Opinions
Rick Rule
Bonterra Energy Corp
BNE-T
TOP PICK
Jul 31, 2017
Stock price when the opinion was issued
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Has a nice 4.9% dividend that is sustainable. They have done really well with costs. The story has free cash flow on current oil prices, which is going to help them pay off debt, which has been a little too high. Free cash flow yield for this year and next is much higher than it was in 2014 when oil prices averaged $94. This has a great history of ROC.
This has always been tricky, because it is fairly closely held, and trading liquidity is pretty crummy. It is typically Canadian dividend funds that buy it and hold it. They found themselves in a position where they had taken on too much debt, and made a mistake of not hedging it off. Have high quality assets. Due to its lack of liquidity, he has been trading at a pretty healthy premium to others.
This hasn’t acted well. It’s like a lot of energy stocks, but this is still down 50% for the year. Got caught with a little “worse than average” balance sheet, which has been a kiss of death in the stock market. With the combination of a really good balance sheet, very low costs and drilling prospects, you are still down, but not very much. It will take a while. It’s one of those companies that needs $60 oil to be better. If you think that is not going to happen, then he would switch to something else where you would be better protected.
A small exploration stock. It appears the drilling is becoming predictive. It is rare we see an exploration play attractively priced in Canada. He seldom recommends exploration stocks in Canada. This management team has been successful in the past in the same terrain they are exploring now. (Analysts’ target: $23.25). (One of our faithful viewers has pointed out that BNN may have misinterpreted Rick's choice, and these comments might have been intended for Bonterra Resources (BTR-X) instead. )