Opinions Bill Bonner
PrairieSky RoyaltyPSK.TOCOMMENTJul 16, 2014
Bill BonnerStock price when the opinion was issued
As of Jun 05, 2026. Market Open.
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Exceptionally well run. All-time high today. His struggle has always been what's the fair multiple on a royalty company? Trades at 19.5x PE, 18x for next year, and FCF yield is 5% (not compelling). Yield is 3%.
He owns some in his income fund. If you're really bullish on oil, royalty is not the way to go.
Eric NuttallStrong performer over past several years, so trades at fairly high multiple (for example, twice that of FRU earlier this year). Extraordinarily good exposure to the Clearwater, good job with its business model. He struggles with what a fair multiple is. About 10% upside from here, and that doesn't do it for him. Yield is 3.8%, not overly compelling.
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Premium contentOur 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.
FRU is such a low-cost producer, it hasn't benefited as much as marginal producers have in the uptick in oil/gas prices. So its margins haven't increased as much. FRU asset package is so good, he's happy to own it despite this year's price action. He likes both names.
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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.