Opinions
Swanzy Quarshie
Husky Energy
HSE-T
SELL
Feb 10, 2016
$12.250
Stock price when the opinion was issued
oil
gas
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TOP PICK
Hold for a year or so. We're in a secular bear market for commodities, but we're heading into year two of a four-year cycle. Year three is strong for energy (2021). So, HSE is poised to rise. He expects this to move above $12 to $16, and possibly higher in 2021. Resistance is $13-14, the upside target. (Analysts’ price target is $11.39)
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gas
HOLD
Down and out? Remember there is a nice dividend ($0.50 annually and a yield over 5%). The skepticism is in how are they going to grow the business. The balance sheet is in fine shape -- debt of only $4.6 billion and they are sitting on over $2 billion in cash. The key is with production, can they start growing it? Will be East Coast Canada, China, etc? When WTI was around $66 the share price traded over $20. If you own it stay with it.
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gas
DON'T BUY
It has been a very difficult share to own for investors. Right now they are in defense mode again as oil prices have fallen recently. He expects a proactive cut in production out of OPEC however. Creditors are putting clamps on further US shale production currently, so he feels there is a road to better times ahead. He thinks there are better investments than Husky out there though.
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COMMENT
They announced a $1-billion spending cutback. Their cash flow is right on their dividend, so they could cut the dividend and use that cash to lower their debt. Cash flow is tight with this low oil price. They could endure Q2 without cutting the dividend and cash flow improves along with the oil price. The upstream side will have less cash flow, but downstream could be much more profitable if people return to driving.
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COMMENT
ATH vs HSE vs MEG? The clear stand out is MEG, who is 55% hedged at $59 oil prices. ATH has a high cost project with Hangingstone and is burning cash, although they have enough liquidity for the next 9 months. He would never own HSE, because of their ESG issues. All bets are off for all of them if $25 oil prices remain in 2021.
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gas
A challenged company. Has one of the cleaner balance sheets, however management misstepped when they decided they were going to pay the dividend with all shares, and then decided to remove the dividend altogether. This is the trouble when you have one primary shareholder, as they essentially dictate what happens to the company. Doesn’t feel the upside is as great as with other companies. If you own, consider switching.