Opinions
Josef Schachter
Vermilion Energy Inc
VET-T
BUY ON WEAKNESS
May 01, 2018
Stock price when the opinion was issued
You might be interested:
Lately they've had success in exploration in Germany, but near-term capex to exploit that is questionable. Are hard hit, now trading at half their book value. Are paying a near-6% dividend. He's held on. He may use VET as a source of funds, but otherwise won't sell it.
Canadian gas is where it's at. Interesting angle with this name is that they have gas in Europe -- Ireland, Germany -- and the market's not fully reflecting these assets in the price. Well managed, good tradition of being shareholder friendly via dividends, buybacks, and managing debt well. Underappreciated.
In this market, he doesn't want to chase highs. He's looking for stocks that haven't moved yet because the market is overlooking them. Yield is 4.78%.
They acquired Spartan Energy, which gives them a low-cost Saskatchewan producer and a lot of light oil, which is easy to move. Their balance sheet has improved significantly. They had $1.36 billion in debt with $1.57 in equity. That’s a tight balance sheet. After the acquisition, which was an all-stock deal, they’ll have $1.5 billion of debt against $2.8 billion in equity. This gives them more oil in Canada and a much better balance sheet. He thinks this is an interesting story, the price has come down and thinks it is a good value if it breaks below $40. Spartan was a good buy for them and the next buys will probably be international.