Stockchase Opinions

Rob Stabile Raging River Exploration RRX-T COMMENT Oct 07, 2014

This is viewed as one of the best in class operators when it comes to the junior/intermediate oil and gas space. Management team is highly regarded. Growth is getting harder to come by because they have been so successful. If you are bullish on oil and you want to stay exposed there, this is one that you can hold on to.

$8.380

Stock price when the opinion was issued

Oil and Gas (Integrated Oils)
It's the ideal tool to help you make quicker, more informed decisions for managing and tracking your investments.

You might be interested:

BUY

This is one of the few remaining growth companies left. It doesn’t pay a dividend. It’s price dropped sharply after the Spartan acquisition because people thought that deal was horrible and it’s in the same space. It sells at 3.2x Enterprise value to cash flow, has 4 years of PDP reserves. Very inexpensive relative to its asset value. Problems: A high decline rate, and they are focused on the Viking, which doesn’t have a lot of running room left in the Viking. They recently acquired new property, which should be a source of news soon. They have also announced a strategic review.

STRONG BUY

This offers the highest torque of any energy stock to rising oil prices, so he likes owning this one. The one knock is that they have been a one trick pony in the Viking area with a decline rate of 40%. They acquired a lot of cheap acreage in the Duvernay region to help diversify. The question is, is the new play going to do well? The CEO has $120 million of his own money in this and the balance sheet is squeaky clean. He could see a 78% upside in value from here.

STRONG BUY

This offers the highest torque of any energy stock to rising oil prices, so he likes owning this one. The one knock is that they have been a one trick pony in the Viking area with a decline rate of 40%. They acquired a lot of cheap acreage in the Duvernay region to help diversify. The question is, is the new play going to do well? The CEO has $120 million of his own money in this and the balance sheet is squeaky clean. He could see a 78% upside in value from here.

DON'T BUY

There is a positive trend for the energy sector. There should be some sort of digestion from here. Geopolitical risk. The pick seasonal strength for the sector is really coming to an end now. Over the short term expect some consolidation. Technically shows that $7.16 is a better price to buy this.

WATCH

This is a bit of a different story because they announced strategic alternatives. It helps when a management team owns so much of the stock. The process should be completed within a month. They will probably find a buyer for one of their assets. He sold this name a month ago. As it sells off it is getting increasingly compelling.

DON'T BUY

BTE-T vs. RRX-T. RRX-T has been taken out by BTE-T. One analyst says you will now own a company with a much higher debt. BTE-T is a zombie company because of debt. 78% debt to equity last time he talked about it. After the deal RRX-T will have a huge increase in production. If you believe in $80 oil by year end then this a good leveraged play on oil. He thinks we will below $60, the problem is that this stock is too levered. It will be at 75% debt to equity. The market is voting negatively on the deal.

HOLD

Part of Baytex, good way to get exposure to Eagleford as well as Canada. Bought Raging River, multiple is in line, and they have decent growth. Hold your shares if they get rolled into Baytex. Market thinks they overpaid, but if you buy good rocks, you’re going to get a good result.

HOLD

Raging River had good light oil assets but issues with decline rates. Baytex shareholders were comfortable with the debt, given the torque to heavy oil differentials. Mashed together, it has allowed the concerns over BTE-T debt levels to be abated and is opening doors for new opportunities.

PAST TOP PICK
(A Top Pick Feb 02/18, Down 57%) She recommended it on the date of the announcement of the Baytex intent to acquire Raging River and sold on the announcement of the date of the takeover. Therefore, Raging River no longer exists.
PAST TOP PICK
(A Top Pick Mar 15/18, Down 2%) It was acquired by Baytex. Baytex remains his largest holding. It is extremely undervalued. They beat on Q4 and expect Q1 to be a beat. It is at a 24% free cash flow yield. No issues with balance sheet.