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Very well regarded company. Stumbled earlier in the year and then they put out a very good Q2. Transitioning more towards being a SAGD producer in the coming 2 years. Because it is so well regarded, it trades at around 10X cash flow. Quality of assets are stupendous, but there are other names that have a higher yield and as good a balance sheet and trading at a lower multiple.
(A Top Pick September 19/12. Down 21.03%.) Great acreage in BC. Takeover target. Execution remains fine. Well results have been in line with expectations. Continues to delineate their acreage. Apathy to natural gas has caused many names to sell off. They have the ability to sell into a pipeline that isn’t as impacted by the wide basis differential so are getting a $.50-$.60 premium compared to other natural gas producers. Still likes.
(A Top Pick September 19/12. Up 66.28%.) Did a perfect job of commissioning the market for its conversion into a dividend company, put together a stable of assets that fit that and using the currency that the market gave them to make accretive acquisitions from Barrick. Could see this getting to $14.
(A Top Pick September 19/12. Down 4.61%.) People are slow to appreciate their water flood upside. There are several billion barrels that are amenable to water flooding and thinks they will be booking barrels for the very 1st time this year. Spending about 120% of their cash flow to grow production by 6% and pays a 7% yield.
With their new CEO they have had 5 quarters of sequential growth and growing production by roughly 14%-16%. In their current commodity deck, they are able to bring in an additional rig and potentially grow up to 20%, while at the same time essentially maintaining a debt-free balance sheet. Operating in Albania. Thinks it is going to stall around $4-$4.25 level. He has been scaling out recently.
You have to be really, really careful with this stock. This company is locked into long-term contracts on offshore drilling rigs. Because of their cash situation and lack of exploration success in Indonesia, he feels they have about 6 months of life support left. Thinks they have to come to market and do a massive equity financing to clear up the overhang. Burning cash on a daily basis.
Balance sheet is very strong. This is largely more of a gas producer. Because, to his knowledge, they didn’t protect themselves from this blow out and the fact that they don’t own their own infrastructure, they are a bit more subjected to the price of natural gas. There are some near-term headwinds for the shares. Well regarded and has great assets but wouldn’t be at the top of his list. (See Top Picks.)
Exceptionally well run company. Largely light oil of the Pembina/Cardium field. Had some recent success in drilling the longer horizontals. Implication of this on certain plays in Canada is transformational. You spend maybe 15%-20% more on a well which could increase production from 250 to 1000. Payback is much faster and, as a dividend payer, it gives that much more cash flow and free cash flow to increase growth rate are pay out a higher dividend. Wouldn’t be surprised if they increased their dividend in the next couple of months. Probably trading at 9.5X, so not the cheapest stock but the implementation of technology, if successful, could transform this company to be able to grow potentially in the mid-teens and still pay a pretty healthy dividend.
Payout ratio is about 100%. Had an issue where they lost production in an area called Primate but at the same time they are having some success in another area through horizontal drilling. Thinks their guidance to the street is a little on the conservative side. Feels it is kind of stuck in a holding pattern with maybe 10%-20% upside. Exposed to heavy oil differentials.
Stock dropped when they converted to a dividend paying company where financial controls were probably not quite as strong as they should have been. Holding their annual meeting this Friday, so there should be an update on their production standpoint and their strategic reviews. There are 2 scenarios. 1.) It gets sold at $1.30-$1.35. 2.) Possible parachuting in of a new management team.
Faced some challenges this year. Recently cut CapX program pretty significantly. This was a high growth company so subsequently had high declines. Struggled on the drilling side where they over capitalized on one area. Production is falling and debt to cash flow has ballooned from almost 0 to 1.7-1.8 times. Feels they can maintain flat production by using all their cash flow. They require further success through water flooding. There is promise in the stock long-term.
Being acquired at $2.86, effective November. Doesn’t expect there will be a better offer so he would recommend Selling at this point.