Baytex Energy Corp (BTE.TO)

The problem with this stock is that it has been forming a base for more than a year. It has been absolutely range bound. Hope for the best if you own it and if it blips up then get out.

6.625% bonds maturing 2022. He feels they are a much safer investment. You don’t have to hope oil comes back.

It has a bit too much debt. This has been one of the victims of the oil price turn as they had too much debt at the top. She likes management. They have a lot of torque to higher oil prices. Heavy oil is a better asset in Canada.

They are marred with too much debt and can’t grow. They look too unattractive compared to peers, with the worst production forecast and one of the worst balance sheets.

This was hurting big time a year ago; really suffering under the much, much deteriorating balance sheet, caused by debt, caused by making acquisitions. They got through it and had a nice recovery into the summer of 2016, but as oil prices weakened they are now struggling.

With his expectation that fuel prices will march higher, this is going to be an interesting torquey name. The debt is termed out, so they don’t have to deal with near term maturities. With prices north of $55 a barrel, this company really starts cash flowing nice numbers.

One of the most cyclical of the cyclicals. It is cyclical in that it is in oil, as well as its returns being up and down. The biggest problem is the leverage. There is a lot of financial leverage on this. If things go well and you get this in the right time, it can pay off. On the other hand, because of the leverage, there is a lot of risk, and could end up being owned by the debt holders. Maybe only put in a small position.

The market is very concerned. The chart shows there is no bounce at all.

He exited this recently. They have fantastic assets and a pretty good stake in the Eagle Ford area, which is a prolific area with high quality assets. They also have assets in Canada in the Peace River area. A very good portfolio of assets. His concern is the balance sheet. They have a ton of debt, and the market is concerned about that. When you have a levered talent sheet, it limits your ability to grow production, which is what is happening in this case.

The only non-dividend paying stock he owns. It used to pay a dividend, went through the downturn and a lot of dividend based investors sold. The core assets are still very good. It still has a leverage issue, but are working through that. Recently did an acquisition in Alberta that looks very promising. Fundamentally thinks oil prices should be higher, and if so, this stock has a lot of potential.

This company transformed itself over the last couple of years. Unfortunately, it did it at a time when commodity prices were collapsing. 3 years ago, they bought Aurora and got into the Eagleford, one of the best development plays in the best area. Paid a pretty high price which hurt the balance sheet quite a bit. In the meantime, their Canadian heavy oil program was going on, the area that really got hurt when commodity prices collapsed, and ended up with a debt heavy balance sheet. They’ve done a lot to clean that up, and have just recently begun on the growth path by making an acquisition in Western Canada. There is a lot of “show me” that now needs to happen. It has become a play on commodity. There are better opportunities elsewhere.

He is still very positive on this. There were studies that were showing that when they bring forward their reserve numbers, the increases are going to be fantastic. This isn’t just a Canadian company. They have significant holdings in the shales in the US, where most of their capital expenditures are. They are going to do very well.

At this time, he would consider this to be just a Hold. There are some stocks in the sector that are more compelling from a price point of view, but with the improvements we are seeing within the sector, this one could do fairly well going forward.

(A Top Pick Feb 23/16. Up 96.6%.) There are times to own and there are times to not own. The time to own is not now. There is no differentiation largely in the marketplace between the “haves” and “have-nots”. This one is clearly a “have not” based on their balance sheet. He wants companies that have excess free cash flow, that they can use to drill, grow production faster and compress their multiples much faster.

For many years this had a very conservative balance sheet, primarily in Western Canada. A few years ago they made an acquisition in Texas. His issue is that their debt levels are very high at 5X debt to cash flow. The dividend payout is at about 112%. He prefers names that have a better, stronger balance sheet.