Crescent Point Energy Corp (CPG.TO)

It is a very credible management team. Energy may not be where you want to fish right now, but this one is good if your outlook is 3 to 5 years. This will be one of those survivors in the energy patch.

High dividend yield. There is a concern in the marketplace about the sustainability of the dividend, although she is comfortable with it. If oil stayed here or went lower then she would reconsider the dividend sustainability. She is cautious about stepping into oil plays in a big way, however.

(Top Pick May 20/14, Down 34.64%) He is down because of the oil mess. He talked to the company extensively and it is one of the best run companies in the country. It is going to be a true mid to large cap producer. They acquire land or companies with land. They keep on issuing equity to pay for acquisitions. In the latest deal they picked up 700 wells that are conducive to water flood with recover rates of 15-25%. Despite all the issuance of new shares, you look at the production growth per share and it is positive.

Just issued a lot more equity, which is helping to protect their balance sheet. Paying a real high dividend. Debt to cash flow is pretty high at around 2.5X. There are better ways to be making money than this. If you have it, OK.

50% of production is hedged over 90%. As time goes by the hedges roll over and then cash flow will come down. The 10% yield they can maintain.

Thinks this one is a Buy in this kind of environment. You do want to be in a company where their capital is essentially going to be safe. This is a call option on higher oil prices. Did an acquisition of Legacy Oil, which is a very good acquisition. It is accretive and right in their backyard. She thinks the market is getting fatigued with their deals.

Acquiring Legacy (LEG-T). They have garnered a reputation for being a serial issuer. In this kind of oil price environment, people probably now appreciate that they issued stock and didn’t leverage up to do a lot of deals they did. Leaves them in a strong position. The 10.08% dividend is safe given the hedging they have in place for this year, and about a 3^rd into 2016. The balance sheet is still solid.

Had good support of around $35 for a number of years. Currently there is a shorter term support at around $27.50, which it has tested a couple of times. If it doesn’t hold this level, it would probably go to the low it had at the end of December and the low $20s. Dividend yield of around 10%.

The company did an equity issue to buy Legacy a couple of weeks ago. Got it at a good price and it is going to be a good acquisition for them longer-term. The company has cut capital spending. Have a very good hedging position this year. Dividend yield of 10.2%, and they would rather cut capital spending rather than cut the dividend.

Raised $600 Million a week or two ago to fund an acquisition, which he likes. He likes CPG-T. If we get to $60 oil it could be a $30-$32 stock. People don’t like the sustainability of the dividend. They were at 135% payout, but after this acquisition it lowers the payout by about 10 points. Their dividend should be seen as more sustainable. He doesn’t see the dividend being cut.

There have been a number of moving parts lately. Just acquired Legacy, which was a big acquisition. In order to do so, they had to raise capital, which increased debt to cash flow to around 3.4 times. Also, increased their payout ratio to over 100%. They are not earning their dividend, so are depending again on their DRIP program. Yield of around 10%, is usually a worrying sign. He is not adding to his position, but is watching it carefully.

Recently did a new issue again. They are very busy, and he applauds them on how busy they are. Their balance sheet is pretty strong and they have the flexibility to maintain that dividend. But they absolutely have to have the oil price recover, and he doesn’t believe that will happen.

On this one, you really have to have an outlook on where you think oil is going. If you are bullish on oil, this is one of the plays to own. A dominant producer in the Bakken in Saskatchewan. Recently acquired Legacy, which had good assets that were complementary to this company’s holdings. He sees oil in the next 6 months as flat to slightly down, but as we go into next year it should start to rise. This would be one of the positions he would be comfortable owning here.

He has always had a problem with them constantly issuing equity. He would prefer a company that didn’t need to do it. The Legacy acquisition is okay. He likes them more now than last year because more of their assets are outside of Alberta. If the cycle turns, the acquisition will look really good. Don’t worry about the dividend.

Acquired Legacy (LEG-T) and had to assume some debt to do some equity. In a sense that is the kiss of death for some people, but this is an accretive acquisition and you didn’t want them to do it for all debt. The equity issue is at $28.50 and the stock is still $.50 underwater. Thinks that at around $28 with a 2.76% dividend, it gives you almost a 10% yield. If it goes back to where it was 2 days before the acquisition, the stock will be up 10 from here and with a 10% dividend, $31 a year from now gives you a 20% return. Yield of 9.85%.