COMMENT

General Market Comment. He likes how oil inventories are down, but the problem is winter is over soon and demand falls by 2-3 million barrels per day by June. World inventories will rise by 200-300 million barrels by then. There is 500,000 barrels per day of export growth out of the US and Saudi Arabia has cut exports to the US as a result. He looks at US inventory, production and international movements as the key statistics. He sees US production going up 1.2-1.5 million barrels per day this year, along with Canadian production growth, this will absorb all the growth in World oil demand this year. By April, he expects to see inventories build in the US and OECD countries and prices will return back below $50 US/barrel.

COMMENT

Energy Bull Markets Comment. He is near term bearish on oil prices, but thinks this will help fuel the next bull market in energy. The Reserve Life Index has fallen to 5-6 years – the lowest level in decades. Companies want to see flat production in 2018 and will pay dividends and pay down debt with surplus cash flow. He is bullish on natural gas stocks, but sees about 20-30% downside on oil company stocks in the next quarter. This will set the stage for the next long-term bull market. He sees WTI at $100-$150 in 3-4 years from now. Many companies are priced below book value today, but have room to go to 2 times book value – a 400% upside potential.

COMMENT

US Natural Gas Market Comment. He is very bullish on natural gas prices in the US. Cold weather has knocked inventory down, with 93 bcf drawdown this week. He expects US LNG exports to rise from 2-3 bcf per day up to 9 bcf per day in the next two years creating more markets for Canadian gas into the US.

COMMENT

He thinks this company wanted to repair their balance sheet and is now showing some traction. Victor Lee knows Canada and they could become an acquirer in the future. The dividend could also increase. The stock has been boring, but it is trading below book value and on cheap cash flow multiples. It does not have the sizzle; it does not have light oil or Monteney natural gas. He would pick this for less volatility with 10-15% upside per year.

DON'T BUY

This company has a bond maturing next year and the performance of the stock has been poor. It has production of 6713 boed in Q4 down from 8609 boed the year before. The balance sheet has been the problem and people are worried whether they will be able to extend the bond. It is very high risk.

BUY ON WEAKNESS

He holds this company and sees a target of $10 in the next 12 months. In Q4 production came in below his target of 23,000 boed, but the cash flow was very good. Debt is not a problem. Management has a good record. You may be able to buy it sub-$5. (Analysts’ price target is $9.68 )

BUY ON WEAKNESS

He says this company is trading below book value, when historically it has traded at 2 times book. He still worries about low oil prices and how it impacts next quarterly earnings. He would buy this under $2.

DON'T BUY

This company has a lot of its business in the US, where the Bakken and Permian plays are very prolific. The stock could really run, but the problem is the debt to equity ratio and are carrying $1.8 billion in debt. He thinks the stock will drop below $3 before rallying to $7 next year. There are other names in the drilling space that are better like Trinidad and Ensign.

DON'T BUY

This company has a lot of its business in the US, where the Bakken and Permian plays are very prolific. The stock could really run, but the problem is the debt to equity ratio and are carrying $1.8 billion in debt. He thinks the stock will drop below $3 before rallying to $7 next year. There are other names in the drilling space that are better like Trinidad and Ensign.

COMMENT

Would you purchase CNQ-T or SU-T? He thinks both are great companies, but they have a high beta to an oil price decline. Suncor would be a good buy in the mid-$30s. CNQ is producing almost 1 million barrels a day and are a great success. (Analysts’ price target is $51)

DON'T BUY

He says this company has assets in Turkey where natural gas is priced three times higher than Canada. The company has not completely tested their well there and their pilot well will not be online until 2019. Over 95% of Turkey’s natural gas is imported, so the potential is great. If the stock was under $2 it would make sense. He believes there are better options in Canada – this is too speculative at this time.

BUY ON WEAKNESS

He does not have this on the recommended list yet. He thinks it is a buy at these levels, but thinks it will trade lower on weaker oil prices. This company has traded up to 2.7 times book value, so the potential is up to $60 in the next 3-5 years. He would wait to buy it in Q2.

BUY ON WEAKNESS

This company has a nice dividend and the book value is $12.33, but is a little heavy on debt. A back off into the high-$30s would be a good buy on a 3-5 year view. He thinks the dividend is safe. Yield 6.4%.

BUY ON WEAKNESS

He likes this company, sees production growth, and thinks it trades cheap on a cash flow multiple basis. This stock has traded 2.2 times book value and if it trades below $2.75 CAD it would be a buy.

BUY ON WEAKNESS

The price is coming close to book value of $10.37. The balance sheet is in good shape and he likes management. Hold off until it falls closer to book value. Yield 4.5%.