Stockchase Opinions

Dennis da Silva Twin Butte Energy TBE-T COMMENT Sep 25, 2015

A medium-heavy gravity producer. Got into trouble last year with some high declines at their heavy oil property, and have shifted more of their emphasis to the medium gravity side of things. There are other names that he would recommend.

$0.310

Stock price when the opinion was issued

oil gas
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DON'T BUY

If you look at the numbers, it looks like the dividend is sustainable because the payout ratio is less than 100%. This is one that has been proven, but it still needs to rationalize that asset base a little bit. She would like to see that happen before she took a closer look at it. In the years to come, they are going to have to prove that they have a real turnaround possibility to get investors interested again. Not a story to be in in this environment. Dividend yield of 16% should be cut.

DON'T BUY

It is heavy oil. They don’t have a terrible balance sheet. There may be a dividend cut. He prefers others.

DON'T BUY

She no longer owns it. She would be cautious of it. Issues with their assets being too thinly, too rationalized. Investors have shied away from too much. Doesn't support their dividend long term.

COMMENT

Sold his holdings in the last 6-12 months because he was worried about the sustainability. Likes management and some of the assets, but it is just a very small boat in a big see of issues with oil prices.

DON'T BUY

He knew this company when it transitioned into a dividend paying entity, back when that was in vogue to get a higher re-rate in terms of the valuation multiple. This is a higher cost heavy oil producer. In this downturn, it has exasperated a lot of problems in terms of the sustainability of the dividend, and put an enormous amount of balance sheet stress on the company. Their credit facility is around $275 million, and got cut back to around $225 million. There is apparently a non-revolving component of that of about $85 million that comes due at the end of April. They have about 6 weeks to figure out how they are going to pay back about $60-$70 million. They have to sell the company or sell assets.

SELL

When a company falls like this one, his experience has been that you just tear the Band-Aid off. You have to ask yourself what is the energy environment today and what are the companies that are doing well. This is pure heavy oil in Western Canada. Depending on the new normal commodity price, heavy oil might just come out too low.

DON'T BUY

Probably a good tax loss candidate, but at $.07 maybe you just hang onto it. The downside is 100% and your upside is limited. He would suggest that bankruptcy is not far off. Not a name he would hold.

SELL

This is going to be a bankruptcy, so if you own he would Sell immediately. It is not going to come back. They’ve been trying to negotiate with their lenders.

SELL

At this point, you just try to blow this out and forget it. They have stumbled over the years with a litany of operational mistakes. When the commodity price collapsed, debt got them.