Bonavista Energy Corp (BNP.TO)

Dividend is secure for now. Well managed. Doesn’t have extremely large amounts of debt.

(A Top Pick Nov 8/11. Down 27.53%.) With the increase in production of natural gas, it will be of great benefit to fertilizer, chemical companies as well as power companies, etc. There will be continued growth in the US economy that will go forward based on cheap energy. Thinks the 8% dividend will be safe.

Tried to do a bottom of the market acquisition and issued equity to do it. Ultimately they are going to be dependent on natural gas prices doing well to hedge forward their production. 7.99% dividend yield and it is possible they can maintain this, but it is far from certain.

Expects natural gas to be north of $3 in the next 12 months. Recently added to their deep gas acreage in Alberta through an acquisition, which will add about 67 BOE’s per day of gas production. 8.2% dividend yield should be safe.

Natural gas. Very well regarded management. Stock is down due to concerns on their debt load but recently did a financing to pay for a gas acquisition and to pay down their debt to a much more manageable level. Very healthy dividend over 8% which management will absolutely not cut.

Would place management team in the absolute top quartile of Calgary companies. About 60% gas and have struggled with the challenging gas environment. Market has traded the stock as though the dividend is at risk but management has indicated they are doing a number of other things before they would consider trimming the dividend. Recently did a strategic acquisition of some assets from Fairborne (FEL-T) and at the same time they raised about $345 million of equity, which should shore up the balance sheet and put the company in a stronger position.

Bonavista (BNP-T) or Arc Resources (ARX-T)? In North America we have had very low gas prices and lots of volume growth. He has tried to take advantage of gas by being on the infrastructure side of things and benefiting from processing and transportation. If you want to own gas specifically, he would be more inclined towards Peyto (PEY-T), which is a very low cost producer and they have lots of liquids which are quite valuable.

Sold BNP. He is worried about us going into the shoulder season and BNP is a little more stretched in the balance sheet. This is an entry point for a partial position.

Fair weighting to gas which presents a bit of a headwind. This is a stock that you don’t have to own. Good company but he doesn’t see any compelling reason that it is going to go higher. If you have it, you should be okay.

Just made an acquisition for $300 million of a deep gas field, which will add about 700,000 BOE’s per day. Unless there are drastic price reductions for gas and oil, he thinks the dividend is safe.

He is a little bit nervous about the next 2-3 months on gas prices. Technically it is over the 200 day moving average for the 1^st time in a long time giving you a bit of support. You also have a bit of fundamental support if Europe doesn’t do something stupid in the next month but this company will not lead it because gas price will still be in the shoulder season.

Head and shoulders pattern. Question is whether it will break the neckline. If it breaks it then it should be bearish.

8.3% dividend is a red flag. Largest commodity is natural gas, even though they have liquids. Amongst the best operators in Canada but you can’t fight the commodity price.

About 60% gas and 40% oil. If natural gas prices stay above $2.50-$3 and crude stays at the $85 level, the dividend should be sustainable. Management has stated they would sell non-core assets and cut back on growth CapX before considering a dividend cut.