Whitecap Resources (WCP.TO)

With excellent VRN merger, market cap is now suddenly relevant to large institutions. Bullish on oil for second half of next year, but range-bound till then. This makes it important to choose oil names that will re-rate for a variety of reasons without needing oil price to go up. 

At discount to peers. At least 25 years of stay-flat inventory. Significant increase investor attention from US. Decline in US shale requires them to go to less mature areas such as the Montney and Duvernay (both of where WCP has exposure). Trades at only 5% forward cashflow at $60 oil. He believes fair multiple is 7x, which translates to $19 a share. 

If you dare to dream of not-impossible $70 oil, that's a $23 share price. Yield is 6.28%.

One of 3 oil names he owns, given his somewhat cautious view on oil. One of the lowest multiples of the Canadian mid-cap producers. Purchase of VRN improves asset quality. At least 25 years of really high quality stay-flat inventory, so they don't have to burden themselves with M&A. 

Yield is sustainable down to ~$50-51 oil. Trades at 4.8x cashflow, while peers are closer to 6x. Sees roughly 42% upside. In 2026, focus will pivot to the twilight of US shale, demand growing for next several decades, and OPEC running out of spare capacity. 

Low risk, low debt, strong balance sheet, high asset duration, very shareholder friendly. High insider ownership. Inventory keeps getting better over time. Yield is 6.64%.

Ten most actively managed funds are underweight energy in general. Any exposure is ~6% vs. 18% for the TSX, and they only buy the big 3-4 names. Companies that are in the tier just below that, such as WCP, tend to trade at a discount. That should change as more generalists come back to the gas patch. Quality name, undervalued.

He owns it for the dividend. Good cash flow. Fine operator. The Veren acquisition has given them more room to produce. Even at current oil prices, they are turning a profit. Is holding it for the dividend, but doesn't see a catalyst to move this higher.

Good value. Though he tilts toward nat gas, a good choice if you want an oil-levered name. A steal of a deal on VRN, with more benefits to be realized. Good management team. Lots of light oil. Good growth profile. Decent valuation.

Likes management. Now seeing tons of synergies from the deal with VRN. Reported last night -- production higher, cashflow very strong, capex lower. A name he's looking at. You can hold this for the dividend.

The sector of course is sensitive to commodity prices, and WCP is flat on the year. It is quite cheap at 9X earnings. The 7% dividend is attractive and payout ratio attractive in the 25% range. The balance sheet is OK, even after the giant VRN acquisition. Production rose 65% in the Q2. WCP plans to hedge 25% of production and has said its leverage does not prevent more buybacks. While the sector outlook is mixed, we would consider WCP one of the better names in the sector, certainly.
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Bottomed around $7, and now seeing higher highs and higher lows. In an uptrend. Above both rising 50-day and 200-day MA. Technically, looks fine. Lots of investors like this name. If you own, he'd hold. Seasonally, things get better from here.

His firm is more focused on the Clearwater. A name like TVE is performing a bit better in the market.

Acquisition of VRN a gamechanger in terms of building critical mass. Makes it the largest landholder in the Montney. Nice mix of stable, low-decline production that generates FCF to finance the high-growth gas assets. Ready to ramp up and scale up the business. Nice yield of somewhere just north of 6.5% (above average for peer group).

Over next 5 years should grow in range of 3-5% per annum. Tends to under-promise and over-deliver. Total return of ~10-12% is quite attractive.

Likes it. Trades at a reasonable 7.5x PE, and a good ROE while book value is at 1.6x. Pays a good +6% dividend.

It is one of their biggest holdings in one of their portfolios and they have owned it for a long time. It has grown by acquisitions and discoveries. The price has been relatively flat but it could be due to move. He also owns TVE, Spartan, etc. He likes the dividend - a company that consistently grows its dividend means it is more likely to outpace the market since it is focused on shareholder returns.

Light oil with a high decline rate (versus other types of oil). Good job with enhanced oil recovery to try to mitigate that decline rate. Good management team. Company expects $200M in synergies from the merger, which should be accretive over time. Dividend safe at these levels. Hold, but don't add at these prices.

A name to buy right now would be CNQ.

It has gone sideways and is dependent on oil and gas prices. It is focused on longer life strong free cash flow assets. Has strong management and good insider holdings. Monitor the high payout ratio and integration risks. There is a possible 28% upside and the potential for an attractive short term rally.

Stock's behaved pretty well given what's going on out there. Trading above all the moving averages. Would probably have it on his watchlist. Dividend looks safe. He'd wait for a catalyst in the energy sector before adding.