Tourmaline Oil Corp (TOU.TO)

It is one of his favourite names. The liquids will go up a little this summer. They are talking about 300 BOEs this year. This company is one of the largest he covers. 2% yield. It is the cheapest he has ever seen for one of these companies. Book is $28 and it got to $20. Below $18 it is a table pounding buy. This is a name you want own at under 20% debt.

Nat gas prices have barely risen in Canada. This is one of his few Canadian energy stocks. They signed long-term contracts priced when natural gas was higher, and sell in various markets so benfit from those currencies. Their cash flow growth has slowed, but it's 3.7x this year and 3.2x in 2019. Well-managed company. Bide your time here. One of the best stocks in this sector.

This is a trophy stock. It is one of the best run companies. It was $60 in 2014. Their production is 18% liquids and they are bringing on more liquids. They will be a significant beneficiary of LNG Canada for 2023, along with Painted Pony, Birchcliff and Bonavista. They have increased their dividend from 0 to a 2% yield. He expects cash flow above $4 per year. Book value is $27. He expects it to drop below $20 in tax loss selling season and sees that level as a table-pounding buy.

The second largest natural gas producer in Canada. Half of its value is in the infrastructure it owns. It has been a laggard in the market, but its stock is highly correlated to natural gas prices, which is not representative of the fact only 24% of their production is sold into the depressed AECO market. Their liquids cut is up to 20%. A good candidate to benefit from a LNG project announcement. Yield 1.7%. (Analysts’ price target is $29.44)

He thinks high quality producers are going to do well, but he is more bullish on oil than natural gas – TOU-T is 70% natural gas. He would look to others like Surge, Baytex or Vermilion. You want a company that can increase monthly production and monthly profits and this one has failed to demonstrate that.

Tourmaline versus Painted Pony. TOU-T is a $5.8 billion company with 22% liquids, moving towards 40% liquids production soon. PONY-T market cap is $438 million. These are apples to oranges. He lies both companies, however, and both are on his recommended list. If we see a further market erosion with tax loss season approaching in November or December, both will likely become a strong buy.