PrairieSky Royalty (PSK.TO)

He loves this at $15. Because other people drill their land, you don’t quite know how the world is going to play out. The gas market has had a great jump in gas, and this looks a lot better. It is a great thing to own long-term, but he would just like to try and steal it if he can be patient. He came within $2 in the spring.

A royalty company that gets its money at the top, as opposed to an operating company. Have a good land position, and their participation is high on the food chain. A great place to park funds.

If you owned Canadian Natural Resources (CNQ-T), then you now own some of this stock’s shares. A royalty company and very, very expensive.

(Market Call Minute.) He really likes the CEO, but the valuation is beyond nosebleed level.

A very good business model. You collect a nice stream of cash, depending on how much people put into the ground in your zone. Keep in mind that there is torque to the model. When energy prices are higher, more people want to drill and you get better pricing. Today it is the exact opposite. Management is very competent and are return oriented. If looking for a high-quality way to play energy, this is the perfect type of business.

(A Top Pick April 2/15. Down 16.23%.) Has been trimming his position. Valuation is rich, especially when comparing to a Freehold Royalty (FRU-T). Also, Canadian Natural Resources (CNQ-T) vended their freehold land and gross overriding royalties into this company for an almost 20% shareholder basis. They’ve given indications that they want to dividend half of those 44 million shares to CNQ shareholders, selling the other half on the market. That creates an overhang for shareholders of Prairie Sky. Still likes the company.

(A Top Pick Jan 20/15. Down 12.92%.) Down because of energy prices, but also companies are drilling less on their lands. Also, did a large asset swap with Canadian Natural Resources (CNQ-T) in exchange for shares, and because of financial concerns of CNQ, they may want to be selling some of those shares. The Short interest in this company is very high because of concerns that they are going to cut their dividend. That should really shock no one.

A massive land holder in Western Canada who just made another massive acquisition. The dividend (6.3%) could be cut under current pressures, however. You have to be in the sector. A dividend cut is probably largely discounted in the stock price.

(Market Call Minute.) There is talk about a dividend cut, and thinks it is quite likely. They don’t want to carry any debt, and the payout ratio is over 100% right now. They can pay out almost all their cash flow because they don’t have to spend any money to drill. However, with Canadian Natural Resources (CNQ-T) selling their royalty assets to Prairiesky, you have to recognize that CNQ has a 19% ownership. They could cover off some of their debt to CNQ shareholders in the form of a dividend. Wait until that is over.

Royalties are a great way to play commodities. You have no operating exposure and they have had a big correction here. If and when you turn positive on the energy complex, this would be a great buy. Well-managed and have a clean balance sheet. If we get oil and gas looking a little better in the spring, this will be a big beneficiary.

This is a royalty company. They have been buying assets from producers who are looking to raise capital. Thinks they are now over distributing, so there is potential of a dividend cut. He didn’t buy into it because he thought the valuation multiple was too high.

It is very rare that you get a brand-new, almost another energy class, of shares to buy, and this is it. A royalty company does not pay drilling, operating or abandonment costs. Companies farm on royalty lands and the royalty owner gets a cheque off the top. Operating costs are less than $5 BOE, which is remarkable. This has a very, very long-term lifespan.

His model price is $14.93 a 42% downside. Thinks the stock moves lower. It has to go to $20.87.

Div 0.11 yield 4.54% It's great to have a portfolio because you can then diversify. They don't have as much risk as the companies that do it all. They won't be doing as much exploration right now, but with higher oil prices will do well. Lots of cash on their books, lots of assets. They will end up stronger.

Hasn’t worked out too well for those who jumped into the new issue, but as a royalty firm, he thinks the payout is good. Have good properties. They are still hovering under Alberta’s black cloud. Until we actually see some stabilization, and perhaps a move into the high $50s/low $60s in oil, he is not willing to step into that market. If you are there, your income is probably reasonably safe.