Swanzy QuarshieBaytex Energy CorpBTE.TOCOMMENTFeb 10, 2016

Though making good money on the exchange rate, there is a fear in the energy sector over WCS spreads. That said, the future is bright for the energy industry. Baytex has 3 asset basins; the Duvernay is a growth business but produces less cash flow than their other businesses, and they have the Manville with heavy oil. BTE has rallied with the sector, but there are better and easier energy stocks to own.

BTE is an oil name. Mega-tax deduction. Cashflow just beat. Increased production guidance. Trades in line with peers at 5.2x PE. Excellent balance sheet, better than BIR. He models 12% returns, higher than BIR. All in, this one's the better asset.

BIR is natural gas. Tailwind from LNG Canada Phase 2. Cashflow beat. Cheaper, better growth. 

Both have powerful catalysts. Whether to buy one or the other should depend on your outlook for oil vs. natural gas. Oil has more downside if things start getting better in the Middle East. Nat gas has way more upside, so he'd go that way. Names he prefers to BIR are AAV, TOU, and PEY (in that order).

It's a show-me story on the street after buying Ranger Oil a few years ago and the market detested the deal. Last year, BTE sold the company to pay down their debt. Last January, they replaced the CEO. They used their cash to buy back shares, which he liked. The duration of their drilling inventory is unclear, but trades at a cheap 4.5x PE instead of 6x. 

Wants to see what the new management team can do. The Eagle Ford took their eye off the ball. They have a lot under the hood that the market doesn't appreciate, but BTE is a prove-it story. The CEO is paid only stock, not pay. 

It is refocusing in Canada. He likes the new CEO who is taking his salary in stock. It has hidden potential and he sees 20 to 30% upside.

Great company. Sold Ranger asset that was disliked by the market, used proceeds to pay down debt. Sitting on $500M in cash. Now focused on Western Canada. Added light oil to its heavy oil assets. Buying back shares aggressively. Reasonable yield of 1.2-1.3%.

Likes this one, as well as the whole Canadian oil/gas complex. Unusually good job of beating forecasts over time. He just doesn't have room for all names in his portfolio. Probably a very good choice for dividend-conscious people.

The US and Iran may be struck a peace deal and could be reopening the Strait of Hormuz, but there's a big backlog of oil. They have to rebuild what was destroyed to resume oil production. Strategic reserves need to be refilled. All this takes time. That's why it will keep oil around $80 a barrel. BTW can make money at $60. Beyond 6 months, oil producers will make money hand over fist. BTE's uptrend may be in question, but expects it to find support at current levels.

Size isn't quite there for him yet. Really positive that new CEO isn't collecting a salary, just stock options. Exposed to highly profitable plays in Canada. Net cash to probably use for buybacks. Perhaps some M&A. Work in progress.

Suspects there will be volatility. We're seeing it in the oil price depending on which tweet comes out. The floor for oil prices is higher on the back of the conflict, perhaps around $80 -- geopolitical premium, reservoir damage, production lost, need to refill inventory.

This company has torque to that. If you want to play that game in the short-term, this is a decent vehicle for that. Company's stronger from its reorganization.

Good in terms of capital employed. Wants to see it reduce yield to shareholders and increase sustaining capital investments and new project investments. If you’re underweight energy, you need to get long. He’s very bullish on Canadian oils, but he loved them better at $60 than he does at $100.

Used to be the beta name for leverage to oil. Doesn't have that as much anymore. Cash on balance sheet will be used to buy back shares. With oil where it's at, you get paralysis on M&A (sellers want current price, buyers want to pay what it was a month ago).

Approaching fair value, though can maybe spin out another 10-20%. See his Top Picks.

If an investor has more information than the rest of the market, that's a real inside track on a company. Thinks the energy sector is quite sustainable. Has never owned, but he's now going to take a look at it.

Western Canadian O&G companies are all having a field day with higher oil. They'll all work until the Strait of Hormuz opens. A short-term play.

No more room to run. Levered, higher-cost oil sands play. Stretched balance sheet. Sold Permian assets, now it's left with Canadian assets at premium valuation.

Instead, look at TOU, CVE, or WCP.