Birchcliff Energy Ltd. (BIR.TO)

A dry gas producer, although the Gordondale transaction increased their liquids cut to about 25%, which helped alleviate some of the pure risk of being a gas producer. They are prone to seasonality like any of the gas producers, going from winter heating requirements to summer air conditioning requirements, where there is a lull. The company is very well hedged. The balance sheet is much better after the Gordondale transaction.

He does not like any of the peers enough to own them. It is going to be another year of pipeline outages in Canada. But if you wanted to own one, this would be it. He recently exited it to put money into service stocks. He has a lot of respect for the management team. It is going to be a bumpy ride to get to is target price.

A gassy stock and has very strong seasonality, historically from around the last week in January right through until approximately the middle of May. However, it is not happening this year, so wait until the technicals confirm that seasonal trends are actually occurring. This is still in a downward trend.

A Canadian natural gas focused producer. He is bearish on Canadian natural gas, so would want to avoid a name like this. The Canadian natural gas space is going to have problems competing with the US shale industry.

(Market Call Minute.) A solid, solid gas producer on the West Coast.

Best in class, smaller natural gas producer. Good management. Good at increasing their reserves and managing costs. It is just a play on gas prices.

A gas producer, but one of the better ones. Very rich liquids gas. They’ve also done a fair bit of hedging. Although the price of gas has fallen dramatically, companies are finding that development costs have also fallen dramatically. He likes the company.

Just released really, really strong results. Terrific operators and have great properties. He is a little concerned with the natural gas price not going up dramatically from here. Also, you should be a little cautious about the border adjustment tax Trump is floating and its impact on Canadian E & P companies.

Predominantly a gas producer. Trading at a material discount relative to its gassy peers on a production per share growth over the next couple of years. They’ve picked off a great asset from Encana (ECA-T), and part of it has exploration access in the D2 zone, a liquids rich oily zone. He expects results in mid-March and is optimistic they will be successful. They have an internally financed ability to grow production very meaningfully over the next 5 years. Trading at 5.2X, and he thinks it will be able to gain an 8 multiple over the next 18 months, a 65% upside from today’s level. Dividend yield of 1.24%. (Analysts’ price target is $12.70.)

He is a big fan. The stock did exceedingly well from the first quarter of last year. They are a modular growth player so there is growth built in every few years. The stock is backing off with the decline of natural gas. They are a very low cost operator. It is a core name for investors once we get through a little bit of a shakeup.

This has always been kind of a gas name, and gas is very difficult. The track record is pretty good, having earned as high as 9% return a couple of years ago. It is lower now though, just because the commodity price is lower. He would expect this to rebound, and if it can rebound to a 9% return internally, the stock is worth about $11.

The model price is $13.81, a 50% upside from here. The stock has been consolidating since July. He would hold on. Materials could outperform here. There are no transits on this stock.

All 3 picks have recently done fairly transformative acquisitions. He wants to own companies that have institutional following and access to capital markets and could do smart acquisitions at the bottom of the cycle. A natural gas producer and has a Pouce Coupe asset. His issue historically has been that they have always had too much debt, but they did a $625 million acquisition of a Gordondale asset that is contiguous to their Pouce Coupe asset. The 2 fit together really well. It has the effect of lowering the decline rate, and he thinks has increased the cash flow profile. They also brought down their balance sheet leverage. Has a five-year growth plan in place that is entirely funded by internally generated cash flow. He can see this being in the mid-teens by next year. Dividend yield of 1.04%. (Analysts’ price target is $12.35.)

He used to be short. It was a decent trade. Canadian natural gas producers are in a tough place given that they might be pushed out of their biggest end market, i.e. the US. If you need Nat gas exposure in Canada then this is not bad, but he does not think one needs Canadian gas exposure.

They made a transformation a couple of months ago to more Natural Gas. The Americans are looking at our Natural gas companies. If we have that colder winter we expect, it will do well.