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This is the most recent convert to a dividend paying model and what he likes is that management has about $47 million invested. Have used very conservative estimates for building the business model to figure out payout ratios. On the payout ratios, he has them spending 96% on cash flow and at the same time they are growing at about 8% with a 6% yield. Drill results they are achieving in the Cardium as well as their Monarch play and a potential play in the 3 Forks is going to allow them to increase guidance in the next couple of months to increase the dividend.
This is such a hated name that it has been pretty bombed out. Should be receiving the proceeds from their put with Petro China in the next 2 months. $1.3 billion amounts to $3.30 a share. Duvernay is going to be one of the key plays for 2014 and this company has 200,000 net acres in what they believe is the core of the play. This could ultimately be worth $5-$7. Also, have 1 billion barrels of reserves and about 7 billion barrels that you are getting for free.
Stock was killed for much of 2012. They have continued to execute. Had 5 quarters where they beat estimates and thinks it will do so again in Q3. For this year and 2014, spending cash flow they will be able to pay down their debt and grow cash flow by about 13%. Feels debt to cash flow will come down to 1.6 times. US investors are becoming more interested when they see how cheap mid-cap light oil growth companies are. Have a 15 year drilling inventory. Value of their known reserves is about $9.50. Through identified inventory that they haven’t booked, they think they can double that. Ultimate potential value of the shares would be in the mid-teens if not higher. He is looking for $9.