Paramount Resources (POU.TO)

Has been a great performer. He would say this had 3 lives in the last year. 1.) A poor performance in 2016 when it got caught in low commodity prices forcing them to sell almost $3 billion in assets to pare down from 60,000 to 10,000 BOE’s a day. 2.) Being a liquids rich producer grew the 10,000 to 30,000. Executed according to plan and the stock has probably gone from $13 to almost $25 through that process. 3.) Just acquired Apache Canada and merged with Trilogy, and now back to 90,000 BOE’s a day. (Analysts’ price target of $25.)

(Market Call Minute.)

This has had a nice move over the last year. They’ve shed some non-core assets.

They did a good deal with VII-T. They build long term assets before the stock got beat up. It has recovered nicely. If the price of oil comes down then it is possible after the winter we could see lower prices of $4-5. Hold off and wait until about late Q2 of this year.

An interesting company. Most of their value comes from its new position in Seven Generations (VII-T). Feels there is an opportunity in this story. Management team has an excellent track record of finding assets.

(Market Call Minute.) Made a major fabulous asset sale, and can now pay off all their debt. There is about 11,000 BOE’s a day of production. If this backed off to the $7-$8 range, it would be a Buy. Under $10, it is something to look at.

Short term we have a nice little trend. Seasonality kicks in at the end of August for Nat Gas. It has bottomed and then a slow rocket up. We will eventually see energy start to bottom. We are in the short seasonality for oil right now. It is also tied to the US$. Risk management is really important here.

In the process of going through a transaction of selling off their crown jewels to Seven Generations (VII-T), and expects the deal to close in the next 4-5 weeks. Going forward, this is going to be a holding company with a half a dozen or so holdings, the biggest being Seven Gens. Outside of that holding company status, there is a producer as well, and they will be trying to grow their production. It is a much better holding now than it was 2 months ago. (See Top Picks.)

Has a lot of respect for the family behind this company. This business is predicated upon higher commodity prices than what we see today. The goal for a commodity business is for them to get stronger through a downturn, not having to sell one of their best assets. Doesn’t think they proactively manage their balance sheet, but made some decisions around facilities and infrastructure, that if oil had stayed at $100, it would have looked really smart. With oil at $30, it almost cost them their legacy.

It has a rounded bottom. We are now starting to make slightly higher lows. If it breaks $17 then we have a complete rounded bottom. These guys have cut costs and they can operate with lower commodity prices. This one is prepared and it is now okay for it to go forward with the current commodity prices.

Gas focused. Was one of the outliers last week. A debt laden company, but has a lot of levers it can pull. Improved last week as people got the impression that equity markets were once again open for companies to raise capital. He is not sure that applies to this company. The large shareholders in this company are much more interested in riding out the cycle as opposed to impairing their company with fire sale prices for their assets. Thinks it will be one of the preferred names to play in a recovering natural gas environment.

(Market Call Minute.) Great assets and a great amount of debt. Feels they need to raise money here. If you own, Sell and buy it back closer to $6.50-$7.

Very gassy, but it is wet gas, so they have some cash flow that goes up and down with oil prices. Well-managed. It will have its time again. If he is right and there is a $4-$5 pullback, this will probably pull back to $7, which would be a better entry point. (He owns the bonds.)

They were building a massive facility to bring on a lot of natural gas, from the Montney, etc., and the problem was that they added a lot of debt. They finished 2015 at $1.7 billion of debt against $548 million of equity. Sold to Pembina under a contract basis to use the facilities, and they’ll pick up about $500 million which they can use to pay down some debt. On the positive side, it is trading at a significant discount to BV $5.18. His view is that the debt is still too high.

Needed to raise some cash, and it was just announced Pembina Pipelines would be picking up the Musreau facility for $556 million.