Painted Pony Energy (PONY.TO)

This stock was a sell on fact situation following the announcement of Shell to proceed with LNG on the west coast. There is long term exposure to BC natural gas out to 2023. They are having trouble proving the value of their acreage. He would not own this as he remains bearish natural gas.

This is very leveraged to a positive FID LNG announcement on the west coast. It had been on a dangerous trajectory for crazy growth, but it has reigned that it. It is not in the top four natural gas holdings for them.

Tourmaline versus Painted Pony. TOU-T is a $5.8 billion company with 22% liquids, moving towards 40% liquids production soon. PONY-T market cap is $438 million. These are apples to oranges. He lies both companies, however, and both are on his recommended list. If we see a further market erosion with tax loss season approaching in November or December, both will likely become a strong buy.

It has dropped and is attempting to consolidate. It is in a cup formation. If it breaks its old lid, it may break out. If own, you may want to hold, but would not buy until a break out is confirmed.

Their debt is not a problem. Book value is $6.47. Would be a buy if the stock price went to the low $2.00 range. This is a stock you want to own for the long term. When gas comes back into favour, Painted Pony is one of the go to names.

The chart looks good at the moment. This has formed a double bottom around $1.70 and has been trading steadily higher. This is a good bargain potentially and has moved through resistance around $3. As long as energy prices continue to do well, it could rally by another $0.50 with $2.60 as key support.

They have a lot of debt but you have to look at the equity. They are about 9% liquids and 91% natural gas. Their stock popped last week because they announced on two wells. They are now finding more liquid rich opportunities. It is one of the names he likes. He projects $6 within a year. He feels the bargains are in the natural gas side.

It was in a down trend but the worst may be over. Don't buy in the middle of a consolidation. Buy on a positive breakout. If you hold it then see what happens.

People criticize it for their debt. They are only 33% debt to capital position. He thinks it is an attractive story. His target is $3.06 this year. They are 96% gas. If LNG comes on line, it will need gas. Under $2 PONY-X will be a great buy.

This is a great way to play new LNG development. If you own it, ride it into the Shell decision to go ahead with LNG. With the right asset sale they could dramatically improve their debt-cash flow metrics, so that could make him more bullish eventually.

Maybe it is a good takeout candidate. This is an example of a name that is lagging the commodity. It says you should be a little careful. It is more of a trade here. $7 may be the upper limit. Take profits when you can.

They have the 3rd largest gas reserves in Canada. He’s not buying it because his focus is on oil companies that have had a 50-to-70% dislocation between what oil has done and what the stock has done. He is also focused on service companies that are able to push through price increases, have net cash on the balance sheet, are trading at 2 to 3x EBITDA, with 20% free cash flow yield. Painted Pony doesn’t fit this mix. Pony has fallen 50% this year based on natural gas exposure. He’s been bearish on nat gas for a year. They’ve done their best to diversify their market but the backdrop for natural gas in 2019 and beyond is not good in Canada and in the U.S.

He admires the company. He has not bought any at this time, but it is quite interesting. It is one of the better managed mid-sized companies in the oil patch. We are going to see more M&A in the industry and this is one that could take advantage of that.

Unfortunately the gas sector faces production that is stranded and at low commodity prices. He continues to stay away from this sector, but feels the risk-reward is looking better.

He follows it. He has a $4 target as a speculative buy. Careful because of volatility. Maybe it'll be cheaper later this year. It interests him.