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Opinions John O'Connell, CFA
Painted Pony EnergyPONY.TOCOMMENTSep 16, 2014
John O'Connell, CFAUnknown
$13.30
Stock price when the opinion was issued
$0.69
As of Oct 08, 2020. Market Open.
oilgas
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DON'T BUY
He is bullish on Albertan-based natural gas because we have declining production and supply, increased take away capacity and inventories are at a 10 year low. The winter will eventually come and then there is the prospect of depleting storage. A lot of Nat gas companies have hedged away their Alberta gas exposure. Pony still leaves him a little uncomfortable, however. He likes BRK-T, TOU-T and ARX-T. The balance sheet of PONY-T leaves him pause.
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BUY
They have significant assets in the core area that will benefit from LNG. They had a tough second quarter and production came in because they shut in some production. The fourth quarter is going to be good. He thinks they can buy down debt next year. It is a higher beta stock and not owned by institutions. They could be a takeover candidate 3 or 4 years down the road.
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BUY
Results are not out yet because of a pipeline issue on the West Coast of BC. He thinks their volumes will pick up again as the pipeline issues are resolved. It is a very cheap stock at one and a half times cash flow. We need LNG takeaway capacity on the west coast, which will benefit them in 2024. We are probably going to have the lowest storage levels in a long time in North America due to cold weather. And Canadian Nat Gas prices are above $3 right now. It looks like cold weather will go on a little longer.
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They have amassed a significant resource in North-Eastern BC, which is right in the fairway where all the pipelines go. It can go north, south, west and east. They have enormous reserves. Getting those reserves out of the ground is going to require that an LNG facility is going to be built. They have signed an agreement with AltaGas (ALA-T) to do some processing. He doesn’t know if investors are going to have much patience waiting for an LNG facility to get built. This won’t happen until at least 2020. A much more sensible place to build an LNG facility is not in BC, but in Oregon which has a better port facility.