-N) that is supposed to close this month. This is pretty much reflected in the stock price. It gives them a lot of cash in their books. The capital commitment to the project is huge. At this stage, the issue is more the price of oil. At $35 oil, the project doesn’t make economic sense to develop. If there was a $60+ oil, then it would be better.

Murphy Oil (MUR-N) threw $400 million into the Duvernay plays for this company. Also, Athabasca sold off some of their oil sands assets giving them $700 million in paper. They still have a large debt position, but have liquid assets to offset it, so are pretty close to being debt free. These are big growing assets. However, oil sands producers are high cost producers, so if oil prices were to stay at $30, they would have a lot of problems. This one seems like a reasonable shot, but not without risk.

Has avoided this stock. Has always considered it to be an over the horizon stock, i.e., the earnings were way out there somewhere. Oil sands have really taken a hit.

(Market Call Minute.) There are a few challenges for the company. They are in the Duvernay which is a gas play and there is not enough cash flow for this company.

There is evidence that oil is possibly putting in a base. This could possibly happen on the stock, but it is way too early in the game to make that prediction. He would want to see a definitive move off the base that it is forming before he got anywhere near excited.

In the last 48 hours, everything has been ripped through and getting so beaten up that he is trying to find what could come out of this. This is probably not where you want to go first. They have big construction. There is no real clarity on it. It still comes up with some question marks.

This is one where her own opinion is improving, but she is not quite there yet. Just started their Hangingstone SAGD project, which would give them some nice sustainable cash flow if there is some nice production growth from it. Has huge opportunities, but is pretty cash flow poor. With the SAGD, that will help little, but she needs to see some execution on that front. Have a lot of cash on the books because of what they got from China, but it is going to be spent to prove up the Duvernay.

The issue is the oil sands projects where they struck a deal with the Chinese. This is an area of sensitivity with the NDP government. Executives think the #1 target will be the oil sands because of its long life and the revenue they could generate. The other area of concern is their other major play, the Duvernay lands. Although it is highly prospective, it requires a lot more work and is very expensive. In this pricing environment they don’t have the cash flow to finance it effectively.

They have a good asset and have monetized part of it. With the capital spending you need in the sector there is no need to just buy it and wait for something to happen.

The deal they did with the Chinese group has now been concluded and the cash is in the bank. They have access to $1 billion of funding. The question now is what do they do next. Thinks it is a pretty good speculative buy currently.

Oil sands are the most at risk on future pricing. He has never been a fan of this. You have to be careful getting into a long-term project that takes a long time to bring to market, and if the pricing of the product, at some point, may come under pressure. We are in that spot right now

This is quite interesting. It has been decimated in the decline of oil. It went public at $18. This has a solid asset for a longer-term investor. If you like oil sands, you could buy this. Don’t trade it; just own it for the next cycle.

This is a bull market stock in the sense that they have 2 major projects. One is Hangingstone, an oil sands project, and the other is Duvernay acreage. Both are higher cost projects. He thinks you need $80-$90 oil for the Duvernay to be feasible, and at $65-$70 you could probably look at Hangingstone, so there is no need to own it currently.

This has become a bit of a show me story. They need to deliver some operational consistency. Have brought in new management and are trying to get the story going again. Producing about 6000 barrels a day of light oil. Have finally gotten most of the proceeds of their Put option from the Chinese. Feels the model is self financing until at least 2016.