Cardinal Energy Ltd (CJ.TO)

Spartan Energy (SPE-T) or Cardinal Energy (CJ)? Not a bad company, but he prefers Spartan.

(Market Call Minute.) 4.5% dividend yield and is very stable. Hasn’t proven out their growth by acquisition strategy versus Crescent Point (CPG-T). He is watching this.

This is a really good mix of defence and offense. It has a really good balance sheet and low decline rates. Every year they don’t have to grow many wells to keep production flat. Operating costs are little bit higher, at about $20 a barrel, so they don’t make a ton of money with oil at $40 a barrel, but they don’t really need to. If you have a 5-year view on oil that it gets back to $50-$60, then the risk/reward is very good here.

Good sensitivity to oil without the financial leverage. Decline rates are low.

Whitecap (WCP-T), Crescent Point (CPG-T) or Cardinal Energy (CJ-T)? A really great company and doing a really great job. Low cost oil. Very focused plays. However, if you beat it up and you really have oil sit at $15, it gets in trouble. It looks like they want to build a big company, but are really paying up for things.

This IPO’d in 2013, and had the strategy right out of the gate. They were looking to have an oil focused company with a very low decline rate, have a balance sheet with very little debt and be very acquisitive. He likes what they are doing. Dividend yield of about 4.5%.

He likes this. A really good company with great management. The balance sheet is excellent. Thinks they are going to have $16 million draw on $100 million line of credit by the end of the year. They have about 125-130 well program going right now. There are tons of torque in this name.

(A Top Pick March 3/15. Down 24.74%.) Just raised $60 million. This is more of a medium gravity oil producer, so the margins are not quite the same. They manage that through low cost and a very low decline rate of about 12%.

This has been lagging the group even though it has a great balance sheet. This company was a rock star in the oil bull days because of management, low decline rate, clean balance sheet and 80% of their production is medium gravity oil. He is looking for 50% upside from today’s share price. Dividend yield of 4.35%.

(A Top Pick June 12/15. Down 36.56%.) With oil prices below $50, it is very challenging. Have done really well with hedging last year, this year and next year, so are quite well protected. However, they do need to see higher oil prices in order to do well.

We are still not out of the oil environment, and all things could happen. When the commodity is low he likes to buy something, and as clean a company as possible. This one has a great team and great producing assets in Western Canada. They’ve done a great job and brought down costs. If oil stays down longer and lower, it kind of gets in trouble on obscure things that normally wouldn’t matter. This has a bunch of old producing assets and they are going to reinvigorate the plays. Has a massive amount of environmental abandonment liability, which might never be an issue, but it is out there, so he goes for companies that are a little bigger.

A very low beta way to have energy. A Western Canadian oil producer with low decline. They are 60% hedged this year and 35% next. Good balance sheet. If he is wrong and oil goes down to $30, this will go down, but not as much as others. Dividend yield of 4.57%.

A medium gravity oil producer in Alberta. They were liked because of low debt and low decline rates. As oil fell, they got penalized because their oil sells at a discount. They have one of the highest leverages to the increasing price of oil. He has a 10% weighting. More than 5% dividend. They should be one of the first to increase their dividend.

A medium quality producer, not heavy oil bitumen and not light oil. There is a differential discount for their oil, which is why the stock has come off. If they didn’t have hedges today, they would have zero margins. They are protected for the remainder of this year with a decent hedge book, but are largely naked next year. His call is on an oil price recovery. They have very little debt. The model of their company is based on very low cost to bring on oil combined with low corporate decline rates. The only thing working against them today is the price of oil. Dividend yield of 6.69%.

(A Top Pick June 12/15. Down 29.88%.) In June oil prices were $60 and there was some optimism at the point that the end of the downside was over on the oil side. When oil rolled again, it hurt the smaller producers especially. This is a medium gravity producer, so oil is a little heavier than most. That means they have pretty high operating costs. When oil prices drop a lot, their margins get really squeezed, but they have been able to maintain a very sound balance sheet and have also been able to work on operating costs. Recently acquired some assets from Penn West (PWT-T) which will really help their growth profile. Likes what management is doing and thinks this is an excellent company and a great Buy at this time.