Opinions

Frederick Kozak Gran Tierra Energy Inc. GTE-T HOLD Jul 16, 2008

His target price is below current stock price. Guayuyaco field is very interesting. Potentially found the largest onshore discovery in Colombia in the last 10 years. Current drilling should put the pin in the oil field size and should be around the end of July.

Frederick Kozak

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$6.150

Stock price when the opinion was issued

oil gas

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DON'T BUY

He's out of the energy sector. It's one of the worst sectors due to an exodus of investors. He owns BP and a few smaller Canadian ones, like Cardinal.

COMMENT

Gran Tierra (GTE-T) vs Parex Resources (PXT-T). A tale of comparing two brothers. Both are in South America with Columbian core assets. Parex being a pure play vs Gran Tierra having ventured into Peru and Brazil and have exited these areas and now looking at Mexico and so forth. Prefers Parex as a South American play, very consistant. Gran Tierra has had its misteps, still has very good core Columbian assets.

BUY ON WEAKNESS

He really likes it. It is on his coverage list. Under 2 times cash flow. The balance sheet is in good shape. It is trading at half book value. Their production will increase. His target is $5.50. It is on his shopping list.

TOP PICK

They had some problems with some pumps that reduced production. The problems have been resolved and sees them generating $0.97 cents in cash flow this year. He expects to see them pay down debt and the stock is very cheap presently. His target price is $5.50. Yield 0% (Analysts’ price target is $2.41)

PAST TOP PICK

(A Top Pick Mar 28/19, Down 90%) That loss reflects the oil sector. But based on their fundamentals, the stock is oversold--all small/medium-caps. This is a long-term hold given its quality assets. He's holding and will add in the near future.

DON'T BUY

Has become a bit too small cap for him and it has fallen into this category of energy producers with high debt loads. This was an $8 stock way back. At this level it is cheap on a book value basis but not on a cash flow basis.

BUY ON WEAKNESS

An oil producer in Colombia. They have shut-in volumes and are not spending money, but rather are paying down debt. Expect a production cut in the next two quarter and only rising in Q4. Buy this below 40 cents.

DON'T BUY

Small oil and gas producer operating in Colombia. His preferred play is Parex Resources. GTE is more aggressive and not as financially strong. Parex has no debt, in fact has cash. GTE production fell off a cliff last year. Higher beta. More leveraged to an oil recovery, if you think oil's going to $70-75, which he doesn't.

TOP PICK

Good development and exploration opportunities. Taking free cashflow and paying down debt, which will continue till 2023. Exploration gives them opportunity to grow volumes. Price of oil has allowed it to return shareholder value. Insiders are major shareholders. No dividend. (Analysts’ price target is $2.88)

BUY

Great energy stock, but seeing better opportunity in other names. Operating in Colombia which has geopolitical risk. Windfall taxes etc.

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Frederick Kozak Gran Tierra Energy Inc. GTE-T HOLD Jul 16, 2008

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