Opinions
Bill Bonner
PrairieSky Royalty
PSK-T
COMMENT
Jul 16, 2014
$38.840
Stock price when the opinion was issued
0
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TOP PICK
Stockchase Research Editor: Michael O'Reilly We reiterate PSK, a oil and gas royalty, generating strong cash flow, as a TOP PICK. The company avoids the capital investment treadmill of a traditional oil and gas producer, yet it has tripled its acreage exposure over the past eight years and has used its free cash flow to rapidly pay down debt. Even at $50 WTI prices, the company will produce sufficient free cash flow to allow it to expand its portfolio further. We recommend trailing up the stop loss (from $14.50) to $15.75, looking to achieve $22.50 -- upside potential over 19%. Yield 2.54% (Analysts’ price target is $22.21)
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PAST TOP PICK
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PAST TOP PICK
(A Top Pick Sep 20/22, Up 20.6%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with PSK has achieved its $22.50 target. To remain disciplined, we recommend covering half the position at this time and maintaining the stop at $20. If triggered, this would result in a net investment gain of 15%, when combined with this recommendation to cover half.
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PAST TOP PICK
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PAST TOP PICK
(A Top Pick Sep 20/23, Up 23.3%)Stockchase Research Editor: Michael O'Reilly
Our PAST TOP PICK with PSK has triggered its stop at $23. To remain disciplined, we recommend covering the position at this time. This will result in a net investment gain of 27%, when combined with our previous recommendations.
This was a spin out from Encana (ECA-T) on the royalty lands they held. These were fee lands granted to CP Rail (CP-T) when it was built in the 1800s. This is an asset base that is very unique and could not be replicated. There is significant production of about 15,000 BOE’s a day, so there is a lot of cash flow. Dividend is quite secure. The curious thing about a royalty barrel is that there is no cost attached to it. A producer produces 100 barrels of oil, gives this company their 10 barrels, and pays everything out of his 90 barrels. The upside is that there are 5,000,000+ acres of land that is undeveloped, and producers are coming with proposals to drill. Upside could be quite material. At the upper end of valuation, but don’t rule out additional drilling on the lands. If you are a long-term player, it is probably something you want to own in your portfolio.