Surge Energy Inc (SGY.TO)

There are a lot of companies that have had to adjust given the environment we are facing. We are probably in for an extended period of tough times for oil. With the amount of inventories that are coming online, there is not the demand to meet it. Storage gluts which are becoming an issue. This company has one of the highest levels of leverage and he would steer clear of it.

Got into some balance sheet issues because of commodity prices, but she likes that management has taken a very proactive approach to how they deal with that. Had some very strong hedges and have chosen to collapse those hedges to pay off debt. As well, they sold their Viking asset, which she thinks was a prudent thing to do. Have 100% payout ratio and the yield is quite reasonable. Because it is a 9% yield, you could see it being cut, but chances are unlikely.

This one seemed to get ahead of itself on its own merits, but then the balloon got pricked because of oil/gas prices. Its debt load doesn’t make a lot of sense to him.

They cut their dividend which was good and are trying to respond to the environment, but at $50 oil and $3.25 natural gas, the balance sheet does weaken and the debt to cash flow goes to 4.1%. Their effective payout ratio is still not bad at 86%. You can own this if you have a view that this oil weakness is temporary for 12-20 months, but if you are buying it for sustainable long-term dividends and you think oil is going to stay where it is, you don’t want to be here.

Recently cut their dividend, which should have been done a long time ago. This is one of the companies that have been promising a free lunch of increasing dividends and increasing production. What they have actually done is gone out and bought production and financed it through issuing equity. They held on paying out a dividend longer than they should have. The company is going to survive, but it has really damaged their balance sheet. If you are holding it for yield, you have to be very careful because the dividend could go, but that could be a good thing.

Cut their dividend today as had been expected. The stock held in reasonably well on the news, which is promising. The one thing it has going for it is that it has reached a level that goes back to 2013 that would give it some support. If it breaks below that, then maybe there is a better place to put your money. The company is well regarded and well covered by most analysts.

Has held this for a long time and is favourably inclined towards it, but they have a balance sheet issue right now that they are going to have to think about. Not overly levered, but getting up there. Their strategy has been accretive acquisitions. Have escalated the dividend several times. He would be a little concerned about their ability to sustain the dividend today. However, their asset base is spectacular. The team is one of the best on the street and he thinks they will work their way through this. Yield of nearly 20% and a 50% cut would be prudent.

Chart shows that this is above its 2013 low. Yield is over 20% now, so the market is saying that it has to be cut. Be very careful.

Run by an experienced management team and they have a suite of good assets. The big issue is the sustainability of the 20% dividend. Have done quite a few acquisitions quickly and the integration process has not gone as smoothly as it could have been. Because of this they missed a couple of quarters of production estimates. Because of oil prices the leverage is getting too high for comfort and he thinks there is potential for dividend cuts over the next little while. This would not be one of his preferred names right now. Be careful.

Thinks the dividend is sustainable for the foreseeable future and through most of this year. He just Shorted a little bit today for the 1^st time. What has soured him on the name is that growth has been primarily through acquisitions, so you are looking at a company that has to keep growing in a very weak M&A environment. Decline rate is quite high at around 25%. Payout ratio is at around 100%.

This is one that he has not heard anything negative about. His company has a $6.75 target and is a high risk, which means it will be volatile. Yield of 17.3%, so if they cut this back, people will be moving out of it.

They had a management change two years ago. He took the decline rate way down. They don’t have to spend as much as other companies to maintain production. There is debt and if oil prices stay low then there is a risk of a dividend cut.

Have a very high level of debt, and the market is indicating they need to cut the dividend and he wouldn’t be surprised if they did. He has a really small piece of this and is waiting to see what happens with the dividend. If they do cut the dividend, he might actually add back to this, especially if it sold off.

Dividend is $0.60 and they are supposed to earn $0.46, so they are not covering their dividend. Also it is “not in the blue”. There may be a bounce to $5.21, and if he owned, he might potentially be a Seller there. Like all the rest of the small-cap energy stocks, we are going into tax loss season and a lot of these names are going to be scrutinized if not sold, so the pressure is going to be rather immense. Before getting into a trade, he is waiting for all those dynamics to get filtered through and for the analysts to come in. Also a lot of companies like this, especially the smaller ones, they have been buying energy at Top Dollar. He won’t know this until another quarter, when it all shakes out. Yield of 13.2%.

This is kind of a hybrid growth, hybrid dividend payer, medium-sized oil company. Because they have done a bunch of acquisitions it is a little bit stretched as far as the balance sheet goes, so has acted quite a bit worse than the comparative Whitecap Resources (WCP-T). If he were going to pick one like this, it would be Whitecap or Crescent Point (CPG-T). Yield of 14% now and the market is telling you that there may be a cut.