Cona Resources (CONA.TO)

Doing quite well operationally, but unfortunately have been hit with oil prices, especially on heavy oil. Have done an excellent job on hedging, which has protected them in terms of their payout ratio, but these will be rolling off a little bit next year. Excellent quality asset. Valuation is great and is a great way to get exposure to oil and gas. Potential for a dividend cut always remains.

A heavy oil producer with a primary focus in Saskatchewan. It is believed that next week the Alberta government is coming out with new the emission rules, but that applies to heavy oil companies, so don’t panic and Sell this stock. This pays a fairly attractive yield. They have the benefit of having a very good 60% hedge position next year of around $79.50. At the same time they have the benefit of no covenant issues. They do have a large component of private equity, so they can try to make some acquisitions.

An $18 stock a year ago, and is now $5. A heavy oil producer, predominantly in Saskatchewan. It has not rallied to the same extent as others. Trading at around 4.5X enterprise value to cash flow. Has close to a 10 year proved reserve life index. Has a huge hedge position for this year and next, so have been very immunized from today’s oil prices. Leverage is very low. Cut their dividend recently, but is still yielding 9.4%, which he believes is sustainable. The only knock is that they have a large private equity ownership, 67% of the stock.

Ramping up a heavy oil project and has some attractive light oil properties. Feels they are among the group that can maintain the dividend for at least another 6-9 months. This is on his radar screen and will possibly add in October-November.

They like the company. Be cautious, they are hedged, which will roll off next year, like everybody else, but the upside is great because they are a really cheap stock right now. Yield is 10%. They own in a small way.

Has fallen from $18 and he started buying at around $4. This company is 60% hedged on oil production next year, close to $80. Debt to cash flow is below 3X using Strip pricing. Have no debt maturity until 2022. Recently cut the dividend by 50%, and current yield is around 14%. Doesn’t see that being cut anytime soon. They are 100% Saskatchewan, so you have no exposure to the NDP uncertainty.

She owns a little. The payout is quite healthy. A word of caution is that the payout is helped a lot by hedging which tapers off next year. If the oil price environment has improved significantly next year, they might have a bit of a challenge, although like all companies they’ll start to lay in some hedging. Have been hurt because they are a heavy oil player. Dividend yield of 12.3% is sustainable.