Baytex Energy Corp (BTE.TO)

Doesn’t follow. Oil. He is focused on gas at the moment. Oil is at high prices. A lot of people are positioned in oil. Net futures positions are the highest they have ever been. It’s a pretty crowded trade. He is moving towards gas – see Top Picks.

Price weakness comes back to the differential. BTX gets paid on the lower price. XL or rail gets the oil down there to capture the differential. Dividend is safe.

Correlation between the direction of oil/gas companies and the direction of energy prices is pretty good. This one is a well regarded company. Good management. Good dividend, which is sustainable for the time being. If oil prices go down and the differential widens out, this one has trouble with being a heavy oil producer and subject to transportation issues.

One thing that would be of concern is the distribution. Looking at the amount that takes, subtract out capital expenditures and with what the cash flow is, there is a bit of a deficit. The question is, how do companies finance that deficit. This one, compared to Crescent Point (CPG-T), their balance sheet is a little bit more levered, which would imply that they are using a little bit more debt to finance the differential. You should also look at their “finding development costs” and Crescent Point seems to be a little bit more efficient but this company does a little bit better on return of capital employed. Neither one of them is a bad place to be.

Thinks there could be some slight weakness in heavy oil prices over the next couple of months. There’s a key refinery that has been taking awhile to increase their demand for heavy oil. At the same time, Imperial Oil (IMO-T) Kearl project will be continuing to add more heavy oil into the market. This is just a short-term dynamic for him. Very well run company. Trading at a multiple that is too rich for him.

If these lows break then something has gone wrong in the stock and it could fall significantly. We made some support and it is starting to come back, but there is an awful lot of overhead resistance. Doesn’t think we will exceed 52 week highs in a year.

Oil Service Stocks. Jan to March and July until beginning of October seasonal strength.

6.3% yield. Stock price has not been doing particularly well. Energy is tricky right now. You have to pick your spots. You need to find those that have big rampups in production. Prefers things that use new technologies. Prefers resource growth producers, especially in the US.

The king among heavy oil companies. Assets have great depth to them. A great dividend player. A little better leverage in smaller names.

(Market Call Minute.) Trimmed his position recently. Over a long-term, it is a Buy but, given where oil prices are now, he has taken a little bit off the table.

Close to 5% yield but it is a high payout ratio.

(A Top Pick July 13/12. Up 8.9%.) Has cut back a bit on this because he wants to participate a little bit more on Brent rather than Canadian pricing.

Bonterra Energy (BNE-T) or Baytex Energy (BTE-T)? Really likes Baytex but it’s a little pricey, so based on valuation, he would choose Bonterra which is a little cheaper and has pretty good growth.

(A Top Pick Jan 29/13. Down 8.17%.) Has been disappointing but believes it has now bottomed. Likes the long-term growth prospects. Thinks surprises could be on the upside. Has a target of $50 on this. Dividend yield of 6.5%.

Recently bought because of narrowing differential between oil prices. Nice yield of 6.6%.