Latest Expert Opinions

Signal
Opinion
Expert
DON'T BUY
DON'T BUY
March 11, 2014

Drilling results were not stellar and the stock fell about 25% on the day they announced the results. This is a natural gas company with 2 core areas. On the one they have been having good development success. Drilling very expensive wells, but rates of return seem to be very good. Have grown production up to about 1700 BTUs a day so on a run rate basis, that produces about $25 million of cash flow, so the stock is trading at around 4X cash flow. Market was disappointed on the initial drilling results from another area which was an untested Montne trend where they were pushing the fringe of the boundaries. If it had worked, it could have been very, very exciting. They couldn’t test the wells because of the sour contents. This means they need to retest after breakup by bringing on better equipment. Even if they get a productive rate, the cost to produce sour gas is much more than sweet gas, about 4 times. Cautious on the name as the risk is too high.

Drilling results were not stellar and the stock fell about 25% on the day they announced the results. This is a natural gas company with 2 core areas. On the one they have been having good development success. Drilling very expensive wells, but rates of return seem to be very good. Have grown production up to about 1700 BTUs a day so on a run rate basis, that produces about $25 million of cash flow, so the stock is trading at around 4X cash flow. Market was disappointed on the initial drilling results from another area which was an untested Montne trend where they were pushing the fringe of the boundaries. If it had worked, it could have been very, very exciting. They couldn’t test the wells because of the sour contents. This means they need to retest after breakup by bringing on better equipment. Even if they get a productive rate, the cost to produce sour gas is much more than sweet gas, about 4 times. Cautious on the name as the risk is too high.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$2.290
Owned
Unknown
COMMENT
COMMENT
March 11, 2014

Really likes this. Should be having a drilling update by the end of this month, which is their first 2 wells which is kind of proof of concept to the play that they acquired from Penn West (PWT-T). Liked that the stock came out at a very cheap valuation when they IPO’d late last year. The market has since given them a currency to use their stock to go aggregate further assets, which he guesses they have done subsequent to the year end. Pending positive well results, he expects the stock could further increase. By his numbers, it is trading very cheaply at roughly 5X next year’s enterprise value to cash flow. Given the nature of the wells they are drilling, if they come on as robust as management has been guiding, it probably has the most sustainable dividend model of any oil/gas company in Canada. Dividend of almost 5%.

Really likes this. Should be having a drilling update by the end of this month, which is their first 2 wells which is kind of proof of concept to the play that they acquired from Penn West (PWT-T). Liked that the stock came out at a very cheap valuation when they IPO’d late last year. The market has since given them a currency to use their stock to go aggregate further assets, which he guesses they have done subsequent to the year end. Pending positive well results, he expects the stock could further increase. By his numbers, it is trading very cheaply at roughly 5X next year’s enterprise value to cash flow. Given the nature of the wells they are drilling, if they come on as robust as management has been guiding, it probably has the most sustainable dividend model of any oil/gas company in Canada. Dividend of almost 5%.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$13.230
Owned
Yes
COMMENT
COMMENT
March 11, 2014

Essentially a pure play in Colombia where they’ve had pretty good drilling success. 18,000 barrels a day and lots of land to drill. The knock against the company has been the very short reserve life, meaning the reservoirs in Colombia are very different from those in Canada. This leads to high productivity in a very short reserve life. The burden on a company to continually add more and more reserves through the drill bit is much higher than it would be in Canada. Since they been so successful last year, they’ve increased their reserve life to 7 from around 4.5, which is a positive. However, it is now trading at a premium to its booked reserve value so you are starting to attribute some value to its exploration, which is fine, but when you contrast this opportunity to some things in Canada, the overall feel of economics is superior in Canada to Colombia. Prefers others.

Essentially a pure play in Colombia where they’ve had pretty good drilling success. 18,000 barrels a day and lots of land to drill. The knock against the company has been the very short reserve life, meaning the reservoirs in Colombia are very different from those in Canada. This leads to high productivity in a very short reserve life. The burden on a company to continually add more and more reserves through the drill bit is much higher than it would be in Canada. Since they been so successful last year, they’ve increased their reserve life to 7 from around 4.5, which is a positive. However, it is now trading at a premium to its booked reserve value so you are starting to attribute some value to its exploration, which is fine, but when you contrast this opportunity to some things in Canada, the overall feel of economics is superior in Canada to Colombia. Prefers others.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$8.960
Owned
Unknown
COMMENT
COMMENT
March 11, 2014

Delphi Energy (DEE-T) or Painted Pony (PPY-T)? Doesn’t own either. In terms of natural gas names, he is looking at them potentially having weakness so he wants greater liquidity, meaning larger market as opposed to small caps. Both of these are very good companies. This one has been remarkably successful at improving how they been drilling their wells in an area called Big Stone, where just by a few different tweaks they really unlocked the economics for their drilling wells that are coming on, probably at a function of 3 or 4 times greater than they were 1.5 years ago. There is some uncertainty as to how they fund their growth. Debt has been going up recently.

Delphi Energy (DEE-T) or Painted Pony (PPY-T)? Doesn’t own either. In terms of natural gas names, he is looking at them potentially having weakness so he wants greater liquidity, meaning larger market as opposed to small caps. Both of these are very good companies. This one has been remarkably successful at improving how they been drilling their wells in an area called Big Stone, where just by a few different tweaks they really unlocked the economics for their drilling wells that are coming on, probably at a function of 3 or 4 times greater than they were 1.5 years ago. There is some uncertainty as to how they fund their growth. Debt has been going up recently.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$2.580
Owned
No
COMMENT
COMMENT
March 11, 2014

Delphi Energy (DEE-T) or Painted Pony (PPY-T)? Doesn’t own either. In terms of natural gas names, he is looking at them potentially having weakness so he wants greater liquidity, meaning larger market as opposed to small caps. Both of these are very good companies. On this one, the key difference is the liquids content of the wells, the amount of condensate and fluids that come along with production making better economics.

Delphi Energy (DEE-T) or Painted Pony (PPY-T)? Doesn’t own either. In terms of natural gas names, he is looking at them potentially having weakness so he wants greater liquidity, meaning larger market as opposed to small caps. Both of these are very good companies. On this one, the key difference is the liquids content of the wells, the amount of condensate and fluids that come along with production making better economics.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$8.230
Owned
No
COMMENT
COMMENT
March 11, 2014

Being acquired by Spartan (SPE-X) (formerly Alexander Energy) to create Premier Light Oil. Really loves this deal and is really excited about it. This is absolute the best outcome for the shareholders. (See Top Picks.)

Being acquired by Spartan (SPE-X) (formerly Alexander Energy) to create Premier Light Oil. Really loves this deal and is really excited about it. This is absolute the best outcome for the shareholders. (See Top Picks.)

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$1.530
Owned
Unknown
PAST TOP PICK
PAST TOP PICK
March 11, 2014

(A Top Pick April 17/13. Up 19.07%.) Still likes this. It is a frustrating name because it feels like the name is kind of stuck. Very well owned in Canada and they really need to rely on the incremental buyer from the US coming into the name. Have a very sustainable dividend becoming more sustainable in time as their capital efficiencies improve and their decline rates fall with the implementation of water flood. Just listed in New York.

(A Top Pick April 17/13. Up 19.07%.) Still likes this. It is a frustrating name because it feels like the name is kind of stuck. Very well owned in Canada and they really need to rely on the incremental buyer from the US coming into the name. Have a very sustainable dividend becoming more sustainable in time as their capital efficiencies improve and their decline rates fall with the implementation of water flood. Just listed in New York.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$38.720
Owned
Yes