MEG Energy Corp (MEG.TO)

It is the subject of a hostile takeover challenge. He thinks you should get the opinion of more under-the-hood kinds of guys. The market is trading above the takeover bid which indicates there is a possible higher bid.

Trading slightly above the take-out price (Husky is doing a hostile takeover). Maybe Cenovus will step in. It's difficult to
buy the oil sands given the deep WCS discount. Wait.

There is a hostile takeover attempt in play. He understands that this thing could trade a lot higher and there may be competing bids coming in. The market senses there are potentially other players that could come in. There is not much that technical analysis can do when M&A comes into play.

About 1/3 of their production is moving to US Gulf Coast markets, with the help of rail. He expects the heavy differential to narrow towards $20. Yield 0%. (Analysts’ price target is $11.33)

He is focused on WTI reaching over $80 next year and believes the market is over extrapolating the current heavy oil differential weakness too far into the future. The stock has sold off by 30% recently and thinks the NAV is $20 at current oil prices. They have large tax loss pools to draw on in the future. Yield 0%. (Analysts’ price target is $11.39)

A lot of consolidation around $6 over the past two years. The rally in April was solid and there is likely some profit taking going on. He is concerned about a potential drop to $7 very easily with a 6% drop today based on lower oil prices. It looks very tricky right now and it looks risky right now. (Analysts’ price target is $11.39)

He is incredibly bullish on oil. Meg offers the highest leverage in cash flow relative to oil price. They are a 100% pure play heavy oil producer. Meg offers massive leverage. Stock is down 16% this week. Sees over 100% upside if $80 oil. (Analysts’ price target is $11.17)

Heavy oil producer, similar to CNQ. Beaten down with lower oil prices, because of their large debt. If you think oil is going higher than $80, then there’s an opportunity there as they work through their debt. No dividend.

A huge torque to energy prices. He is forecasting $80 oil. This offers the highest leverage to this price. They have fully funded a production ramp in excess of 110 barrels per day. After that they can harvest free cash flow and pay down debt. They have a 50 year reserve body. They could theoretically then pay you a 15% dividend for 50 years. (Analysts’ target: $9.86).

This is not one you need to jump in at this stage. It looks very, very toppy where it currently is. It will probably be a news driven, commodity driven type play. If he owned it, he wouldn't let it break $5.

Will these types of companies be viable in a low oil price environment? This one has proved that it is going to weather the storm, so if you are a high-risk investor but want high returns, then he would just temper the amount you are investing into companies like this.

If you believe in significantly higher oil prices, this stock will go up several fold. If not, they are kind of stuck in the mud. They have excess financial leverage and got caught off side by the selloff in oil. There is not a lot they can do to get themselves out of this, other than a material increase in the price of oil. There are better opportunities elsewhere.