Pengrowth Energy (PGF.TO)

(Market Call Minute.) The debt on this is way, way too high. The CEO is very well regarded. He inherited a "bag of hammers" and has been selling off assets to pay down debt. Has been doing a fantastic job, but just doesn't see the investment thesis on this.

(A Top Pick Apr 7/17, Down 29%) They did a good job of paying down debt. He thinks they will now move on to phase II of the current project and will bring up production. They will more than double production. It will continually bring on more cash flow. He thinks the stock is cheap.

They've sold a lot of assets and repaid a lot of debt. They've got covenant amendments, so are still in operations. Sees the balance sheet turning the corner in 2019. The bad news is that the debt to cash flow is about 6 times. Very vulnerable if prices plummet. It is still very pricey on an EV 2 discounted cash flow. He would look at something else.

If you are bullish on oil this one will move more. Don’t sell it if you think oil is going to go but otherwise you have to let it go.

(A Past Top Pick Jan 9/17, Down 19%) They did a lot of assets sales and the balance sheet is now in good shape. It could see some tax loss selling and that would make it a cheap stock. He thinks it has significant upside next year. They have a growth phase ahead of them.

He is a little hesitant to get into any of the energy companies. Thought the ROC should have turned by now. Price has gone up a little and they’ve gotten leaner, and yet results are still showing a low to even negative return on Return on Capital. To make matters worse, they have a high debt.

The last few days it has moved. This is not one he is invested in because of the debt load. They are trying to rectify this. He prefers other companies with higher netbacks. There are better opportunities for a highly levered oil company.

This is going through a major restructuring. Sold a big chunk of their assets and have gone into other assets. Technically, the long-term trend is still on the downside. However, it has broken the downtrend in the last few days, and there is long-term support. That is encouraging. If you own it, continue to hold until about the 2^nd week in December.

If there is an upswing in oil, this along with the Baytex’s (BTE-T) and the Pengrowth’s (PGF-T) in oil are going to really, really rock. This stock could easily double back to $1.50, maybe $2. However, failing that, it is kind of stuck in the water. They just took on excessive financial leverage, and has been selling off assets.

(A Top Pick Jan 9/17. Down 47%.) This is going to be a great stock to own for the next business cycle. They’ve been selling assets to get their debt under control. They’ll see volume growth by the 4^th quarter.

They have an interesting group of assets, 20% Nat Gas, 50% oil. But the problem is their huge debt. They need to sell assets down. There is not a lot of production growth in their assets.

(A Top Pick Sept 6/16. Down 43%.) He became more defensive after this. He likes this one for the long-term. It was sitting with $1.7 billion of debt about a year ago. They’ve sold assets and after they finish selling the rest of the Swan Hills, there will be $700 million of debt. This is a very attractive Buy under $1.10, and a table pounding buy under $1. A year from now, this could be over $3.

(A Top Pick April 22/16. Down 24%.) Everybody has been wanting to see the balance sheet repaired which has been done.

This was sitting at over $2 billion in debt. They just announced that they had paid down $500 million. Since then they have made 2 asset sales. Once they pay down the debt, they will be below $900 million. They are still looking to sell the Swan Hills which he thinks they potentially can for $250 million. This will be a company with an equity component of almost $1.8 billion and $600 million in debt, and they have solved the problem. The big thing is that Lindberg is ramping up, and right now they are at about 15,000 BOE’s a day over that, and by the end of the year that number will be 19,000 or 20,000 because they are doing 7 well-pairs to bring it on. They are also moving on phase 2, which will bring production in 2020 to 38,000-39,000 BOE’s a day. Once they have this debt out of the way, they can grow their Montney assets. BV is $2.71 and NAV is $2.75. He has a $3.60 12-month target. The bears are looking at the debt and are missing the point of the rising value of the asset base and the generating of cash. (Analysts price target is $1.75.)

This one of his few losers in the portfolio. Paying down the debt is great, but they are selling off assets. What is that going to do to revenues in the future? They still have a big debt load. They won’t have any payments due until Aug/18. He is happy holding.