Veren (VRN-T)

Fell on disappointing data from fracking, which made market skeptical about quality of assets in the Montney. A return to old way of fracking would restore market's faith. Taken out by WCP, and he likes that deal. Over time, thinks the new entity will be meaningfully rerated when market's risk-on again.

Merger could be really accretive, better together. Nice dividend. Scale could really help them both. He hasn't yet seen the terms of the deal.

He likes the WCP-Veren deal. Both were already decent companies, but together will enjoy synergy from cost savings. It will become the 4th-largest light oil producer in Canada. Management knows what it's doing, valuation good. Bigger companies here tend to enjoy a multiple increase. Veren shareholder will receive the WCP dividend, a big increase for them. The combined company will do pretty well.

A year ago they had finished many years of buying companies, built inventories, and drilling economic wells in the Montney. Last year, they tried and failed using a new frack technique. So, they spent on that, and got punished. He's their largest shareholder. The new Whitecap deal: WCP is almost stealing this asset, being opportunistic as they should. Veren identified high quality rock, but screwed up that opportunity. This merger is very complimentary: big asset overlap. WCP gets a very high quality asset at a cheap price (due to market volatility). Size matters; big institutions have left mid-caps for dead. The new company will be the 6th/7th-largest producer in Canada with a safe 9% dividend (down to $51 oil) will force big institutions to look. At $70 oil, this boasts 3.1x cash flow, 17% free cash flow yield, and over 20 years of stay-flat, high-quality inventory. WCP will recoup yesterday's 15% losses.

Laggard in the group. The names he prefers are really in a sideways trading range; chart for SU is an example.

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, this is a name that works pretty well.

It's gone through a huge transformation from Crescent Point Energy, which created bad memories. But Veren is very different and offers huge upside. Caveat: Veren is tied to the price of oil. Crude oil needs to stay around $75+ for Veren to really work. Their cost structure and balance sheet are sound.

It was rangebound in 2022-2023, but has recently broken to new lows. Not a great chart. Note that the energy chart (XEG) has been in a choppy trading range the past year with little real movement. But money managers seeking dividends have been moving out of telcos and into energy, which are now worth considering. Veren looks weak, though. 

Very cheap relative to peers. Oil patch, as a group, has a problem in that Trump is going to encourage drilling, which means a lot more competition. OK balance sheet, as is production and cashflow-per-share growth. 

We're in the midst of tax-loss selling, with so much pressure to pay less capital gains tax. People are just dumping stocks that are, otherwise, decent buys. All things being equal, will have a pop in January.

Hit pretty hard. Last quarter threw people off, with worries over growth. Otherwise, good drilling success. Great transition to Duvernay and Montney. Cheap valuation. Debt paid down to target, so more $$ (about 75% of cashflow) to shareholders.

Frustrating year, but that creates opportunity. Final opportunity will be M&A throughout the sector.

Oil hasn't been the best place. Best time to own oil or its producers is from March to early summer. Most of the producers have been in a sideways trap. This one has broken down, that's bad. If you own it, give it a chance. But if it doesn't start showing consistent up-and-down range-trading behaviour, don't hold for too long. See his Top Picks.

Huge disappointment, and management owns its mistakes. He's met with management and is comfortable with the status, but other investors are just done. Given current prices of oil and gas, trades at 13% free cashflow yield. Quality not impaired, but it will take time. He bought more shares.

There remains no appetite to own small/mid-cap Canadian-only oil producers. We haven't seen consolidation here, thought it did in the US. Don't sell at current levels. They are messing up on operations now, which hurt guidance. But long term the dividend and assets are fine.

Likes it. If you believe oil/gas prices will be higher in 1-5 years, Veren is interesting. But this is a commodity company, so it is volatile. New managers are smart with balance sheets and debt, so they don't need a much higher oil price to make money, but how excited will markets get if oil prices stay at current levels?

Over the past year, lots of insider buying. Cheap valuation, however other energy producers to invest in. Would watch company. Could be better options within energy.