Whitecap Resources (WCP.TO)

(A Top Pick Oct 17/14. Down 17.41%.) Cut the dividend late last year, but haven’t done so this year. On an unhedged basis next year of $55 oil, it is trading at over 10X cash flow, so the opportunity for them to go out and use their currency to scoop assets from some of the majors is great. Because of the valuation he no longer owns it. Good management.

Just reported a solid Q3. Slightly bumped their production guidance and the dividend looks pretty stable. Had reduced their operating costs quite nicely. Great company because of the way they can advertise these larger volumes over the existing infrastructure, and drive down the operating costs. Dividend yield of 6.6%.

In all likelihood, the dividend is sustainable over the next 12 months. A highly efficient company. Just raised their production guidance. With his assumption of $48 oil this year, $55 next year and $60 the following year, their balance sheet is just fine. Payout ratios are below 100%. Cheaper than its peers on a five-year average. The only thing is, these balance sheets are very sensitive to lower oil.

It has not been moving, but that is good news considering what has been happening in the sector. His model price is $11.33 and we had a negative transit last week. He feels it comes back to $10.21 and fools around for some time there. It is probably dead money for some time. Negative transit is when there are negative fundamentals ahead. It is one of his company’s systems of analysis. Maybe you get interested at the $10.20 area.

Loves this as a company, but is not particularly enamoured with the stock at around $12.50. You are paying forward for a lot of great execution that they have had. Trading at around 9X next year’s cash (?) at $55. On an unhedged basis, it would be around 10.5. That is a very high multiple grant. Team has done a phenomenal job, but it feels like you are forward paying for that. Prefers other names where he can pay a 2 point discount on as good of a business model in terms of with sustainability of the dividend or the growth model.

This is a good area to start building an energy position. What he likes about the smaller companies that is that every new barrel adds well to the balance sheet on a growth basis. His company has an $18 target on this.

Always a "go-to" name. The dividend is absolutely secure. The projects they have are light oil projects and are stellar. They will continue to hold it. There is also a growth aspect when oil prices start to go up. Also they are known acquirers. He would not be surprised to see more acquisitions.

Very well hedged through the end of the year, and as they get into 2016 it is still around 40% at above average prices. Efficiencies are top-notch, and thinks you will continue to see them ratcheted down, so no concerns, even in this environment, for another 6-9 months.

He has a very low weighting in the energy sector. There is a lot of pressure on these companies. From a long term perspective, most companies are now undervalued. Net flows of funds in the markets are away from energy. He expects continued pressure on these stocks. He expects oil to dip to the low $30s before the end of the year. Third quarter results are going to be brutal for a lot of these companies. This one is probably one of the better producers and could get financed to make acquisitions.

(A top pick July 25/14. Down 38.19%.) Has been in and out of this name twice since then. It was a name that was holding up better than most. Doesn’t think a dividend cut is in the cards until Q1 of next year. Debt is quite low relative to its peers.

Healthy dividend, good management team, good institutional following for raising money when they need to grow by acquisition. 6.5% yield. It has sold off, but does not have a balance sheet problem.

This is the one junior oil that he held. Well-managed and a good company. When he is ready to start adding to the oils, this is one he will be adding. His company has this with an $18 target and as a sector outperform. Management has delivered very well over the last couple of years. Dividend yield of 7%.

Sell PrairieSky (PSK-T) and move to White Cap (WCP-T)? It depends on what your cost is in PrairieSky. If you have a good cost base and you have good money into it, he doesn’t think he would Sell to buy this company, although he thinks this company is the best run of all the dividend companies out there. Thinks this is good for a trip back up to $15-$16 in a stronger energy scenario. Dividend yield of 6.4%.

He likes this. It is one of the better names out there. The commodity is very important and probably the most important determinant of it, but it is also overall sentiment. Excellent quality name.