Whitecap Resources (WCP.TO)

The market is being fairly efficient at pricing a lot of these companies as they are very similar valuations. He likes this one very much. He doesn’t own it, only because it has held up better than its peers, and is trading at a slight premium. There is upside where he thinks they will increase their CapX spending as long as oil remains in the $50-$55 level. On his estimates, they will be growing production this year by 17%, and by about 10% next year. Slightly better than average growth for a slightly higher multiple. He would have no issues owning this.

Exploration and production light oil production. They plan to increase from 45k to 55k barrels per day production by the end of this year. He likes that the balance sheet has room on it and they carry less debt than peers. They stand to benefit from a rising commodity. (Analysts’ Target; $14.80).

A midsized light oil player and a dividend player. Management’s idea is if it can give investors 10% production share growth, each year, and pay a modest dividend, maintain existing production, it is a viable way to build a business. During the downturn, management was able to buy assets on the cheap. They bought a number of land packages that really increased the size of the company. Dividend yield of 2.28%. (Analysts’ price target is $14.33.)

He likes the company although he doesn’t currently own it. It has been one of the better managed ones through this whole debacle. They have been quite proactive in how they handled their balance sheet and finances. There have been a lot of costs taken out of the energy companies in the last few years, and are much more efficient than they used to be.

(A Top Pick July 21/16. Up 22.92%.) See today's Top Picks for comments.

All 3 picks have recently done fairly transformative acquisitions. He wants to own companies that have institutional following and access to capital markets and could do smart acquisitions at the bottom of the cycle. This does about 50,000 barrels a day, 80% weighted towards oil. Recently did an acquisition of some very low decline assets. They also have a little bit of hedging in place. Feels they have one of the most sustainable dividend profiles of the group. Dividend yield of 2.34%. (Analysts’ price target is $13.89.)

Tourmaline (TOU-T), Seven Generations (VII-T), or Whitecap (WCP-T) for price appreciation? All 3 of these companies are really well run energy companies. They have all done well operationally and stock-wise over the last year. His 1^st pick would probably be Tourmaline, which has the best combination of quality management and growing its earnings and cash flow, with a relatively reasonable valuation.

This has run way, way ahead of its earnings. The consensus earnings is $0.21, which puts quite a healthy P/E ratio on it. Essentially, baked into the current price, is a higher oil price, possibly quite a bit higher. At the current price, it is up against some technical resistance. When you invest in oil companies, you are now speculating that oil prices are going up. If you are wrong, some of these companies are so far away from anything that resembles a reasonable value, that you have big downside risks.

(A Top Pick Sept 12/16. Up 12.41%.) One of the larger holdings in his funds. An oil producer that will grow production next year by about 15% on a per share basis. Still maintains its dividend yield of about 3%. They do that all within the confines of cash flow.

It is a goto name for growth-oriented managers. They are more oil exposed. They are a big beneficiary of higher oil prices. Recently they have done a bit better. He would stick with it.

(A Top Pick July 30/15. Down 1.28%.) Has made quite a few acquisitions and they have been on a bit of a treadmill digesting them. He likes management.

A great name in energy. Very well-managed. It has underperformed for the most part over the past year or so. This is kind of a slow and steady one you can own. It pays a little bit of a dividend.

This is in a higher growth mode, being a smaller company with a smaller base being able to grow; easier to grow organically and add in “tuck in” acquisitions like they did earlier this year. Great asset base. This has been a relative underperformer in the oil group, because it has had a great run up to the end of 2015. He likes it. 2.4% dividend yield.

Management has done everything they said they would do. They have a decent dividend. He thinks they will do fine as oil prices go up. It is just a case of how much oil exposure he wants. It has hit his radar screen.

(Market Call Minute.) Lots of growth and a very sustainable model. Also, you get paid even at these oil prices.