Legacy Oil and Gas Inc. (LEG.TO)

(Market Call Minute.) Likes the opportunity for this company, and sees a re-rating in 2015 as people see the results of better efficiencies and lower costs.

Has been labouring under a balance sheet that was way too leveraged compared to its peers, but they did have a very large asset suite that they can work on, but are constrained. It took a long time for this to change. Made 2 acquisitions in the last little while. These types of acquisitions seem to be deleveraging the company’s balance sheet. This is not a dividend model, but a growth model, so they have to make sure they have a large suite of very profitable projects. Seems to be at a discount to some of its peers. Thinks there will be some good nuggets to come out of their acquisition

A dividend is something that is on the radar screen with the management and the board. A dividend would be appropriate. In the near term they will focus on completions in the Turner Valley. Your timeframe has to be more than a year.

Has been paring off. They made an acquisition recently. They are now drilling wells with payout less than a year, which he likes. Their debt used to be very high and production per share was a little low. So they have been able to find a new zone and to unlock production per share growth and also have reduced debt a bit.

Another of those high leverage positioned stocks that has been struggling. These names are getting interesting because there is an improvement in the Addition & Development market and prices are starting to improve. This company has been a disappointment for quite some time with a pretty stretched balance sheet and is slowly working it down. As prices for dispositions work, these stocks have gone up. You also might like to look at Lightstream (LTS-T) which has recently announced some dispositions and the stock started to appreciate. We are at that stage in the cycle where you can buy some of these leveraged plays and play the deleveraging story.

Recently bought this in the $6 range and a little more in the high $7 range. Sees visibility as they continue to try to deleverage the balance sheet and look for creative ways to create value strategically. You should see a $10 share price by year-end.

Recently made a good acquisition near one of their core plays. Has been a laggard for a while because of the high leverage on their balance sheet for the last couple of years. That is starting to change because management is committed to address that by either joint venture or some royalty interests, etc. Stock had a pretty good run which is why you have seen a drop back here. He thinks there will be continued upside in this company.

A very cheap stock. Has run very nicely. Because it was coming from being statistically cheap (97% oil), it is not one of these huge growthy companies, but the valuation would still imply that you could see $10-$11.

He bought in again. The asset quality is very good. The capital exit by US investors has reversed. They regained a lot of their lost momentum. Their wells are hugely economic. They will reduce leverage on their balance sheet. He would not wait for it to pull back.

Has been put in the penalty box because of debt to cash flow ratios. Having difficulty growing. An interest in part of the asset they have is one of the major assets that Trent may use to go ahead and change the debt position.

(Market Call Minute) There is good torque to oil prices.

Thinks that they just might increase their dividend in the near future. Has a $9 target with a “sector outperform” on it. Likes their properties and what the company has been doing.

Has been in the penalty box over the last few years. He has been buying shares in the $5-$6 range. Company is now starting to perform operationally the way he had expected it to perform 2-3 years ago. If you get it at around $6.50, the upside is probably $7.50-$8, which is where it will trade along with its peers. Some view its debt level of just a bit over 2X Debt to Cash Flow, as a little bit high. Management knows that and they are doing what they can with any excess cash flow to pay down debt. If it can have a Debt to Cash Flow ratio at 1.5X by the end of this year, he thinks you will see an $8 stock.

Executed quarter after quarter after quarter, beat expectations, yet nobody cared. His hope is that there are 2 underlying catalysts that could make people care. The reserve report they issued last week was very, very good and highlighted just how profitable that these barrels are that they are producing. It is costing them on average just over $20 to find a barrel, and at the end of the day, when you take off royalties and operating costs, they are net backing about $60. Their historical production growth rate has not been quite high enough to get people excited. He believes they are currently seeking to bring in a joint venture drilling partner on part of their acreage. His guess is that they are exploring the sale of some of their production to raise cash to pay down their debt to bring down their debt to cash flow targeting a 1X multiple. This could create more interest.

The big picture story for the next 5 years or so, supply is going to dwarf demand in oil and gas in North America. However, when you look at a stock like this that has been beaten up because of some of those reasons of weaker production prices in Canada, and you look at a five-year picture, what you are seeing in this and a lot of these focused here in Canada, you’ve got these big bases coming. In order to get relief there and have some of these start to break out, you need that supply/demand thing to start to turn around. Pipelines east and west, pipelines north and south, LNG distribution should bring better prices to Canada but it is still a few years off. The stocks are starting to respond so this is important to watch.