COMMENT

Market Outlook. Last year there was a massive dislocation between what oil did and what oil stocks did. This year oil was up close to 8% and the average Canadian company is down about 20% from the high on January 26th. He is seeing unbelievable opportunities in the oil stocks. Some names are down 30%. It is craziness. He is seeing the greatest breakdown in history between perception and reality. There is a misunderstanding of US growth oil output and how that fits into the global context. You need growth. The market is already undersupplied. Demand is up – Goldman Sachs is saying 2 million barrels this year. We are in a multiyear bull market for oil because we experienced the largest drop in upstream projects spending globally. Oil price should remain very strong for the next 5 years.

COMMENT

Can you recommend a non-Canadian producer to invest in? He typically doesn’t buy the mega-cap companies. Their growth rate is fairly modest as they are basically a proxy for the price of oil. It has been topical to go out of Canada. He is 40% in the US. Repatriated some to Canada over the past month given the implosion in share prices. He likes WPX Energy Inc (WPX-N) in the US. They are deleveraging. Trading at a 2-point discount compared to its peers. Good mid-cap company with good balance sheet. Main thesis: high quality multi-decade running room and management the he likes.

COMMENT

What is the US reserve for fracking oil? Big debate on shale oil. Arthur Berman a couple of years said that there is a decline rate of 80% or more after the first year. In his opinion there was a fallacy as he didn’t recognized wells that were brought on. In his mind is not a debate on oil shale. It is more about quality of acreage. When you look at the best rocks. Because the marginal economics when you move to your tier 2 erode very rapidly. Companies are drilling longer, and efficiencies are flat lining. He sees that some evidence that high grading is eroding.

COMMENT

Cardinal Energy (CJ-T) vs Torc Oil & Gas (TOG-T). Very different companies. Cardinal is a medium gravity producer. They are 60% exposed. They are going to lower their debt. They can pay the 10% yield and that is sustainable. He would buy Cardinal Energy (CJ-T) vs Torc Oil & Gas (TOG-T). (Analysts’ price target is $6.44)

COMMENT

Cardinal Energy (CJ-T) vs Torc Oil & Gas (TOG-T). Very different companies. Cardinal is a medium gravity producer. They are 60% exposed. They are going to lower their debt. They can pay the 10% yield and that is sustainable. He would buy Cardinal Energy (CJ-T) vs Torc Oil & Gas (TOG-T).

DON'T BUY

Poster child for investors not wanting to own gas stocks anymore. A name that is intriguing. Trading 5.5 cash flow. Should be fully discounted. But there are concerns about take away, summer gas. Unless there is a demand increase LNG you need supply to fall off. He would rather be in the oily names. Valuation looks cheap. In the next year or two years it is hard to come with a catalyst for any natural gas name in Canada.

DON'T BUY

Very limited appetite for the mid-caps in Canada. Trading at 4.1 cash flow. They 5 years’ worth of proven reserves. Effectively paying below the value of the production and getting their unbook inventory for free. They shouldn’t spend any money on waterflooding. The stock market doesn’t give a darn about it.

PAST TOP PICK

(A Top Pick March 23/17 – Down 31%) A player in fracking sand. Sometimes you are wrong on the stock even if you are right on the fundamentals. A space that is not exciting anymore. Q4 is probably going to be very bad for them.

PAST TOP PICK

(A Top Pick March 23/17 - Down 16.4%.) This is outer stupidity. Talk later about this.

PAST TOP PICK

(A Top Pick March 23/17 - Up 5%.) US producers are up as they are not facing a discount on the price of oil.

DON'T BUY

They are one of the names suffering the long-term structural issue. It is hard to have capital tied in Canada.

COMMENT

How is Alberta going to sell their oil down the road? Not going to solve the problem until you have pipelines either going East, West or South. Right now, the Government have given full support to Trans Mountain. But there are delays. We remain short pipe. It is impacting all of us.

DON'T BUY

Would you buy the stock? They are the gas producers that announced that they want to mine bitcoin. He applauds the CEO for his innovation but don’t see capital going there.

COMMENT

Effectively a liquid producer in drag. It is a name with a management team well regarded. It doesn’t have the beta that he wants. Very good well productivity. Very good quality in their acreage. Probably not one bad thing you can say about the company.

COMMENT

You are going to make money buying any energy stock. A question of which one you buy. Historical issues with the Management Team. Trading at half its multiple a few months ago, so from a valuation point is good. Too much baggage in the name compared to others.