Javed Mirza Tamarack Valley Energy TVE-T TOP PICK Dec 24, 2024

Company has hit guidance targets 3 quarters in a row - out of the penalty box as a result. Pure play on Clearwater/Charlie Lake oil plays. Wells are paying our multiple times in ~2 years. Very economic oil metrics. Trading at a steep discount to NAV and cash flow multiples. Would recommend buying at this price. Management buying stock aggressively. 

Hit or exceeded numbers for 3 quarters in a row. People have come back to the story. 20 years of stay-flat inventory in the Clearwater, a massively economic play. Benefit of incremental FCF lowering the decline rate. Shareholders likely to get 60% of FCF for the next several years as it pays down debt. 

Mid-cap, but doing very well. Deep value. Still believes in $80 oil one day, which would translate to 17% FCF yield, and that's where the juice of the mid-cap shines. Yield is 3.4%.

Cheap PE. Likes it. Nothing wrong with TVE, but these stocks are tied to the oil price. Is well run. They hold long-life reserves. The oil prices has more upside than down.

If you assume oil prices go up, and assume they all execute well, which is the buy right now? He likes the upfront dividend. VRN is cheapest on price and financial metrics. Production outlook posted a few days ago is quite positive.

Not sure if the easiest thesis is to buy energy right now with Trump trying to attack the price of oil. But within the group, VRN is a name that works pretty well.

He's been adding; he remains a top shareholder in this. He likes that most of their production is exposed to the Clearwater. Super economical: their payback period on a well is 10-11 months. All companies benefit from a weak loonie, because they sell in USD and bring back that money to Canada. They trade at 3.3x cash flow this year, 2.8x next. Their cash flow yield now is 18% and 20% forward. Pays under a 4% dividend, plus buybacks. He targets $7 in a year at $70 oil.

Trades at a 10% free cash flow yield. Pays a 3.4% dividend yield. They can keep production flat down to $42 oil, among the lowest break-evens for a Canadian company. Are seeing great results. Share buybacks over time make this a sit and wait name. For Canadian oil names, the stay-afloat price of oil is $51 a barrel to maintain production and the dividend.

It is just below their minimum market cap requirement of $2.8 billion but ranks well in their data base and is reasonably priced. Its earnings estimates are set to decline by 45% this year and 63% next year. Much depends on the price of oil. Imperial Oil ranks better. 

It also has assets in Clearwater, and elsewhere. In the last quarter, production was up and Capex was down. It has been very acquisitive developing a very good inventory position and improving its reserve life index over time. He feels it has more upside potential than others. When asked what percentage in a portfolio would he apply to any of these picks, he felt that in a truly diversified portfolio perhaps 1/2 to 1%, maximum 2 to 3%.
Buy 9  Hold 1  Sell 0

Major low in 2024, and then higher lows and highs. Really likes the setup. Given where we are in the cycle, don't add aggressively here. Very bullish Canada longer term, so energy should definitely participate.