Meren Energy (MER.TO)

His understanding is that the Lundins have exited the stock, as they don’t want a company they can’t control. He’s stopped exiting his own position. Generates a lot of cash. The one thing that bothers him is that it’s being too generous to shareholders; he’d rather cash be used for drilling.

(Formerly Africa Oil.)  Now has about a third of his original position, as he's selling it down. Owned it for 2 reasons:  traded at substantial discount to net present value of assets, and liked exploration upside. Management chose to return capital to shareholders instead of pursuing exploration upside.

MER is interesting. A lot of its oil production is hedged, which is great when there is oil weakness and not s great in an oil rally. Still, it is a very cheap stock and offers a very high dividend right now. The merger with Prime looks good, though the discussions with Tullow have collapsed.  It gets a good premium on its production, a combination of good transportation costs, hedging and grades as well. With its very large 2022 discovery now getting more developed (the largest in the world in many years) the growth outlook we think is better than many Canadian names. Risks are still higher, though. With the dividend (likely OK), growth, management, shareholders and benefits of the merger, we do think it should be trading at more than 6X earnings. The average analyst target price is more than twice the current trading price. 
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(Name changed from Africa Oil on 15 May 2025.)  
Bought out joint venture partner in Nigeria. Has begun the process of decapitalizing. Generates substantial surplus cashflow, which it's returning to shareholders via dividends and buybacks. Market is nervous about Nigeria, as it should be. Controlling shareholders have been reducing their ownership. CEO, whom he respected, has resigned.

He continues to own it in the hopes that some of the cashflow can be directed to exploring the extraordinary potential in the country.