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COMMENT
Market Outlook They were the number 1 Energy Fund in the world according to Morningstar last year. Energy stocks are down 15% this month on the coronavirus fear. Supply of oil is falling faster than loss in demand due to China's reduced consumption, he believes. The second half of the year will begin a multi-year bull run for oil. OPEC is providing cover to move to another supply cut this year he says. Supply growth in the US is dropping sharply and he might expect to see a net decline in production there next year. This will be the first year in the last five years, where US supply growth will be less than total global demand growth -- this means barrels outside of the US will be in demand. A supply crunch is coming in the upcoming years he concludes.
DON'T BUY
They are the poster child for the woes of the AECo market. They have debt to cash flow of 4 times. They are maintaining production. We are over 70% through winter and we have seen demand down 14% in North America this season. The outlook is bleak. Natural gas stocks are a play on weather and he does not see any prospects in this space at this time. He is looking towards Canadian oil plays instead.
oil
gas
COMMENT
HOLD
An incredibly well run company. He sold out last year after making a 35% profit. They have some natural gas exposure. They have a massive play in the Montney region where other large players are getting great results. He thinks their need to pay dividends will mean they take a measured move into developing this new play. Meanwhile they are paying a 9% yield, which he thinks is safe if there is reasonable price recovery in natural gas.
oil
gas
DON'T BUY
The stock trades at a premium multiple. Their balance sheet is not as strong as others. He is not keen on the stock compensation for senior management. He thinks there are better opportunities out there. He is not sure that management's decision to keep paying the dividend is not a wise strategy at the detriment of maintaining production. Yield 15%
oil
gas
PAST TOP PICK
PAST TOP PICK
(A Top Pick Mar 08/19, Up 33%) There has been a massive buyer in the market for this stock. He sold out in December and just re-bought at around current price levels. It has direct exposure to heavy oil price strengthening. Crude by rail rates are increasing and is allowing heavy oil inventory to begin dropping. They are using their free cash flow to pay down debt rapidly. They have 68 years of production inventory. He thinks they will become a take out target by a large oil player soon. The stock price could go to $9-$10.
oil
gas
RISKY
A smaller cap stock, so he is a little leery. He also thinks they tried to roll out debt to 2027 that has created some headwind. If you believe in $60 this is a screaming buy, anything less than that it is questionable in its ability to generate positive cash flow. He would prefer MEG-T instead.
oil
gas
