Latest Expert Opinions

Signal
Opinion
Expert
DON'T BUY
DON'T BUY
April 17, 2018

He is looking at Vermillion in its role as the buyer of Spartan Energy. He thinks Vermillion is well run and gives the benefit of international exposure. They have a strong enough balance sheet and they have made the dividend more sustainable. Spartan is being sold to VET at a cheap valuation. This is a very high quality company that he wouldn’t own because it trades at a high multiple. He believes that the market is approaching an inflection point in sentiment, that will have a much bigger impact on the well-run companies that are not liked as much as Vermillion.

He is looking at Vermillion in its role as the buyer of Spartan Energy. He thinks Vermillion is well run and gives the benefit of international exposure. They have a strong enough balance sheet and they have made the dividend more sustainable. Spartan is being sold to VET at a cheap valuation. This is a very high quality company that he wouldn’t own because it trades at a high multiple. He believes that the market is approaching an inflection point in sentiment, that will have a much bigger impact on the well-run companies that are not liked as much as Vermillion.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$43.360
Owned
No
DON'T BUY
DON'T BUY
April 17, 2018

He thinks the stock is going up but that others will go up more. Others will yield meaningfully more leverage to the change in oil price, and he believes oil is going up. Also, Baytex has some debt. Its leverage position is not precarious but it is significant. Too much of its cash flow goes back to the bank rather than to buybacks or to accelerating growth.

He thinks the stock is going up but that others will go up more. Others will yield meaningfully more leverage to the change in oil price, and he believes oil is going up. Also, Baytex has some debt. Its leverage position is not precarious but it is significant. Too much of its cash flow goes back to the bank rather than to buybacks or to accelerating growth.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$4.440
Owned
No
PARTIAL BUY
PARTIAL BUY
April 17, 2018

The caller asked how the company can pay out more dividend than it earns. Mr. Nuttall explained that there can be a mismatch between earnings and cash flow based on when the company books its costs of land and exploration. From a cash flow perspective, using strip pricing, he sees their dividend at about 33% of cash flow. The 9% dividend of Cardinal is completely sustainable, from the perspective of cash flow. If you look at cash flow minus maintenance capex, you see free cash flow of 18%. It is rare to find a business with an 18% free cash flow yield. From the perspective of a dividend-oriented investor, this is a good stock with good exposure the oil market. However, from the perspective of capital appreciation, other companies will grow faster. He acknowledges that companies like Cardinal are perceived to have abandonment liabilities, but he isn’t as concerned about them as he thinks the rest of the market is. He expects a total return in the mid-teens.

The caller asked how the company can pay out more dividend than it earns. Mr. Nuttall explained that there can be a mismatch between earnings and cash flow based on when the company books its costs of land and exploration. From a cash flow perspective, using strip pricing, he sees their dividend at about 33% of cash flow. The 9% dividend of Cardinal is completely sustainable, from the perspective of cash flow. If you look at cash flow minus maintenance capex, you see free cash flow of 18%. It is rare to find a business with an 18% free cash flow yield. From the perspective of a dividend-oriented investor, this is a good stock with good exposure the oil market. However, from the perspective of capital appreciation, other companies will grow faster. He acknowledges that companies like Cardinal are perceived to have abandonment liabilities, but he isn’t as concerned about them as he thinks the rest of the market is. He expects a total return in the mid-teens.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$4.740
Owned
Unknown
BUY
BUY
April 17, 2018

He bought some on the day of the interview (price $8.65 on interview day). The company sells at 4.4x cash flow and the company offers 8 years of existing cash flow from their current producing fields. He thinks it is financially positioned to make more acquisitions next year.

He bought some on the day of the interview (price $8.65 on interview day). The company sells at 4.4x cash flow and the company offers 8 years of existing cash flow from their current producing fields. He thinks it is financially positioned to make more acquisitions next year.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$8.650
Owned
Yes
COMMENT
COMMENT
April 17, 2018

This is an example of a US Pressure pumping stock. He is strongly positive on the category. Keane has net cash and is doing a 100 million share buy back. It trades at 3.5 times EBITDA with a 15% free cash flow yield. There is a lock-up from their private equity sponsor but that comes off today or tomorrow and will have its effect for a short time. Because of the bad weather, focus on their forward-looking guidance.

This is an example of a US Pressure pumping stock. He is strongly positive on the category. Keane has net cash and is doing a 100 million share buy back. It trades at 3.5 times EBITDA with a 15% free cash flow yield. There is a lock-up from their private equity sponsor but that comes off today or tomorrow and will have its effect for a short time. Because of the bad weather, focus on their forward-looking guidance.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$15.670
Owned
Unknown
PAST TOP PICK
PAST TOP PICK
April 17, 2018

(A Top Pick June 19, 2017. Down 16%). The entire pressure-pumping sector, including Trican, is completely undervalued. This company trades at 3x next year’s EBITDA. Mid-cycle valuations are closer to 4 or 4.5. The company has been spitting out high free cash flow, which has let them do $54 million in buybacks. When Shell makes its positive decision on an LNG terminal, which he expects this year, it will be very positive for Trican. He projects their free cash flow yield next year at 20%. He sold his position even though he likes the stock because he thinks that US pumpers are even more cheap than Trican. He can buy the US peers nearer 2.2 times EBITDA, compared to Trican’s 3x and they generate even better cash flow.

(A Top Pick June 19, 2017. Down 16%). The entire pressure-pumping sector, including Trican, is completely undervalued. This company trades at 3x next year’s EBITDA. Mid-cycle valuations are closer to 4 or 4.5. The company has been spitting out high free cash flow, which has let them do $54 million in buybacks. When Shell makes its positive decision on an LNG terminal, which he expects this year, it will be very positive for Trican. He projects their free cash flow yield next year at 20%. He sold his position even though he likes the stock because he thinks that US pumpers are even more cheap than Trican. He can buy the US peers nearer 2.2 times EBITDA, compared to Trican’s 3x and they generate even better cash flow.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$3.080
Owned
No
PAST TOP PICK
PAST TOP PICK
April 17, 2018

(A Top Pick June 19, 2017. Down 19%). The bull thesis on fracking sand has played out. There has been a chronic worry about too much regional supply. There are very few active analysts for this category, so the stock prices whip around unnecessarily. Sentiment is horrific. He would rather own pumpers, which are also severely undervalued but without the fear of oversupply.

(A Top Pick June 19, 2017. Down 19%). The bull thesis on fracking sand has played out. There has been a chronic worry about too much regional supply. There are very few active analysts for this category, so the stock prices whip around unnecessarily. Sentiment is horrific. He would rather own pumpers, which are also severely undervalued but without the fear of oversupply.

Eric Nuttall
Partner & Senior Portfolio Manager, Ninepoint Partners
Price
$28.280
Owned
No