Cardinal Energy Ltd (CJ.TO)

Medium to heavy oil. This is a smaller and newer company, but one that is set up very well for the dividend plus growth model. Have no debt, which is unique for an oil/gas company. They focus on very, very low decline rate oil properties. Thinks their decline rate is around 13%, whereas the majority of the dividend oil/gas players is around 25%-30%. Having no debt makes them much more able to go through a downturn. Yield of 4.33%.

The lowest declines of any of the dividend paying energy companies. The acquisition they just made was a 14% decline rate, really low for energy companies. Yield of 4.3%.

This is more of a yield play. They IPO’d in Dec/13 at $10.50. Sold his holdings in the mid-$15-$16, feeling that the easy money had been made. They are now essentially a pure play on the Glock where they have drilled 2 wells. Three wells will be released the next time they come out with results in about 3 week’s time. The real upside is that they are under leveraged, and given the real low decline rate of their assets, they are generating a lot of excess free cash flow, which they don’t necessarily want to deploy into their existing play. They are looking at other plays. They have been targeting a 2000 barrels a day acquisition for many, many months. It seems they may be getting closer to achieving that. Given that they are trading at around 7.5-7.8 times enterprise value to cash flow, they’ll likely be able to make an accretive acquisition and have the stock go up. There are other names he would prefer right now.

Has done exceptionally well, and the management team is well regarded. They sold a platform where they are going to give you a yield plus some growth. However, when giving out yield, they will not be able to grow as quickly as some of the non-yielding plays. They have the assets to be able to grow.

Had a great start since their IPO of about 30%. Thinks it needs to back fill its valuation and thinks they are about to do that. Has a nice multiple. Hopefully they can find some more properties to buy to give them a better slate and a more robust pipeline of oil projects. Wouldn’t shy away from looking at this again on another financing.

Really likes this. Should be having a drilling update by the end of this month, which is their first 2 wells which is kind of proof of concept to the play that they acquired from Penn West (PWT-T). Liked that the stock came out at a very cheap valuation when they IPO’d late last year. The market has since given them a currency to use their stock to go aggregate further assets, which he guesses they have done subsequent to the year end. Pending positive well results, he expects the stock could further increase. By his numbers, it is trading very cheaply at roughly 5X next year’s enterprise value to cash flow. Given the nature of the wells they are drilling, if they come on as robust as management has been guiding, it probably has the most sustainable dividend model of any oil/gas company in Canada. Dividend of almost 5%.

Thinks this is going to be a really good performer this year. Because it is so new, there are no research reports out, meaning most people have been holding back to see price targets and estimates. On his numbers, they have one of the most sustainable dividend models. Using around 83% of their cash flow to grow production by 9% and pay a 5.5% dividend. Because it is new he thinks they have $13 million of free cash flow, which means they have extra cash to do something with, so if they drill more wells they can double their production rate to 18% or increase the dividend by 60%.