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Eric Nuttall Yangarra Resources YGR-T COMMENT Jul 19, 2017

One of the 1^st ones to unlock a zone in the Cardium, and now the industry is following them. Their results have been getting better and better and better. Production per share has been very, very strong. This is one that can compete with the US names.

Eric Nuttall

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$3.350

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WEAK BUY

A past top pick. It's come off just like the energy sector. It's one of the few companies that's grown production per share. Continue to hit their targets. Cheap multiple. He expects the next few quarters to be strong. He may add to his position.

PAST TOP PICK

(A Top Pick Dec 21/17, Down 44%) He entered at $4.70 and still holds a large holding. They just announced a solid earnings quarter and their metrics all improved. BOE production is now 12,500 and he expects that to increase again. He likes the management team. When oil prices dropped below $45, they curtailed their production and smartly acquired land in their core area. It still looks cheap and management has been buying back stock. He will likely look to buy more here.

DON'T BUY

A fine company, but there are concerns over their total inventory. It comes down to what is the problem with Canadian energy market as a whole. There are only about 5 active analysts in the sector now. When money comes back it may be Cenovus, Baytex or MEG. Canadian light oil producers have a hard time competing against US Permian producers and there is not that much difference in value -- so investors are slow to return here as well. There is just not the depth of investors for this space.

PAST TOP PICK

(A Top Pick Jun 13/18, Down 60%) In the last 6 to 8 weeks oil names have been decimated. The management team spent more on acquisitions than people thought. You don’t want doubt when owning any of these companies, so people exited, and now it has ramped back up in production.

DON'T BUY

It's junior gas and a relative success story with very good production growth and drilling success. But eventually it got hit by the low price of gas. It's tailed off in the past year. If the price of oil rises, YGR will move up before some of its peers, but not the senior oil stocks. You need TransMountain to break ground in order to change sentiment. Won't be much return in the near future. A super-tough environment.

DON'T BUY

It has followed the trend that many small caps have followed. Multiples have compressed. It is trading at 2.5 times cash flow next year. The management has an antiquated mindset that they will grow as much as they can.

HOLD

A long term holding for him. Now is not the time sell. The oil patch has struggled as a whole. They have the flexibility to stop drilling when economics are poor. The stock is cheap here and they have had good drill results recently. At this small market cap (under $100 million) it is not getting any attention. He will look for management to start buying in if the stock drops in value.

DON'T BUY

Liked their ability to buy back shares from free cash flow. But then management decided to chase growth, so he divested. Decent gas exposure. Its recovery is still too low to attract investor interest. Better names to own.

DON'T BUY

There are aspects that will detract institutional ownership. There are some promotional aspects. The name is cheap and are paying down debt. It is not a name he is looking at. The quantitative and qualitative aspects need to match and for him it does not meet his requirements.

DON'T BUY

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

EPS of $0.11 missed estimates of $0.13 and revenues of $42.41M missed estimates of $44M. Its FFO increased by 29% against the previous quarter, and its operational efficiency improved by 3% in average production. It demonstrated drilling cost reductions in the quarter, however, against the prior year, its FFO declined by 36%, and sales decreased by 28%. This was a tough quarter for the company, although it continues to carry a low net debt balance and generates positive free cash flow, but given the challenging oil market backdrop, we feel YGR may see some downside pressure in the near term. It trades at a cheap valuation, but we do not like its recent negative momentum.
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Eric Nuttall Yangarra Resources YGR-T COMMENT Jul 19, 2017

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