Athabasca Oil Sands Corp

You can get into it now. This must wait for the big oil names to rise, before this does. Doesn't see much downside (it's fallen so far), though it could take time for it to rise.

A penny stock, so less institutional money driving it and more retail money, so more volatility. Bearish channel. Constructively positive on oil, and oil comes into season in February. This one is a small cap, so he's not as excited as he would be by a Suncor.

It's on the verge of breaking out--and he buys only breakouts, not before. Chart shows a downtrend, but if it break a trendline it is a possible buy.

They want shareholders to vote to free up restricted cash to potentially buy back stock next year. The key challenge for them is liquidity. There are no sellers and few buyers. If you are looking to buy a small amount, they offer fairly good torque. It is one of the best horses to pick.

Good, long-life production. Balance sheet is stretched, though. MEG Energy is better on the heavier oil side; it's in better shape. Problem is there are no new buyers of energy stocks. We are seeing a bit of a bounce in the past month in oil, however, which is encouraging. Don't rush out to buy ATH, but MEG, Baytex or Crescent Point. There's some risk in ATH.

He thinks there are too few energy players to make the space relevant -- and that is true for the entire space. Only the larger players will get investor interest. He sold this at $0.84 and thought that was the low. The concern he has is that they are not using free cash flow to buy shares, but that has changed. They have taken down a field for maintenance and it is not producer like before -- he has to research this further.

The market cap has become too small for a large fund manager to follow anymore. He sold around $0.82 and it continued to sell off much lower. That scared him about the liquidity. He would need to see $60 WTI and $15 heavy oil differentials to be able to generate enough free cash flow to excite him back in. On top of that, their JV in Duvernay will require more capital outlay soon. He would look elsewhere.

(A Top Pick Oct 19/18, Down 63%) Unfortunately the market cap has become too small for the big institutional investors to be interested in this. He expects the dividend paying energy stocks would rebound well before this one does.

(A Top Pick Aug 17/18, Down 61%) He sold it and bought Cenovus. There's no demand for micro-caps which ATH sadly has become. Their cash flow goes up the most if WCS differentials stay low. To own this, you must believe in $60 WTI or $15 or less differentials. Also, ATh didn't want to buyback shares, which he disagrees with. It now trades near all-time lows.

He does not currently own this. They have a billion dollar joint venture to explore the Duvernay and a similar venture with Statoil and also in thermal development. This may be creating some angst with investors. He is watching this to see how this develops, but is not ready to step in yet.

ATH-T is a prior top pick that he sold about a month ago to buy CPG-T (who has been buying back shares on free cash-flow). He has concerns over ATH-T liquidity in the market and he held heavy oil exposure in other bigger names. ATH-T has done well to deleverage their balance sheet.

If you believe in $60 oil or higher, this offers the highest leverage of any name. If you believe in $55 or lower, you do not want to own this. This company is very sensitive to oil price and oil differential. Negative cash flow at $55 oil and positive cash flow at $60 oil. If Line 3 does come on next year, and oil by rail ramps up, and if get positive resolution to Keystone or trans mountain, this could be a double or triple.

He thinks WCS will stabilize at $17 discount to WTI for the next few years. If you see Line 3 being completed this year and rail filling the gap, this company offers a tremendous leverage to tightening WCS. Their debt levels have been cut sharply. At $55 WTI, this company generates massive cash flow. At $80 WTI and $20 WCS discount, his target is $4.13 for the stock price. At $70 it is $2.67 per share. You can see the leverage.

When MEG-T is gone, ATH-T will be the highest levered company to tightening heavy differentials. They trade on 11 times cash flow and that can fall to 4.5 times with a tighter heavy differential. He sees heavy differentials at $20. He sees a target of $2.67 in share price. He is the second largest shareholder in this company. (Analysts’ price target is $2.16)