Tourmaline Oil Corp (TOU.TO)

(A Top Pick Aug 21/12. Down 0.39%.) Natural gas focused. Likes management and the financial position of the company and their attitude towards growing the business. Management has been very successful in running 2 companies prior to this. Debt levels are certainly manageable. Forward progress to growth is acquiring land and drilling it. Every equity raise that they do, management puts in for all of them. Have had great success on the drilling side.

Seasonal strength for natural gas is usually at this time of year and ends about Dec 21, on average. This is a run up to the winter heating season, so you want to get in before the cold weather sets in. This year hasn’t worked out so well. This one is more energy and you want to wait for the energy strength which runs from January into May. Chart shows a breakout above the 50 day. The 20 day and the 200 day are curling higher. Trading in a range of $38-$44 so he would like to see it break above the resistance. If it breaks out above $44 that would probably be a good entry point.

This is a trophy story, one of the premier valuations and one of the highest valuation stories but he would wait for a buying opportunity, especially in light of his remarks on oil prices.

Chart shows a strong upward trend line from early 2012, which is now starting to be broken. 2013 shows some support, but trend line appears to be in some danger of being broken. Relatively new break, so it might be a false signal. There are some danger signals here. Be cautious.

Sleep at night story. Potential to double reserves. It is on sale and has a rock solid balance sheet.

Mainly focused in the natural gas space. Has top quartile production growth. Fully financed and doesn’t need money from the street any more. No debt to capital so has lots of financial flexibility to fund its growth. Has a huge asset base it can focus on. Extremely strong management team. 12 month target of $50-$52.

Seasonality for natural gas is Sept 6 until Dec 21. This is the strongest time although you can get a run in April as well. Has consolidated in the last several months. Right now it is favourable. Chart shows a high of $45 but if natural gas does well, it could break above that. This is a good level to be looking at this. If it breaks below $39 that would show that it is breaking down.

Loves this company. One of the best operating teams in the basin. Stock is probably flat because of a negative view towards gas prices more than anything. The current lull in the stock is a good entry point. His target price is in the low to mid $50.

Management team has built and sold a number of companies very successfully. This one has probably been the fastest-growing small cap, turning into a mid-cap, turning into a large cap. Growing at about 45% both in cash flow and in production. In the last 18 months, it has built an intermediate oil company as well. Strong balance sheet. Represents exceptionally compelling value.

Very well loved name and rightly so because they have one of the lowest costs in the sector. Still making money at current prices. However, this stock has always been expensive. If the view is positive on natural gas, then it will probably move up. However, AECO is currently trading at a huge discount compared to NYMEX and so in the upcoming quarter there may be a little bit of risk and disappointment on the cash flow front. Alternatively, Encana (ECA-T) would be an interesting gas play as they are looking at strategic alternatives to turn the company around. Trading roughly at about 4X cash flow and debt is reasonable at about 2X. There is talk about them eliminating their dividend and if that happens, this would be a case of Buy on Weakness.

Look at net asset value. Strong growth over the next few years. Great management. Expensive stock. Use price and net asset value to determine value. There are other names he would buy at this level in the energy space. He would add at the $37 level.

Has come off about 10% from its highs recently and is growing production and cash flow at around 40% per annum.

This is one way to play the recovery in natural gas. Still has a lot more to go. Probably the best managed energy company in Canada. Tremendous land base.

There are times in the year when this company sells off and we are not in that environment right now. Company is executing spectacularly.

Although they are growing their oil side, their main focus is on natural gas. They are the low cost producer so if there is a decline in natural gas prices, all of their projects are still profitable. Management team is exceptional and very shrewd. Strong experience in building companies of size and acquiring and building acreage better than others.