Whitecap Resources (WCP.TO)

Long-term story for Western Canada is positive. Finally have infrastructure being built. Government and population seem to be more behind the sector. Short-term outlook is pretty cloudy, especially for oil and particularly as we head into the slower demand period of fall. 

Will take a while to digest VRN merger. Weakness for next 3-9 months. Over time, you'll do fine. Can hold for the dividend. For new $$, wait for a better entry point.

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We'll have to see what the merged company looks like on the other side. No strong opinion on it. Looking at it from an options perspective, companies going into deals like this can see their option premium disappear.

If you don't own it, you can look to buy it ~$10 out to October, and sell that $10 put cash-covered (so 54 cents below where it's trading now). This lets you collect about 20 cents. You'll generate 2% over 2 months if the stock stays here or goes higher, and if the stock goes down you'll be buying it.

There is a merger deal. The earnings report last week was very good. He owns it in the growth fund and likes what they're building. Has very long inventory base. It is good for both oil and gas and can hold their dividend at 7%.

He's totally out of oil producers, focusing more on pipelines (more volume-sensitive than price-sensitive). Purchase of Veren was exceptionally well timed, great asset at a great price. Lots of oil supply right now, concerns about demand, thinks oil will crack $60 again and maybe lower.

Trapped in no-man's land, just like many of the other oil stocks. In a swing-trading range; buy near the bottom, sell at the top. If there's a breakout and it seems as though it's staying, he'll actually add more. But if it starts to roll over, he sells. Might be a bit more upside, but don't pile in at this point because it's so close.

It is focused on sustainable yield but has had reasonable growth as well. He isn't buying because he is interested more on the growth side. Another like this is Prairie Sky which has a very talented team.

Harder and harder to start a new company, so consolidation makes sense. He owns CNQ, because if the market moves it'll move that name first. Anyone who wants to own WCP, owns it already. And there's no immediate catalyst to the industry. Be patient, collect the dividend, and know that it will be higher later.

He'd skew toward ARX, as it's the best-run intermediate O&G company in Canada. On most fundamental metrics, WCP is cheaper. It depends on your own investing style. He's often willing to pay up for management that he considers superior. In a 5-10 year timeframe, you can't go wrong with either.

There are a lot of choices in the sector. He wants the technical picture to be as supportive as the fundamental picture. Possible that the theme is going to pick up steam. He isn't a value investor, buying cheap and hoping it'll get less cheap. He wants to buy companies recognized as the leaders in their group.

Loves the new combination of WCP + VRN -- very synergistic, strong free cashflow, increased scale. Doing some asset sales, which will pay down debt and improve balance sheet. 3% lower capex is prudent in this tougher environment for oil.

Bad news is that it'll move as oil moves, and oil's in a tough place here. Trump will want to see oil prices lower, and the Saudis will want to play along with him. This stock works now, but will be a tough place if oil comes down a lot.

He had a massive position in Veren before WCP "stole" (bought) it. He was very excited about Veren's asset base. However, he is neutral oil now, so doesn't own WCP (prefers natural gas stocks). But he sees massive value in WCP. Are paid an 8.6% dividend yield, which is sustainable to low-$50s oil. Is upside here. Trades at 4x cash flow. At $70 oil, it will trade at a 5x multiple and shares will cost $14.

Possible risk of oil prices coming down in next 6-12 months. Important to hold a stock that can withstand commodity price volatility, good balance sheet, not too much debt, strong assets. Its lighter oil is subject to higher decline rates, about 26%. Merger will see lots of synergies. Digesting debt. Hesitant to own for short term.

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All oil has been hit recently, but long run energy is key to future growth. So, WCP is buy, can expand their reserves and a good low-cost producer.

Production of 179,051 b/d rose 5.5% and beat estimates  of 174,000. Crude production rose 5.6%; NG liquids production rose 14%; gas production rose 2.7%. EPS of 27c did miss estimates of 39c; Revenue of $942M beat estimates of $876M. Guidance will be provided when the VRN merger closes. Even though they missed estimates, per share earnings still more than doubled. Payout ratio (12 months) is less than 25%. The dividend looks secure even with a drop in commodity prices.
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Profitable around $51, so you have about $6 of margin right now. Growing 3-5% per year. Paying down debt, balance sheet extremely strong. Dividends are sustainable down to $52. Wouldn't be surprised if they dialed down capex, which makes the dividend even more secure. Montney assets are significantly better than the market appreciates. Good natural gas weight. Yield is 9.3%.