Spartan Energy Corp (SPE.TO)

Made a major acquisition of light oil from Arc Resources for $700 million. Management has done everything right. Trading exceptionally cheap compared to its larger cap peers. It is going to start populating itself in larger portfolios. Everybody acknowledges that they have managed this downturn. When he first bought this, they were doing 3000 barrels a day, and are now going to do 21,000 barrels a day this year. They have loads of inventory and don’t need to make any acquisitions. Decline rates are low. (Analysts’ price target is $4.25.)

Very conservative with their balance sheet. High quality assets.

A core name in her fund. The management team is exceptionally strong. They did a great job building a portfolio of quality assets in South Saskatchewan. Current weakness is an opportunity.

Operationally, they’ve been performing very well. They continue to explore their asset base and with applying new technology, getting more production out of their reserves. Highly levered to the oil price, which hasn’t exactly been on fire in the last several months. If the US border adjustment tax comes into effect, this might have some impact on Canadian exports.

He’s constructive on energy. Since the start of the year, the overall energy space in Canada is down about 10%. Smaller/intermediate companies like this are down anywhere from 20% to 25%, so there is a disconnect between the 2. A well-run company and the balance sheet is in great shape. Management has a great deal of experience.

Started to build a position after the stock broke down through $3. A premier company that has always garnered high multiples. There were a lot of US holders in a bunch of these names, and because of fears of a border tax, they decided to exit. This is not inexpensive, but is a lot less expensive than it once was. Good growth and very good netbacks, and he is trying to build a bit of a position.

A light oil focused company. Recently bought a land package from another company. Fantastic management team. The company has been hurt by selling out of the US, worries about a border tax and fears of carbon tax. Thinks it has been hurt more than a lot of the other companies. (Analysts’ price target is $4.46.)

Began last year as a fairly expensive stock. A well-run company and a deserved premium valuation. When there was a recovery across the bottom, it didn’t get the same lift as others. The most positive moves were on companies with stretched balance sheets and iffy type resource plays. Made a transformational acquisition in the 2^nd half of the year, and are in the process of digesting that. Exposed to some good plays in Saskatchewan. A name he would stick with.

The poster child for what has been happening over the past month i.e., large, large US guys blowing out all their Canadian exposure. The stock has fallen by almost 20% this month. This is a stock on sale that can easily grow by 10% a year for many years, down to $45 oil. Very conservative balance sheet and a very conservative team. Proven value creators. Trading at under 5X enterprise value to cash flow. It will be trading at $8, a 70% upside. (Analysts’ price target is $4.54.)

This is going through a transition. They made a massive acquisition. It was a good deal and paid a fair price for it. Thinks it is chewing through all that stock that is probably being recycled to some extent. There have been small-cap managers selling, and mid-cap/large-cap managers that have been buying. It is in great financial shape. The correction is because it is trading at a rich valuation, being such a well-run company. It can grow profitably at these prices. A lot of investors are worried about Mr. Trump and whether he will introduce some border tax. Doesn’t think he would do it as the US refineries need our crude. Starting to look very, very reasonable to him, and at these prices it looks like excellent value. (See Top Picks)

All 3 picks have recently done fairly transformative acquisitions. He wants to own companies that have institutional following and access to capital markets and could do smart acquisitions at the bottom of the cycle. Recently did an acquisition of some assets from Arc Resources, about 7500 barrels of 98% oil in Saskatchewan. The assets fit perfectly into the company. It also brings them through that 20,000 barrels a day threshold, which opens the company up to a broader universe of institutional portfolio managers. (Analysts’ price target is $4.60.)

Energy stocks are not in the best position at the moment, but the track record is pretty decent and the valuation is good.

Bought some good assets off of Arc Resources (ARX-T) last week, and did an equity issue at around $3. The CEO and his team have done a great job. They have kept the costs down low. He really likes this company.

(Top Pick Nov 2/15, Up 33.40%) One of the best managed companies in the energy space in Canada. They have expertise and the balance sheet is in good shape. You will be well rewarded holding this name.

This was close to being a Top Pick today. A very well-managed company. They are very cost-conscious, and have good production in their wells. He likes it on a technical basis. If you can buy this in the $3.10-$3.15 range, you should do pretty good. His analysts have a target in the $4.25-$4.50 range.