Canadian Natural Rsrcs (CNQ.TO)

(A Top Pick August 28/12. Up 7.46%.) Sold his holdings.

(A Top Pick August 12/12. Up 6.11%.) In the penalty box and probably deserves to be. Now at the lowest valuation on a relative basis to its historical valuation that we have seen in many, many years. One thing that it has going for it is that the heavy oil differential has narrowed significantly over the last year.

For him, this was a choice between this and Suncor (SU-T). Suncor has a more diversified business. This one really needs that heavy oil differential in Canada to go up and stay up. Other than that, these 2 companies are almost equal. (See Top Picks.)

(Market Call Minute)

Have been having issues on their Primrose property. They think they have identified the leaks. Have seemed to have gotten around their Horizons problem of last year. Still remains a free cash flow juggernaut where, over the next 10 years, free cash flow will exceed their current market cap and their debt. People have to be patient with this one. Great company and long-term fundamentals remain very good.

Oil/gas company with international operations, both in the North Sea and West Africa. The Canadian operations in the oil sands continue to generate excellent returns. 10^th consecutive year that they have increased production. Had a hiccup when the Primrose East had seepage from their cyclic steam operations. This caused a $3.5 billion hit on their CapX. One of the largest reserve bases in its group. Yield of 1.62%. Price to cash flow is very cheap at 5.1X compared to 6.1X of the comp.

Historically does well in the summer time. The summer trade is coming in, a nice little trading range. Will probably get a nice little move on soon. A number of analysts are jumping on this to see it go higher.

There is uncertainty about one of their properties, Primrose, which has 2 leaks and is releasing bitumen. This company had this problem in 2009 and were ordered to stop steaming. Short-term guidance from this company is that there are no changes. Have stopped steaming but still have production. The concern is the impact for 2014. Has a proved reserve value of around $27, which would be his absolute worst scenario. If it ever approached that level, he’d be a very active acquirer.

(Market Call Minute.) Canada’s preeminent heavy oil producer. Likes the fundamentals of heavy oil going forward.

For longer term appreciation. Even in the short term on a valuation basis, he would lean toward this one. Paying less for their profitability than for BTE-T. CNQ has a low payout ratio. He would own it at the right price.

This is one of his favourite stocks in the space. On a price to cash flow basis, it is one of the cheapest at about 5X this year’s and next year’s cash flow basis per share. Looking at what the price of WTI has been doing relative to Brent and the narrowing of the spreads, (related to 1) transportation of oil by rail, 2) hope that Keystone will get passed and 3) if Ontario gas distributors can be assuaged with a TransCanada Pipe (TRP-T) conversion to transporting oil from West to East), these all speak well for this company. Can see $40 in the next 12 months.

This is one of the companies that is really going to benefit from the tightening of differentials. Technically it has broken up higher. He is watching this closely. Has had problems in the past but things seem to be working out alright. One of their problems is a leakage in one of their oil recovery projects and he is not sure of what the implication of this is.

Good long-term company but be aware of a correction at some point. You might be safer in some of the senior oil/gas companies because they have really been the dogs of the market for quite a long time so they are probably going to be sustained. For the long-term this company is all right but you are going to get corrections.

(Market Call Minute.) Feels this is the best looking one of the seniors and he just made a purchase today. Numbers will be improving going forward.

Thinks this will continue to do well if the sector generally recovers. The whole Keystone pipeline uncertainty has cast a pall over the whole industry, especially the oil sands.