Legacy Oil and Gas Inc. (LEG.TO)

(A Top Pick Aug 1/13. Up 9.02%.) Phenomenal asset base in all the best oil-producing regions in Western Canada. Incredible management team. Trading at only 3X cash flow and doesn’t see why it wouldn’t trade at 5X. Light oil base that has big production growth in front of it. Still a Buy.

Is coming out of the blue. A lot of these have been moving up.

Stock was killed for much of 2012. They have continued to execute. Had 5 quarters where they beat estimates and thinks it will do so again in Q3. For this year and 2014, spending cash flow they will be able to pay down their debt and grow cash flow by about 13%. Feels debt to cash flow will come down to 1.6 times. US investors are becoming more interested when they see how cheap mid-cap light oil growth companies are. Have a 15 year drilling inventory. Value of their known reserves is about $9.50. Through identified inventory that they haven’t booked, they think they can double that. Ultimate potential value of the shares would be in the mid-teens if not higher. He is looking for $9.

Good management. A premier light oil company operating in Alberta. He bought this company for growth and he thinks they are well-positioned. Have a huge tract of opportunities. A pure light gas player. Have been hedging at about $100 a barrel and he thinks they have a terrific future. Very cheap. NAV is at least $10 and it should morph into higher levels.

(Market Call Minute.) Very large portfolio. Have been doing a very good job in Turner Valley. Stock is very cheap at 2X cash flow.

[Caller wants High Dividend Energy – what does guest recommend?] Likes LEG-T. But no dividend but there is speculation that they could convert to a dividend paying company. SU-T (HOLD) is a good way to play and get a dividend. You might also consider TOU-T

Put out a really good quarter last Monday. Stock continues to outline 10%-15% per share growth for multiple years. Have a 15 year drilling inventory. Light oil producer. Trades at 4X. Used to trade at 7X so even if it gets to a 6 multiple on continued execution, they’ll be a $9 stock. Biggest concern people have is the leverage. He is not concerned. They are going to focus on deleveraging the balance sheet.

Had some bad times the past couple of years. Production numbers were pretty good and the growth is there. He would like to see some better per share growth down to the bottom line, but in and of itself, the quarter they released was okay, but the market is still sceptical of the long-term situation. He likes it. Feels the management team knows what they are doing.

Good management. In very good shape. Doing 2 acquisitions that they did counter cyclically. Bought the Villanova Saskatchewan assets at a good price. Have very low decline rates in Turner Valley. It just has to turn around that debt to cash flow and it would be eligible as another dividend paying company.

Close to self-sustaining. 20k barrel per day production. Exceptional management. LEG is at a point where they have enough cash flow for capital spending. 3 times cash flow.

Finally getting some recognition from the street in terms of some of the positives of underlying fundamentals. Has been a victim of very wet weather. 2 years ago they missed guidance and had to spend a bit more which has been an overhang on the stock, even though they’ve been executing. Beat their 2012 guidance and he thinks this year is going to be very strong. Have a suite of very, very good assets. Turner Valley is working out much better than people had given them credit for. In their most recent wells, they drilled 3 with certain tweaks by changing their drilling fluid. Also shot 3-D seismic allowing them to stay in the zone much, much longer. Have also unlocked a good play in Midal with paybacks in less than a year and a half. Exposed to over 300 million barrels of light oil. Have an inventory of 15 years.

We are trying to have a leg up for seasonality. It has banged into the 200 day moving average. You would like to see it get above the $6.50 level. Until you get above $8 you are in a bit of a trading range in this stock.

Light oil in Alberta and Saskatchewan, a Bakken play mostly. Other companies have turned to a dividend model. This one was considering it but believes they are now saying they are going to stay a growth. Recycle ratio is 2X, which means that every $1 they get out of the ground, they make into $2. Looks like their production growth per share is about 11%. Feels that if they get to an average valuation with 11% growth the stock could be $9 one year out.

(Market Call Minute.) The company is in a turnaround phase. They are managing within cash flow and are doing a pretty good job.

Chart is showing a little bit of a double bottom taking place, which is a positive sign. This is also the seasonal time for energy.