Athabasca Oil Sands Corp (ATH.TO)

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.

Has been a tragic story even before the oil price went down. They have relatively high cost plays. It looks like a stranded asset. He would prefer a producing asset that could pay you a dividend.

This is one of those companies that really got squeezed by the commodity fall. Unfortunately gas prices have worked against them in the Duvernay, where they are still in the process of improving cost efficiencies to make it truly economic and generate rates of returns that should be north of 25%-30%. Their other major asset, which is just steaming up and wrapping up, is their Hangingstone heavy oil project. The 2 things that you probably don’t want to own in a $50 oil and $2.50 gas environment, is an early stage, capital intensive gas project and a heavy oil project.

Doesn’t know what the lows were in 2008, but that could be a reasonable projection as to where it would end up. Watch for some complex action, up and down, up and down, for a little while. That tells you a base is being put in. Trend on this has been lower lows and lower highs. When that stops happening and there is a progression of sideways activity, that is a sign that the downtrend is over.

Has undergone some interesting transitions. One is a Put option on their Dover property, which brought in a new player and gave them a bunch of cash. 12 months ago he would have been really skeptical about the payment of that Put. They got half, so that is behind them now. There is more coming by the end of August. One thing they have to pay attention to is their thermal projects. Because of low oil prices, all the heavier oil SAGD mining operation projects are under scrutiny. What are costs versus what you are going to sell your oil for? They will have to be diligent to prove to the world that thermal projects are economic at a price. Their light oil projects are pretty good. He would be favourably inclined towards this company.

Sold their Dover play for $1.2 billion and their debt load is $770 million. They don’t have huge revenues, so they have a lot of troubles, but at the same time, they have some cash to play with. When you are buying these companies that have these debt loads, you have to remember that maybe you can lose everything.

He would have thought this would have held up better, because it got the payment from the Chinese and so it has about $2 as share in cash, which is the opposite of some of the others. Doesn’t pay a dividend, has a lot of cash and has a good balance sheet. But it is also kind of a prospective company that needs to spend some money to bring production on stream. This will not be the 1^st stock to move, by far. Wait for oil prices to come up and other seniors to move first.

The mad money category if you can stand extreme volatility. They are becoming remarkably interesting to a value investor. He can see the temptation to get in, but would want a company that is less volatile and has a sustainable dividend.

Chart is a very ugly picture, but at $3 it gives the company a market capitalization of $1.2 billion. This is basically what Petro China paid them. He likes what they have in their Duvernay assets and the growth they have in Hangingstone. If oil prices slipped down to $60-$65 a barrel, there is going to be risk to the whole energy sector, but their balance sheet is in very good shape.

There is a lot of inherent value in terms of oil sands, deep basin assets and Duvernay potential. This company is in a bit of transition. The CEO has stepped down, so there is a leadership change at the top. The light oil division they were trying to get going over the last couple of years, has not done very well operationally. There is a lot of change happening with the company. They think they are going to be free cash flow positive by 2016, so until that point, they are going to be self financing.

Production in North America has just been phenomenal and is impacting prices. This one didn't even participate like other energy names, from the spring into mid-summer. Chart shows it has broken down. At $5-$6 it will probably have some sellers back in.

(A Top Pick Nov 29/13. Down 28.86%.) This was just a bad call. Not generating cash flow right now. A great, long-term asset story. Even at today’s oil price you have an NAV well in excess of $10. Insiders are buying.

(Top Pick Sep 25/13, Down 38.25%) He got out in the mid $7s. They settled with first nations. The challenge now is the indiscriminant selling in the energy market and which ones to buy.

Has never been particularly positive on this one. They have a lot of time to put in before the oil starts to come out of the ground. They also seem to be on the edge of the cliff with their financing from China. There are lots of other companies that are in production and showing earnings and giving a yield.