Tourmaline Oil Corp (TOU.TO)

One of the premier natural gas producers. They have an excellent cost structure and a pretty good balance sheet. Recently did a pretty big acquisition from Shell. His issue is that the company is bumping up against 200,000 barrels a day. If you pick a decline rate, which he would imagine would be close to 40%, the company basically has to replace 80,000 barrels every year, either organically or through acquisitions. That becomes harder and harder for a company this size.

Tourmaline (TOU-T), Seven Generations (VII-T), or Whitecap (WCP-T) for price appreciation? All 3 of these companies are really well run energy companies. They have all done well operationally and stock-wise over the last year. His 1^st pick would probably be this one, which has the best combination of quality management and growing its earnings and cash flow, with a relatively reasonable valuation.

(A Top Pick Sept 12/16. Up 2.14%.) A great company. They have liquid rich natural gas in the Montney and the deep Basin in Alberta. A management team that is incredibly great at finding energy molecules. They bought a company, sold it, bought a company, etc. This is their 3^rd iteration of a company. Management owns about 25%. Recently did a big deal of buying about $1.5 billion of assets off of Shell. Most of these assets were ones that they sold to Shell 7 or 8 years ago from their last company.

He is positively disposed to natural gas. Because of the quality of the team, he still thinks you can see 25% upside in the next year. They are at 230,000 barrels a day now, and over the next 2 years they are getting up to 320,000 barrels. (Analysts’ price target of $43.59.)

Strong management are doing great things. They are the lowest cost operators in their plays. He does not think you could go wrong long term in owning this. He feels the price of oil may take a bit of a breather.

3 days ago it hit some volatility stops. Long term it has come right back to some support (an ascending line he drew under the lows). It is a pretty good risk to reward. Right now would be a good place to step in. If it goes down more than 3% then get out.

(Market Call Minute.) Go ahead and buy this. Just made an amazing deal buying some assets from Shell, sold them for $6 billion, and bought them back for $1.3 billion.

Mainly gas, and is on his watch list. There is no dividend, which is why he has stayed away. This, along with other natural gas stocks, have been doing much better. He owns Arc Energy, and if he were adding to this, his preferences would be Tourmaline, Peyto (PEY-T) and Advantage Oil & Gas (AAV-T), in that order.

It is not too late to get in this. It had a bit of a bounce on the back of a very big transaction of about $1.4 billion to buy Deep Basin Montney in Northeast BC and Alberta. This is a core name for him. Trading below its historic norms in terms of multiples, which is an opportunity.

High quality assets and high quality management. The stock has been working awesomely because they have been usurped by other companies such as 7 Generations which captivated people’s imagination by being able to grow production on a higher rate and was spending less relative to their cash flow. They have been fighting that, but people have been concerned that they have been so good that they had gotten too big to be able to grow at the same pace. He would buy this if you are bullish on natural gas heading into this winter. This is on his radar screen.

(Market Call Minute.) Awesome management team. For a high quality gas, it is one of ones to own in Canada.

Has a lot of respect for this company. It is one of those companies that has really had lots of access to capital, and have done very, very well. It has gas exposure and she likes that they are growing from oil and liquids. Historically she has not been a gas bull, and has a harder time paying up for gas. If you are a gas player, this is a great story to invest in. Natural gas prices have been very volatile in Western Canada because of Trans Canada (TRP-T) doing some maintenance on their pipeline. That creates a backup in volumes in Alberta which has created volatility.

(Market Call Minute.) Good operator. She wouldn’t buy right now because the energy patch is going to be under some pressure, but this is a good, long term hold.

It is the management team. These guys know where to find energy. They keep costs low. The top list of findings over the last few years are so often TOU-T. They have technology and innovation and it has really brought down the costs for the company. It is natural gas story. Natural Gas is being consumed more and more as we get off coal. Demand is going way up from chemical, to power to Mexican exports. He thinks gas prices will get better next year.

Not one of his favourites. They put a tremendous amount of capital into the company. They used to be at 8% return on capital, but now it is at 1%.