Obsidian Energy

OBE-T

Had new management come in. Yield of 18% implies that they are going to have to do another cut. They are trying to sell off assets and refocus. She wouldn’t put any money into energy producers until we see stabilization in crude oil. For investors wanting to step into energy companies, they should be really buying financially strong companies that have a strong balance sheet with a hedging program in place.

Great resources, but this is not one he would put new money into. There are much better companies out there. They still have a lot of work to do. He would avoid this one for the time being.

This company has been in a state of turmoil. Their balance sheet is still quite levered. Have been hoping to sell off some assets and understands they will be selling off some with about 7000 barrels per day. That should help mitigate the situation. Has been some management turnover in the last couple of years, but the worst thing that is hitting them right now is the lower commodity prices while they are financially constrained. There are safer ways to participate in the oil patch, but if it survives, it could have a lot more leverage.

Operational execution has not been great. The capital structure had too much debt. They paid a non-sustainable dividend for years. They have cut that and have been trying to sell assets. There has been management turnover. The latest shoe to drop was a change in the CFO and a whole bunch of restatements of the financials. Also, believes there are some class action lawsuits. Too much debt.

Sold some assets for over $300 million. Taking some really important necessary steps. Modeling $80 oil and $3.50 natural gas, its debt to cash flow is still too high at 3.4 times. Priced pretty cheap relative to the group at about 6.4, but not cheap enough. Its payout ratio would rise for its dividend to about 161%. There are better alternatives amongst higher risk names than this.

Have gone through some restructuring and accounting issues, which are now largely behind them. They are still restructuring their portfolio and making some asset sales. There are more attractive names than this one.

Avoid it. It is a big moving ship and it takes a lot to move it. There is no need to own it. Too many headwinds.

To rectify its position with its covenants, the dividend is going to have to go. The best case would be a major cut.

Have had problems from an operational perspective for a number of years. It now appears that there are accounting irregularities as well. This may make their costs look even worse. He would wait and let this play out. The dividend may not be safe.

Down 15% or so today. This will not go to zero. If you made money on a short like this, then take the money and run.

Wouldn’t touch this. Thinks there are long term ongoing issues. Deleveraging by selling off assets. Last quarter was pretty good in terms of capital efficiencies, but when he can invest in so many other names, he doesn’t find this overly compelling.

They have too much debt. They are diverting assets to pay down debt. Sell it, take the tax loss and switch into another name that is firing on all cylinders.

Until she sees their debt numbers and visibility of a lower debt, she will not be buying. Likes to see debt at 2x times or less on a debt to cash flow.

You are seeing a pullback now. They are ‘coming out of the blue’. The market is agreeing with the balance sheet. You want to buy it here. Sell if it goes to EBV -3.

Has been challenged for years. He stayed away and will revisit once they have this cleaned up and have sustained growth.