Bonavista Energy Corp (BNP.TO)

Severe winter has caused natural gas spot prices to spike up. We are going into the shoulder season with a very low inventory level, which is positive. Looking further out 12 months, there is still a lot of supply that can come on stream. When natural gas gets above $4, switching to coal becomes less attractive. Doesn’t expect to see natural gas down to the $3 level again.

His internal target price is about $18. There was insider buying at the $12 level and he added to his position and this has worked out quite well. If gas can hold in the $4.50 range, he believes this would be an $18 stock. 5.3% yield.

The case for them is related to Nat Gas and LNG. 1 and 2 year futures prices are below $4, so people are saying the higher prices for Nat Gas will not continue.

On a short list of companies he would look at adding to his portfolios. A very gas focused company but in a lot of exciting plays. It is in a good position to benefit from stronger gas and liquid gas prices.

Dividend yield is absolutely safe. Have very low payout ratio. Pretty good managers of their assets. The upside is a play in central Alberta called the Wilrich and they have been very busy drilling wells into this very liquids rich natural gas prone area with great success. Feels there is upside in the value of the stock.

A natural gas producer, so suffered from the prolonged slump in gas prices. Good assets, so if gas prices start to get more positive there is demand uptake. Also, as LNG exports start to come closer, this could be an uptick for all producers but this is one that he is staying clear of.

Very good performer over the last couple of months on the expectation that it was going to be the next turnaround story. Just sold his holdings today as there could be some near-term weakness in natural gas stocks later on this year. Approximately 100% of their cash flow equals their CapX, which will translate into 5% growth. Effectively, almost 100% of the dividend is being paid using debt. That may change as their payout ratio decreases as they ramp up production. They are deleveraging slightly. Debt to cash flow is now down to about 2.2X.

A great portion of their business plan is focused on some of the highest internal rates of return projects in Western Canada. Because of a counter cyclical acquisition they made when prices were low, their debt creeped up, which caused a problem with distribution. This has not taken away its execution. Have a lot of natural gas liquids and condensates that is growing at a very high level. Have a long-term fractionation agreement with Keyera (KEY-T).

Has been buying at these prices. Definitely a higher risk. Has a higher yield. Balance sheet is at the high end of where he would like it to be. Good properties and good management team. The knock on the company is that there hasn’t been production per share growth but the asset base is there and it looks like they are focused on turning that around. Also, as gas prices firm up, it will benefit.

Sell Bonavista (BNP-T) and buy Enerplus (ERF-T)? Bonavista has done relatively better and has always been a well-run company so he would hesitate to leave this one. Still pays a pretty decent dividend yield of a little over 6%. About 80% natural gas, so it has been penalized to some extent. Very good properties and extremely well managed.

Just starting to make a turnaround. Even though it has moved up in the last month, you will see it trade higher in the next year or 2. $16-$18 in a 2 year time frame.

You’ll be fine with this stock. He has become a buyer again over the last 6 weeks. Likes what he sees. Doesn’t see a dividend cut coming. 6.2% dividend yield.

Used to own but not now because it is more Nat Gas, which has a muted outlook. But an early start to winter is helping. Would prefer to get into it a little later after confirming a trend.

(A Top Pick Nov 26/12. Down 13.34%.) Disappointed when management assured him that the dividend would be maintained and it wasn’t. Sold his holdings.

Strong management team. Board of Directors owns about 13%. Great track record. Has been hampered over the last number of years because of lower gas prices. Concentrating their focus on 2 core areas, which improves, their capital efficiencies. Has exposure to some really, really good plays. Good Cardium acreage, which will continue to support the cash flow. Debt level is a little high but manageable. Trades at a significant discount to peers. Yield of 6.58%.