Bellatrix Exploration Ltd. (BXE.TO)

LNG Canada is coming on in 2023 – a long time to protect the balance sheet. He does not like the level of debt as it handcuffs any financial gains. He would not own this.

(A Top Pick December 18, 2017. Down 33%). He was early in his recommendation of this company, but it is doing the right things. It is extending the maturity of its debt. The company was over $3 a year ago. Production in Q2 was up compared to Q1. It will drop for Q3 because of a slowdown in production due to the low AECO prices (see http://www.gasalberta.com/gas-market/market-prices). Q3 will be the trough in production. Bellatrix has just announced a junior acquisition that will add about 2000 boe per day. He expects to see a 40,000 run rate in Q1 with over $1 in cash flow. Book value is $12.11, which is ridiculously higher than the current price. The company is in the Spirit River play, which is liquids-rich. He expects the stock to rise to $7 a year from now.

This company is very leveraged (5 times debt-to-cash flow), which will limit its ability to develop capital projects. He has stayed away and was not a fan of the various joint ventures and prefers to own companies that own their own infrastructure.

A Top Pick November 9/17 Down 64%) Natural gas companies, as a whole, have been taking a beating lately. People are worried about prices of $1.00 /mcf. LNG export capacity is sopping up growing production in the US and he expects a 3.2 TCF storage level there heading into winter, compared against 4.0 TCF historical rates. He thinks this could be a “five bagger” if natural gas prices pan out as he thinks back to $4.00 /mcf in the next 2-4 years.

This has been beaten up along with a lot of the small cap Nat gas companies. The company is viable; they are generating cash flow, and paying down debt. He sees it going to $7.00 if he is correct on a $3.00 Nat gas price, and a $20.00 target in 3-5 years

They have a lot of debt and have been slowly trying to pay it down. If bullish in this sector, there are other stocks to look at. Financial risk exceeds his comfort level. No dividend.

(A Top Pick Nov. 9/17, Down 61%) It is a cheap stock and he likes it lot. Management is focusing on paying down debt. This is a strong buy on any weakness. His Top Picks today are ones that have not moved yet. The balance sheet on this one is NOT a problem. They have grown their balance sheet recently. They have time before the renewal of their debt. He thinks it will move up sharply when people get more bullish on Natural Gas.

The energy sector has moved up somewhat. Gas has not done as well as oil. He made tremendous money in the past with this one but has recently been killed with what he still holds. They make promises and never come through. He is very wary of it. It could go up 10 times or go bankrupt. It is the definition of high risk / high reward.

A Nat gas play. These stocks are right in the dog house. Production is up from last year. It is 54% leveraged which is better than before and better than other companies. These things have been thrown out but people are going to be surprised by how well they do over the next 3 to 5 years. It could be a $20 stock. (Analysts’ target: $1.53).

Earnings to grow 25% in 2018. Main challenge: it's still unprofitable as earnings are pressured. Cash flow is $1.10 this year but will decline to 84-cents in 2019. There are better opportunities in oil elsewhere.

(A Top Pick July 28, 2017. Down 40%). He recommended buying on weakness, the stock dropped and he recommended it most strongly last December. It is up 50% since then. He thinks the stock can go up to $7. He pointed out on the 10 year chart that the stock has massive upside when the price of oil moves. For example, it went from less than $15 in 2012 to nearly $60 in 2015. Similarly in 2009-2010, the stock went from $2 to $17. They go from being hated to being loved, and right now, the natural gas story is getting strong. Storage is low, last week there was even a draw. The US industry is so focused on drilling oil and liquids that the focus on natural gas is just not there. The LNG takeaway capacity in the US is going from 2 bcf to 9 by the end of 2019. Canada does have the pipelines into the midwest, and they are expanding. These can carry a lot of Canadian production into this growth of demand of 7 bcf. He also expects LNG to BC to be approved, which will result in a further increase of demand for Canadian natural gas, at better prices.

This was his top pick last year too. They are doing 37000 boe/day, production volume is up 16% from the year before. He thinks that going forward they will do 38000 boe/day. The company’s cash flow should be over $1 this year, so it is trading under 2x cash flow. He thinks the stock can go up to $7 in one year, and has a $20 target for 5 years. He pointed out on the 10 year chart that the stock has massive upside when the price of oil moves. For example, it went from less than $15 in 2012 to nearly $60 in 2015. Similarly in 2009, it was a $2.40 stock and a year later it was $23. They go from being hated to being loved, and right now, the natural gas story is getting strong. The company can make money at $2 gas, but he expects gas prices to go up as American exports of LNG rise. If AECO goes to $3 at the of this year, this stock will go a lot higher. The book value is over $15.37 and NAV is $13.68. This stock is ridiculously cheap. (Analysts’ price target is 1.58$)

He still owns some of this. He has taken the unusual step of not buying below their buy limit target price, due to the uncertainty. He thinks this could be a 10 bagger ultimately. He is not recommending this to subscribers presently.

This company is 74% natural gas. Book value is $15.67, cash flow last year was $1.12. Current stock price is $1.47 so the company is trading just over 1x cash flow, which he sees as shockingly cheap. This was a $50 stock in 2014. Debt is $397 million against $774 million equity. In 2009, this stock went from $2.40 to $23 a year later. So when a bull market comes, this stock can rocket upward. His one-year price target for this stock is $7. He owns it personally and his family owns it. (Analysts’ price target is 1.75$)

They're okay from an asset base, but their debt-to-cash ratio is a high five. He's bearish on nat gas, so he wouldn't buy natural gas names like this. Generally, he's biased in favour of oil.