Pengrowth Energy (PGF.TO)

With as much debt as they have they are not viable if the price of oil goes down. They have a big problem in terms of their balance sheet. Don’t make it a core holding, but you could buy a small position if you wanted to.

It trades at a premium. They are at 6 times debt to cash flow. He wants re-rate stories. There are other stories. You want a leaner, cleaner story.

Sell? There is probably some news on the way regarding this company. There was a rumour in Toronto that somebody was going to buy an asset from them, which would dramatically improve the balance sheet. Also, if he is right about crude oil prices, this is a very torquey, heavy oil, high cost name that would probably give you a reasonable lift. In other words, there are probably more opportune times to sell. Wait a few months.

About a 50/50 mix between oil and natural gas. It has a big balance sheet, and they are going to have to look to do something to fix it. Have some very good assets. Seymour Schulich is a big shareholder and has been buying a lot of stock on the open market, which is a positive sign. At these levels, he doesn’t think it is compelling enough given the risks you are undertaking.

(Top Pick Sep 6/16, Down 9.35%) It backed off recently but see his Top Picks today.

They had to find a way to survive after the government changed the rules for royalty trusts. They did a good job of focusing on getting long term assets. They aim to sell their non-core assets. When you get to the fourth quarter their balance sheet will be repaired and they could be a $3 stock in 2018. It will be a table pounding buy very shortly. (Analysts’ Target Price: $2.01).

This is an interesting one in the oil/gas space. It has been overlooked because they’ve had so many problems over the last number of years and have had to sell off a lot of assets. They took on too much debt and made too many acquisitions. They’ve got some smart people on the board and involved with the company. Have been selling off assets and really trying to shrink the business. This is on his radar screen.

Management hasn’t come through with a lot of the promises they made through the years. Conference calls always sounds like things are going really well, but for years the stock price has kept going down. It may be at a turning point now. The stock is cheap on many levels. They still have a lot of debt to deal with. If they don’t deal with that well, that will come home to roost in the next year or so.

A lot of energy stocks have a similar pattern. In the short term, this looks fantastic, but looking at a 5-year chart, you are bumping up against huge resistance at $3. It may have a little more upside, maybe to $2-$2.30, but it has a mountain of supply and resistance going back to 2012. He is not too keen on this.

Essentially an oil sands play. She sees it as treading water until we get some resolution with oil prices. Also, has a lot of debt. Even when oil prices and the story improves, they are going to need to raise equity.

Pengrowth (PGF-T) and Perpetual (PMT-T)? They have had some challenges with their balance sheet over the last couple of years, with the collapse in oil prices. The company has been pretty conservative in their spending this year. They have very good assets. Their balance sheet is still over 3X EBITDA and 2X debt to cash flow, which is a little high for comfort, but they are slowly getting there. He feels that this one is better positioned.

(A Top Pick April 22/16. Up 9.04%.) In the 2^nd quarter, they did 56,735 BOE’s a day, 62% liquids. They did $0.16 in cash flow. Have done a fabulous job on their hedging and are using that to pay down debt. BV is $2.99. They still have a significant hedge book that will carry them through the end of this year.

He has a target of $2. 40 12 months from now. If you see this under $1.80, it’s a fabulous Buy. Potentially, 2-3 years down the road, as they move and add more to Lindberg and clean up the balance sheet, it could be a 2-3 bagger before the end of the decade. Good management.

Has no yield and he is a yield investor. It might be a good investment for somebody who is looking for a little bit of torque to the upside.

(Market Call Minute.) You have to believe in $100 oil to get to the $10 level. This would be a Sell despite his fondness for management.