Encana Corp (ECA.TO)

Doesn’t invest in large cap energy names for the most part, because it is very, very difficult to grow these businesses organically for extended periods of time. This one has been the poster boy for selling low and buying high. They split the company up and ever since then it has been a disaster. Have been having a garage sale to pay a dividend and it has been destroying the stock price for 5 years. Not a fan.

It is way too early for stocks like this. Thinks it is going to stay in this price range for the foreseeable future. A good company.

After selling off PrairieSky (PSK-T) they have a couple of billion dollars which they needed for their balance sheet. They were moving their assets into the US and wanted to be in some of the hot play areas. Now very big players in the US in the Eagle Ford and Permian. In Canada they are very big in the Montney and Duvernay. Stock has been hit because of all the problems in the oil patch. Have had to sell some assets to repair the balance sheet. BV is about $13 and the stock got down to $13.31 BV in Dec/14. Any time you can see it in the $13-$14 BV, it is very attractive. Long-term he is bullish on natural gas.

As much as the company has tried to reposition the portfolio towards liquids, changing a ship that big is a work in progress. He likes what the new CEO has done over the last year. 2014 was the transformational year, so they are really focusing on 4 key plays. He is not positive on gas right now, so he would not be a holder of this.

Gas is the primary driver of this one. There continues to be lots of gas. Even if production pulls back it is easy to put it back on. He can’t see the price of gas going up dramatically. They had lots of balance sheet issues, but addressed those with an equity raise.

It is hard to invest in energy and we are seeing energy down again today. It was recently out raising a billion to address its balance sheet problems. This makes it a good time to take a look at this one.

This is down like the group. Not a pure gas anymore, but feels they are susceptible to lower prices because they have an oily side. He would much prefer Tourmaline (TOU-T) and Paramount Resources (POU-T).

Likes what new management has done since they have come in and taken over the company. Running it extremely well and are consolidating the assets in a better way, which is tough to do in this environment. Balance sheet is a little stretched, but the financing they did is going to help that to some degree. Recently bought into this a little, and is comfortable with it.

Has done a very good job and she really likes the approach management has taken in ensuring that they have gone away from that 32 plate area to 7 core areas. They are in the right place. Her only concern now is that they are trying to grow oil production in an environment where oil is very challenged. Have moved their production profile from being very gassy to a lot more oily. She would rather see producers use a “wait and see” approach, so she is a little bit cautious on this one right now.

At $50 oil and $3.25 natural gas, cash flows per share fall 40%. Their balance sheet does get worse and goes from debt to cash flow at 5.4 times. If commodity prices stay as low as they are, they are going to have to cut their dividend and their CapX even more.

(A Top Pick Dec 11/13. Down 19.13%.) They transformed this company significantly over the last number of years, and much more liquids oriented than it used to be. Longer-term, management has done an extremely good job. They transformed the company at a much quicker pace than people anticipated. When looking for companies to participate in, in this troubled sector, you want to pick the survivors, and he believes this will be one of them going forward. Still attractive to him.

With this you are banking on a rebound in the price of oil, which he thinks is probably not a bad bet. This was heavily gas and then made a huge switch into oil. Unlike all the other gas stocks, which held up, this got much more damaged. However, the stock is now fairly cheap. If you are patient and nothing too awful happens with oil from here and into the next year, the stock should do okay.

(A Top Pick Dec 9/13. Down 20.27%.) Has sold a little bit of this. He thinks in general they are moving in the right direction. Has a few tough years ahead of it.

Their move to get into oil means it will take all of this year and most of next year to move to the high margin oil business. It may be beneficial to do this right now. The oil price trend will reverse itself at some point.

He added at around $18. He sold at $21 a couple of times. You don’t want to run from these things here.