Bankers Petroleum (BNK.TO)

Has been working very hard on their top line as well as their cost structure. Their margins have been improving as a result. A very solid business with an excellent balance sheet. That's not going bankrupt in this environment.

(Past Top Pick, Feb. 12, 2015, down 38.25%) Still owns. They are liquid and there is a lot of torque to the oil prices. They will do very well in the rising oil price or the falling oil price. The management has done some terrific things in terms of cost management, which will protect the core business of the company.

(A Top Pick Feb 12/15. Down 9.34%.) This outperforms in the right oil price environment and underperforms in a falling one. It is actually down less than the benchmark, which is surprising because it trades like a high beta stock. Thinks it has great opportunity.

One of his favourite oil names. Operating in Albania and Europe, so are exposed to Brent pricing. Have done a good job of controlling the resources and consolidating their operations and making more money out of every barrel they produce. At a $50 oil price, they pretty much can’t grow, but can still maintain production. Believes oil prices will gradually recover to $65-$70 by the end of the year and these guys will be able to restart their engine and grow again.

He is starting to look and add a little bit of oil at this time. He feels that inventory levels should start to level off because wells right now are not even generating the cost of drilling the well. Because of this there is a massive shutdown of well production. Although he doesn’t own this, he does like it and his company has a target of $4.50.

(A Top Pick April 24/14. Down 52.19%.) Still a core holding for him. Very highly levered to Brent prices. A $10 move in Brent prices would change the net asset value in the Company by 25%. Excellent balance sheet with access to the largest onshore heavy oilfield in Europe. Have done an excellent job of execution.

Our own companies are so beaten up right now, why take on that incremental risk of looking to Albania? To go into this one, it needs to be next to nothing and super clean.

Located in Albania. Had some challenges historically with meeting production guidance, but have been able to sort those challenges out. In the last 2 years they have shown a very consistent ability to meet guidance. There is currently a hiccup with some water pump issues, but they have that back on line. Potentially a free cash flow machine. Last year they had a little bit of free cash flow, and without the commodity crisis and price downdraft, they would have actually seen a really big growth of free cash flow. Very rare to see with an oil/gas company. Management has taken a very measured approach making sure they grow production at a disciplined rate so that the decline rate does not get too out of control. Also, increasing profitability by cutting costs.

The stock has been pounded along with everything else. What is not working in this company’s favour is that they have about a 20% differential to Brent, so their cash flow is more sensitive to the change in price of oil than to a light oil producer. If you are an oil bull and can be patient and want to buy it and look out a year, it is highly likely it is going to be higher, but over the next 6 months he doesn’t feel that he absolutely must own it. He’d rather get paid to wait with some dividend names.

This is a big holding for him. The company is delivering a very low risk development style growth. They are doing 15% a year in Albania in one of, if not the largest, onshore heavy oil deposits. Have worked out a lot of the technical kinks there and are at the point where they are just manufacturing returns for shareholders. Thinks the wells deliver an internal rate of return of about 75% and have a net present value of $3 million a well. He sees the company doubling in size in the next 5 years. In addition, enhanced oil recovery techniques are showing some very good initial success.

Albanian. It is a geopolitical risk. There are so many better opportunities out there. Prefers to be closer to home.

His company has a $9.50 target on this. He prefers investing North-South. Geopolitical risk is important to him. He understands the politics in North and South America, and there are so many choices here that he hasn’t looked at this one.

Large, onshore oil play in Albania. This company is going through transition, and is moving more into horizontal drilling, water floods, etc. to try and unlock the secrets of a large oil deposit. Thinks free cash flow is still probably a year away. He is looking at this one closely, but he wants them to reach the tipping point of profitability before he gets in. (One of our followers has just advised me that this has really been cash flow positive for well over a year. Thanks Trish.)

(Top Pick July 23/13, 129.65%) Leadership changed at the top of the company. They cut costs. He continues to be optimistic about the company going forward. Albania is probably not the best part of the world to invest in, but management is solid and they licked their technical challenges. It throws off a lot of free cash flow. Operations are improving and they are cutting costs. They are having early success with recovery using polymer floods. They get Brent-linked pricing.

Production continues to grow and net backs are increasing. One of those stories that was loved a number of years ago and then everybody hated it for a couple of years because they weren’t able to have the cash flows people were expecting. Now they have started to do so, incrementally every quarter. He is going to take a closer look at this, but charts are telling you that things are doing well operationally. Cash flow continues to increase. An interesting story at these prices.