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Sees no reason to own this for at least another 6 to 9 months. At one point, they were the most esteemed management team when it came to heavy the oil, and the stock was as high as $7-$8. They had the ability to fund at the time, because they had 2 projects that required massive, massive funding given their oil sands developments in situ, but they chose not to for reasons that were beyond him. They are now in a situation where they have to sell funds, and that takes longer. Have 3 primary properties. One is flat lining in terms of production so it is difficult to get excited about. The next is Onion Lake where they will have results in the 2nd half of 2015. On the 3rd one, they need external funding. Trading at roughly 6.3-6.4 times next year’s cash flow, similar to Spartan (SPE-T), which is actually growing production, internally funded with better economics and balance sheet as well as higher inside ownership.
Sees no reason to own this for at least another 6 to 9 months. At one point, they were the most esteemed management team when it came to heavy the oil, and the stock was as high as $7-$8. They had the ability to fund at the time, because they had 2 projects that required massive, massive funding given their oil sands developments in situ, but they chose not to for reasons that were beyond him. They are now in a situation where they have to sell funds, and that takes longer. Have 3 primary properties. One is flat lining in terms of production so it is difficult to get excited about. The next is Onion Lake where they will have results in the 2nd half of 2015. On the 3rd one, they need external funding. Trading at roughly 6.3-6.4 times next year’s cash flow, similar to Spartan (SPE-T), which is actually growing production, internally funded with better economics and balance sheet as well as higher inside ownership.
This is more of a yield play. They IPO’d in Dec/13 at $10.50. Sold his holdings in the mid-$15-$16, feeling that the easy money had been made. They are now essentially a pure play on the Glock where they have drilled 2 wells. Three wells will be released the next time they come out with results in about 3 week’s time. The real upside is that they are under leveraged, and given the real low decline rate of their assets, they are generating a lot of excess free cash flow, which they don’t necessarily want to deploy into their existing play. They are looking at other plays. They have been targeting a 2000 barrels a day acquisition for many, many months. It seems they may be getting closer to achieving that. Given that they are trading at around 7.5-7.8 times enterprise value to cash flow, they’ll likely be able to make an accretive acquisition and have the stock go up. There are other names he would prefer right now.
This is more of a yield play. They IPO’d in Dec/13 at $10.50. Sold his holdings in the mid-$15-$16, feeling that the easy money had been made. They are now essentially a pure play on the Glock where they have drilled 2 wells. Three wells will be released the next time they come out with results in about 3 week’s time. The real upside is that they are under leveraged, and given the real low decline rate of their assets, they are generating a lot of excess free cash flow, which they don’t necessarily want to deploy into their existing play. They are looking at other plays. They have been targeting a 2000 barrels a day acquisition for many, many months. It seems they may be getting closer to achieving that. Given that they are trading at around 7.5-7.8 times enterprise value to cash flow, they’ll likely be able to make an accretive acquisition and have the stock go up. There are other names he would prefer right now.
He has been using $4 natural gas for 2015 for his own modeling, which is proving to be where the futures price is coming down to. This one screens out as a very cheap stock, but unfortunately is somewhat cheap for a reason. Had an asset in the Wilrich, which they sold to Bonavista (BTE-T), and they took the cash and de-levered the balance sheet, which was fine. They were also ramping up CapX very meaningfully. However, when they came out with their pro forma guidance in terms of production, relevant to the increase in CapX, it was overwhelmingly disappointing. Also, there has been a massive turnover in sentiment with respect to natural gas.
He has been using $4 natural gas for 2015 for his own modeling, which is proving to be where the futures price is coming down to. This one screens out as a very cheap stock, but unfortunately is somewhat cheap for a reason. Had an asset in the Wilrich, which they sold to Bonavista (BTE-T), and they took the cash and de-levered the balance sheet, which was fine. They were also ramping up CapX very meaningfully. However, when they came out with their pro forma guidance in terms of production, relevant to the increase in CapX, it was overwhelmingly disappointing. Also, there has been a massive turnover in sentiment with respect to natural gas.
Repurchased assets in the Foothills. Stock was a little rich because of the very good management premium. Have been trading at around 7.5X forward cash flow. The long term optimality of a team that is one of the few people left in the country that have experience in driving these types of wells in virgin territory in the foothills, has a strong likelihood of doing well next year. A little expensive. If you are a long-term investor, you can be comfortable in owning this.
Repurchased assets in the Foothills. Stock was a little rich because of the very good management premium. Have been trading at around 7.5X forward cash flow. The long term optimality of a team that is one of the few people left in the country that have experience in driving these types of wells in virgin territory in the foothills, has a strong likelihood of doing well next year. A little expensive. If you are a long-term investor, you can be comfortable in owning this.
Dry natural gas. Sold his holdings last week, based on their announcement that they had purchased assets for $100 million. Thinks people were getting agitated that management was taking so long to make an acquisition. Feels the biggest risk is equity financing coming in. The manager is very conservative. Given that they have a debt to cash flow of around 1.5-1.6 times, he would think the manager would be uncomfortable at that level. If you own and are mildly bullish on natural gas, they have a fairly low cost structure, so hold onto it.
Dry natural gas. Sold his holdings last week, based on their announcement that they had purchased assets for $100 million. Thinks people were getting agitated that management was taking so long to make an acquisition. Feels the biggest risk is equity financing coming in. The manager is very conservative. Given that they have a debt to cash flow of around 1.5-1.6 times, he would think the manager would be uncomfortable at that level. If you own and are mildly bullish on natural gas, they have a fairly low cost structure, so hold onto it.
Not the top 1, 2 or 3 in natural gas names, but if you own he thinks you will do fine. They put out an operations update with one really good well. Also, had another that was crappy in terms of liquids yield. He is focusing more on the crummy well because of the variability in geology. Have been deleveraging given the ramp in their cash flows. Part of that was contingent on high natural gas prices, and as gas has sold off, he thinks this thesis is somewhat challenged. Have an offer for their Wapiti asset which would serve to deleverage the balance sheet. There are names he likes better, but sentiment has overshot to the negative.
Not the top 1, 2 or 3 in natural gas names, but if you own he thinks you will do fine. They put out an operations update with one really good well. Also, had another that was crappy in terms of liquids yield. He is focusing more on the crummy well because of the variability in geology. Have been deleveraging given the ramp in their cash flows. Part of that was contingent on high natural gas prices, and as gas has sold off, he thinks this thesis is somewhat challenged. Have an offer for their Wapiti asset which would serve to deleverage the balance sheet. There are names he likes better, but sentiment has overshot to the negative.
(A Top Pick July 30/13. Down 1.79%.) Had been on the verge of getting $1.3 billion from a Chinese company, and this is still dragging on. The $1.3 billion is now going to be $1.23 billion. There have also been recent headlines that some Chinese executives that were involved have been arrested. He would rather invest in others. If you own, you could get a gap up if they eventually get the proceeds, which he thinks they will. Continue to Hold.
(A Top Pick July 30/13. Down 1.79%.) Had been on the verge of getting $1.3 billion from a Chinese company, and this is still dragging on. The $1.3 billion is now going to be $1.23 billion. There have also been recent headlines that some Chinese executives that were involved have been arrested. He would rather invest in others. If you own, you could get a gap up if they eventually get the proceeds, which he thinks they will. Continue to Hold.
