Tourmaline Oil Corp (TOU.TO)

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%.

This is in his group of great companies. Gas price has just had this run because of the hot summer weather, so he would wait. They don’t have a lot of debt and have about $1 billion of hard asset value, such as pipes and plants. However, on cash flow at this gas price, they are still committed to spending $1.1 billion, and the cash flow 6 weeks ago look like it was going to be $600 million. Gas price needs to go higher. Sold his holdings into this run, and moved his money into TransCanada (TRP-T).

In this current environment, you need to separate the company from the stock. Has a lot of admiration for the company team. They were trading at a relative discount to some of their peers. He really likes the company, but has been bearish on gas for a very long time. He is especially bearish going through this summer because there was no heating demand this past winter. As a result, storage in North America is epically high, and Canada is even higher. It would have to get into the mid to high $20s before he got interested.

At the annual meeting in June, what should shareholders pay most attention to? Management is quite bullish on natural gas, so she would question them on that. Their cash flow projections are based on higher natural gas prices, so if they don’t get the higher prices, how do they close the funding gap between their funded CapX and the expected cash flow. She would also inquire about their Charlie Lake oil play, a very interesting play. They’ve just spent some capital there and can ramp up production quite quickly. She owns a little because of their gas liquid exposure.

(A Top Pick May 4/15. Down 32.12%.) You don’t have to look any further than the price of gas, versus a year ago to see why it is down. It has grown tremendously over the past year. Very, very well-managed company. Has been busy enhancing its infrastructure to position for the eventual recovery in natural gas.

His technical target is around $40, but the charts show a little bit of support at around $25, which we don’t want to see broken or else it could end up seeing $21.

Oils are turning the corner. It is now a matter of time. This is a quality company and well-run. More oil than gas, which is important. What you are looking for now are the strong survivors, and this is a survivor. The strong will lead off the bottom here.

(Market Call Minute) It is in his trading zone. Model $12.16, 55% below its current market price. Leave this one alone.

This has been a high growth energy story for a long time. They have great assets. If he was looking for a play in the energy space, this would be 3^rd on his list after Crescent Point (CPG-T) and Seven Generations (VII-T). The $40 oil price we have today could be more sustainable than people think. The trend is showing that there is some firmness to this oil price. There is a high likelihood that production continues to decline in the US, which will support the price even further.

If you are bullish on Nat Gas than you buy this one. He is bearish on gas, however.

Oil prices are down, and this is arguably the best managed oil company. It is larger in capitalization. Just raised some money to fortify their balance sheet. Feels they will be a consolidator with these low oil prices. They have tons of drilling locations. This is one you can buy, hold and put away.

You have to like natural gas and the energy area, and that you are going to see some recovery. If he were going to be buying an oil or gas company, this would be in the top 4 of choices. They are very good at keeping their costs down.

One of the better managed. There would be a point where he would switch some of his current holdings into this. It is one of the better companies in the oil patch.

(Top Pick Feb 05’15, down 26.13%) The bottom is in and a lot of other tail winds have happened in the last couple of weeks including short sellers coming in. Large money managers wanted more access to more shares of this stock. It is a quality team behind it. Good stewards of capital. They acted a lot better than others.