Husky Energy (HSE.TO)

Like a lot of companies in the oil patch, dividends are being cut. We are coming into a probable 2^nd round of cuts. Companies have to do everything they can to keep their balance sheets in reasonable good shape. This company has good assets, but the oil is too low and they are not making any money.

Rather than eliminating or decreasing dividends, they decided to flop it into a form of stock dividend. In a single day a lot of dividend funds were forced sellers giving it a one-day significant fall off. Has recovered somewhat, but not a name the street is ever going to be fully warmed up to. To him this is an Avoid.

It has had a nasty fall. We have a lot of support from 2009, but then it recently broke down when they said they would pay the dividend in stock. The volume increased in the previous low and then again now. Tax loss selling is coming to an end. If you have it, keep it and it should rebound in January.

Took their regular scheduled dividend and paid it in shares instead of in cash. It is expected that they will reinstate the cash dividend in about two quarters. Fundamentally it is probably a Buy at this level, but he is very suspect of energy companies and you don’t need to be there right now. Crude oil is going to be under pressure for some time.

The senior Canadian space has all been acting a little bit better lately, while this company has gone down. The suspension of their cash dividend in favour of a stock dividend whacked the stock to below $20. There is probably good value in this company at this price level, but it will take time for investment sentiment to be repaired.

Until energy prices start to improve, you basically have dead money. There is great value in these things if you have a bullish outlook, but there is no rush to be here. You are much better to keep your powder dry, let the market turn and show a bit of strength.

Have changed their dividend to equity, which is one reason for the big selloff. They also wrote down some assets. They are more sustainable now. The balance sheet debt to cash flow is 2X for 2015, and 1.7X for next year given his assumption of $48 oil. This is the cheapest in the integrated names. Even with all the cutbacks, he is still modeling production growth of about 4%. They stand ready to sell up to 50,000 barrels of production and to do a royalty spin out. It is approaching good value if you believe oil has found a floor at $48 WTI.

Changed their dividend from a cash payment to a share payment, so you are going to get the old dividend now in shares. Over the next 2 years, they plan to build their business model at $40 oil. Looking at sound risk management, that makes sense. This is trading cheaply and it has the assets that the oil market wants to have. Has a refinery. Trading at about 5X cash flow. Dividend yield of 6.38%.

He has concerns about the sector. Oil prices are probably not going higher in the next couple of years. He prefers SU-T. Refiners in the US look more attractive. Steer clear of producers at this point.

Clean balance sheet, but the stock is not reflecting that. He is a little confused on why the stock has been so soft. Thinks this is a stock that is going to perform well when oil prices start to move. This is going to be an okay investment going forward.

Generally negative on oils, even the integrateds like this one. It has downstream assets in its refineries and gas stations. Certainly a lot safer than a pure exploration or pure producer in that area. Taking a little nibble on this one is okay, as it is not going to disappear. The dividend is pretty secure.

(Past Top Pick July 21 2.014, Husky down 28.42%) Using stop losses he got out of all 3 of his past top picks because of the oil crisis. In the case of Husky you can see that it is trying to make a base. It is almost making a “W” and if it breaks the downtrend line, it might be a buy. But it hasn't quite yet.

Their refining operations have held in much better than companies that just produce oil. The dividend is attractive and safe. They have an off shore gas play in China that is coming on line. This is one name you could start to get some exposure to.

Have done a good job in the last couple of quarters and he has bought some recently. Positive cash flow in the downstream refining business. Pays a nice dividend. When oil moves higher this one will underperform.

Downstream assets. They buy oil at this level and turn it into gasoline, etc. It is the place to be. They repurposed their upstream oil and gas assets to very long life, low decline, and low capital intensity. Very profitable projects. They have a series of well thought out horizontal drilling projects in Western Canada. They use a cookie cutter approach and get very high rates of return.