Paramount Resources (POU.TO)

Tourmaline (TOU-T) or Paramount (POU-T)? This is a case where you have to choose the better of 2 good companies. They are both pretty good, but he would put Tourmaline, far and away, as probably the best managed company in the oil/gas sector.

If you are looking for gas exposure and a very well run company, this one is at the top of the list. Has had some great drilling success with a huge resource space.

Gas producer. Has fantastic growth. They are going to double production, and cash flow is going to jump in 2015, and then again in 2016. The Riddell family is in on this, and they are very sharp. They basically run it like a private company and think 10 years ahead. He thinks this is a $75 stock.

His second biggest holding. He bought the flow through and the common. The drop of 4.50 is just the market correcting. He would buy it today.

A high growth story. Has a lot of really great assets. Should enjoy significant cash flow growth going into 2015. He would buy on a pullback of 10-15% from here.

There is still a lot of growth coming. A deep gas play with their own plants. His one-year target is $70-$75.

Has had a great run since the beginning of the year. Looking at cash flow and production numbers, and if with what they have and are working on comes online, in the next couple of years he wouldn’t be surprised to see this trading at $100. Seasonality wise, energy stocks tend to meander through the summer. He would initiate part of his position now, and look to add further on any weakness. Prefers Raging River (RRX-T), Rock Energy (RE-T) and Tamarack Valley Energy (TVE-X).

Depending on how you value their investment in Cavalier Energy and Fox Drilling, they have about $10 of their share price embedded in investments. If you look at the business as valued at $45, there is massive growth in their core business. Liquid rich gas in the Montne. Bringing on a Musreau gas plant, which will allow them to bring production from 30,000 barrels equivalent to about 70,000 barrels equivalent over the next 12-15 months. Massive growth on production and cash flow, which he thinks is repeatable over the next few years.

(A Top Pick Jan 16/14. Up 31.49%.) You really get the leverage when you get your surface facilities up and running and pump the commodity out of the ground in multiples of where you were in 2013. Moving from 20,000 BOEs a day in 2013 to about 60,000 in 2015.

7.625% bond maturing December 4/19. (Top Pick Dec 7/2012, Up 16.50%) He is downsizing this position. Since it is a bond, going down is an increase in return. Thinks oil and gas producers will not perform as well going forward.

Has a facility coming on stream in 6 months. This asset will kick off a tremendous amount of free cash flow. They are in one of the hottest areas in the deep basin in Alberta. It might get pulled back a little, but he can’t tell you how much momentum is coming from US buyers. Just because it has been parabolic, that doesn’t mean it has to pull back from here.

Nat Gas. This is a big step change company. Gas plant goes operational May 1. Can grow from 20k to 70k barrels by end of 2015. It backfills the valuation. A repeatable play. $1.2 billion in debt, however, but it does not worry him.

Thought about having this as a Top Pick. You should see massive expansion of volumes of 20,000 BOEs a day up to 70,000 over the next year or so as they bring on their Muzro (?) gas plant. That is the big risk. Does this come on in time by June and will the production start to kick in. If they meet their goals, he thinks this could easily be a $70 stock in 2 years.

(Top Pick Nov 8/12, Up 21.13%) Continues to be a core holding. A harvesting operation. Finally their big plant expansion comes on by end of year. Lining up well for 2015. Would hold or add if he didn’t have it and may still add to it. It will probably always be expensive because of their quality of management and execution.

(A Top Pick Feb 5/13.) 7.58% bond maturing April 12/19. Felt very comfortable with the asset coverage and the management team. Made about a 9.5% return. You could easily Buy this bond today and continue to make very good returns.