Baytex Energy Corp (BTE.TO)

This week will really help us to figure oil out. Look at stop losses. Make sure you have it in place. He suggests $6.70. The down trend is over, however. ‘VSTOP’ is a calculated stop loss point that incorporates the volatility in the stock.

Oil prices have had quite a bit of drama over the last 24 months, and lately OPEC has pulled a surprise to the good, which has propped the price up. He thinks OPEC can largely stick to the deal and have the support of Russia. However, there is a cap to the upside on oil getting too high. At over a $60-$65 level, the US drillers will rush back in. This company was doing “just okay” in the $55 range. They are a big player in the US. If you believe oil prices will be in the mid-$50, this one will do just fine.

He has a very small position. Views this as torque to higher oil prices. He is comfortable with the credit profile, which has been an issue in the past. They ended up securitizing their credit facility against the assets, and pushing down the subordinate note holders. Doesn’t think the company has an issue with debt, but it has struggled in an environment of lower oil prices. Once we get to $55 oil, it becomes profitable again. Once it gets to $60 and beyond, this company looks a lot better than it does now.

Generally, energy looks like it is going to do better. We are probably at the bottom in energy. If they are okay on the balance sheet side, you are probably okay.

He has always liked it when he was looking for long oil exposure, but he is not looking for that right now. If you were bullish on oil, a $10 move will get you an outsized return.

Energy is a top sector on a short term basis. On a long term basis it is moving up towards the top five. We have a nice little base with a slow upwards trend in BTE-T. We are going have some resistance around $9. Now is probably a good point in terms of risk/reward as it is near the bottom of the trend line.

When he looked at the oil market he decided he wanted to own larger cap oil if he went into it. But he owns the debt of this one because it traded at 80 cents on the dollar. He feels the Eagleford assets were worth about $2 Million. If they had gone bankrupt he would have got his money back on the debt side. The debt is safer.

If you are trying to get exposure to energy, this is one to own. It can be a volatile stock as it has a fair amount of leverage on its balance sheet and a lot of sensitivity to moves in oil prices. It has a lot of torque to the upside if oil prices recover, but can have a lot of downside too. He is getting more positive on oil.

Short or Buy? Shorting is always difficult, because the window is quite small, especially for something that is as volatile as crude oil. If you are looking at a multiyear scenario for Holding it, then you are probably okay buying it now. Wait for the next week or so for it to fall. It has a relatively high debt load.

A very high beta name in terms of the potential for oil price increases. The balance sheet is not good. They have stretched out maturities which is at least encouraging. You need higher oil prices to make money in the stock. He has a $70 target for oil prices in the next couple of years.

This is definitely a Sell or Avoid. It basically tracks the price of oil, and there is no recovery. Sellers are still willing to accept low prices and keep selling. No new or strong buyers have stepped up.

Doesn’t think this is in danger in the short term. They have a lot of debt, but a lot of it is term debt. Also, have had some bank lines that they have securitized against their assets, which gets them in line with the bank covenants. They have bought themselves a lot of time. She likes their Canadian assets. A “wait and see” story.

He wants to like it because he likes the Texas assets. The issue is that it does not work at these oil prices. He used to own it and then exited the traded. If you are bullish on oil it is a great name to buy. This would be the first name he would buy if oil went up.

In the 2^nd quarter, they harvested a lot of their hedge book. At the end of 2015, they had $106 million, and are now down to $24 million. A big portion of their cash flow came from their hedge book. They now have losses on some of their hedges on their books. His big problem is that they have $1.9 billion of debt, ($8.83 a share), with a BV of $2.1 billion ($10.33 a share). Volumes are coming down.

He loved this earlier this year. He liked that it had no debt maturities coming until 2021, so the balance sheet was a lot stronger than people had thought. However, that trade has kind of played itself out. He would love to own this in the $5 space.