CONNACHER OIL AND GAS LIMITED (CLC.TO) Buy,…

CONNACHER OIL AND GAS LIMITED (CLC.TO)

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DON'T BUY

Very high risk. Very technically adept but have mismanaged the capital structure. Needs $85 oil to cover the interest costs on the debt and finance their capital expenditures.

BUY

High risk because their debt levels are extremely high. Have changed their strategy. People are concerned about their liquidity and solvency but they have $75 million in cash and liquidity is very good. Expect they will continue to pay down debt.

WAIT

Oil. This one follows a very distinct seasonality pattern. Usually oil sands stocks are interesting from around the end of November through to May. However, their current trend of this stock is still heading lower. This stock has very strong seasonality.

DON'T BUY

Producing in the oil sands but the problem is they took on an awful lot of debt. Anytime the oil price goes up, they can repay their loans, but if the sentiment is that oil price is going to come off, it gets crushed.

BUY

Victim of a falling oil price. Have more leverage of any oil company in Canada. Cost structure is extraordinarily high. Ramp up at one of their oil sands operations has been disappointing. Recently bought 10 million shares because there is a tremendous difference in where the stock is and its NAV. High risk investment.

HOLD

Probably will trend up. He has a hold on this. Spotty record and high levels of debt. Be cautious on names that have a high level of debt given problems with US and European debt.

PAST TOP PICK

(A Top Pick April 5/10. Down 38.01%.) Had expected oil prices to rally and they did but this company didn’t keep up so she sold and broke even.

BUY

Average refineries in North America are about 92 years old and were built for a 40-year life span. Their refinery produces jet and higher grade fuels so margins should do quite well. Also have their debt in US dollars. Well diversified. Has a $2 target on this one.

WAIT

They are doing lots of deals with their debt. Would sit back and watch this one for a while before getting into it.

PAST TOP PICK

(A Top Pick April 5/10. Down 18.07%.) Execution wasn't as good as she had hoped.

COMMENT

If you are a Bull on oil, there is not a better stock to own in Canada. It is the most leveraged to oil and heavy oil. Current enterprise value is $1.5 billion and proven plus probable NAV is $3 billion, so it implies more than a double in the current share price. Trades at a discount because of their $850 million debt. Selling off non-core assets and are hoping for $250 million. Also have 3 oil wells in light oil. Questions their ability to finance future growth. $1.75-$1.80 is a pretty conservative outlook for the stock price.

DON'T BUY

COMMENT

In the late stages of a bull you should try to stay away from small caps. You’ll do a lot better with the bigger names. This one had a period of bullish congestion last year and is trying to break out. You should be OK.

BUY ON WEAKNESS

Very levered to oil prices, both ways. Are selling assets to clean up balance sheet. As long as oil stays above $85, they are undervalued. A junior oil sands play. A little riskier than average.

HOLD

A good name with oil sands properties. If you are looking for torque to rising oil prices, go with COS. Biggest push back is disappointing production and relatively high debt levels.

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CONNACHER OIL AND GAS LIMITED (CLC.TO)