Baytex Energy Corp (BTE.TO)

Got hit quite a bit. It has a $50 million tax thing with the CRA, but that is not a big deal. Have a leveraged balance sheet. It is about 3X debt to cash flow. He compared its cash flow of 130% to Crescent Point’s (CPG-T) at under 100%, and avoided it because of the difference. Lower oil prices would make that even worse. If oil stays low for quite a while, this company at some point would probably have to cut their dividend.

Higher risk name because of higher leverage. Their total debt to cash flow is 3 times, but half is long term debt and we could get an oil price recovery in 9 months. It used to trade at a premium to CPG-T, but no longer. In the short term he does not see the dividend being cut.

Has a debt to cash flow of more than two times. Rule of thumb is that when you get more than two it is a warning sign. They did a large acquisition earlier in the year in the US. The company looks stretched, but they have a lot of discretion about how they can allocate the capital. Management has a history of guiding the company well. Thinks they have the ability to skate through this. He is optimistic about the Canadian heavy oil price.

This was a very high growth rate stock. They bought Aurora in June that was going to be very accretive. The risk was that they took on more debt at the time of the transaction, and debt to cash flow went to about 2, which was fine if oil prices stay higher, but not good if oil prices do what they did. Their payout ratio, at $75 WTI and $3.50 natural gas he models at 160%, so that is not a safe dividend.

Likes that this is heavy oil. It has been a great stock looking out over the past 10 years or so, but it has been very disappointing. Sold most of his holdings, because it just wasn’t working. The issue for all oil companies is oil and oil prices. Oil is $76 and he expects we will touch $60 before we touch $80 again. The term structure and the futures are telling you that, and also he doesn’t see strong global growth. (Absent the US and to a lesser extent Canada.) Doesn’t see the dividend being an issue at present.

A well-managed company. Good assets. Doesn't think the balance sheet is in terrible condition. Have been severely affected along with a lot of other oil/gas stocks. Believes it is going to level out from here. If we have some stability in the energy market, he thinks this will come out of this downtrend and reverse itself. Wouldn't be surprised to see this appreciate fairly quickly, should conditions improve a little.

Always has his eye on this because of its size and domination in the heavy oil market. Has been punished a little more than some of the other names. He would want to see it basing from a technical standpoint before he looked at it, as well as some revision in their numbers. Probably won't see that until the CRA issue is resolved.

A well run company. He was not that keen on their recent US acquisition. Heavy crude oil prices have been quite good recently. The Canadian dollar is falling, and a lot of investors don't appreciate that the falling Canadian dollar is a very healthy offset for a lot of these Canadian oil-producing companies, because they sell in US dollars. This is one that you could own at these prices and probably do pretty well.

This company has always been kind of at the forefront. A big move for them 3-4 months ago was when they bought a portion of a company in the Eagleford shale part of Texas. The Eagleford shale is why the US is now the world's largest oil producer. The area is twice the size of the Bakken oil field. It costs $40 a barrel less to get it out of the ground because it is so close to the surface. They get more money per barrel because it is international pricing and is a lot cheaper to transport it to the Gulf. Likes this one a lot.

(A Top Pick Feb 11/14. Down 20.48%.) Had owned this for the acquisition of Aurora. Sold his holdings at around $46 and $47. This is still a good dividend payer. Likes management and the Texas assets, but he prefers Whitecap Resources (WCP-T).

Trades at a lower multiple than some of the others in the group. The beta is about 1.5 whereas peers are closer to 1. They carry a much higher debt level than peers. Prefers VET-T.

Would be seen as one of the higher quality players in the space. Oil prices have been weaker recently and there is concern about the sustainability of dividends. He believes oil prices will not go much lower here and that BTE-T has a sustainable dividend.

Baytex (BTE-T) or Crescent Point (CPG-T)? Owns both and considers both of them as core holdings. The concern on this company is that they bought into the Eagleford play in the US via the acquisition of Aurora. This is a light oil play while Baytex is traditionally known as a heavy oil player. The more he has looked at this acquisition, the more he has come around to it. Recent well results have been very positive. 30 day production rates of 800 to 1000 barrels a day, which is excellent. Feels investors have concerns about them using a little bit more debt to finance the acquisition. He thinks the company has a pretty good hedge book and he is very favourable on heavy oil pricing going forward.

This is one of the high quality names that behave very differently in these environments. Below $30, this looks very interesting from a fundamental perspective. It is highly possible that a potential dividend cut is priced into the name at these levels. His preference would be Crescent Point (CPG-T).

Participated in the trend break into October. He would have liked to see it hold its support at around $37. The fact that it is below that is a little bit troubling. Also, the other indicators are not showing any kind of strength. It is looking to test the low of $33.24, and if it breaks that, you would have to go back on a much longer time frame as to where it is going to come in. This will probably depend on the macro picture of oil supplies.