Stock price when the opinion was issued
The US equivalent of Baytex (BTE-T). The largest acreage holder in the US Bakken play. Because the stock fell by 75% last year and 50% this year, the equity component of the overall enterprise value has been crushed. If he is right on oil prices, the upside is huge. Also, liquidity is much better than what the market is paying them for. There are no maturities until 2018-2019, no covenant issues below the price of $30. At $40 oil, the stock is worthless, but at $45 it is worth $7, at $50 it’s worth $14, and at $55 oil it is worth around $22-$23.
Energy started getting hit in June 2014. It got creamed in Jan/2015 when oil hit $25 a barrel. The sector bounced 75% from January last year through January this year, and then rolled over. He would say the sector is technically broken. The breadth of the percentage of stocks performing well, is contracting, meaning that money is leaving the space. Whether it is energy service, refiners or service companies, there are risks. He would be very careful.
(Market Call Minute.) On the higher end of financial leverage, he would rather buy something like Enerplus (ERF-T) where you get the same product leverage, but a fraction of the debt.