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Fell on disappointing data from fracking, which made market skeptical about quality of assets in the Montney. A return to old way of fracking would restore market's faith. Taken out by WCP, and he likes that deal. Over time, thinks the new entity will be meaningfully rerated when market's risk-on again.
He's tempted, but difficult to see a near-term catalyst. Extremely strong balance sheet, very competent management. Gaining market share. Niche player. Closest competitor is not as good. Spending environment not good for service companies. Stock will struggle. He'd prefer pure-play oil yielding 9-10% or natural gas.
Small-cap yielding 8%, sustainable in low $50s. Wouldn't be surprised if it dialed back capex, which makes the dividend even more sustainable. Almost a pure play to Clearwater, an exceptional resource. Owns in his income fund, on his list to add to the main fund. Inexpensive. Respected management.
There was an opportunity about 2 weeks ago when share prices fell, but the price of oil and FCF did not. Massive disconnect. ATH for example, a big holding of his, bought back 2% of its shares in the month of March; very aggressive. He's also notice insider buying throughout companies.
When the price of oil collapses, a company's priorities to protect are, in order: the business, the balance sheet, dividends, and then share buybacks. The sector average for balance sheets is 0.9x debt to cashflow at $60, which is very strong. Dividend sustainability is $51 with production flat. Any residual free cashflow is going to buying back stock.
He shares the caller's bewilderment. Why didn't Warren come to Canada with its better valuations and resource depth? Could be because it has a clean tech division which earned tax credits when ESG was stronger than today. Inventory challenges. Better opportunities elsewhere.
Offers near-term leverage to a bullish outlook for natural gas, plus long-term exposure to a very bullish outlook on oil. 60% gas, 40% condensates. Very deep resource base. Growing production over next 5 years by ~50%. Also buying back 30-50% of shares at $60-70 oil.
Once production targets are met, its plants will be filled, and the plan is to return 100% of residual FCF back to shareholders. Exceedingly strong balance sheet. Likes the CEO. No dividend.
Attachie, a growth project, has superb economics. They have about 4 or 5 more buried in their portfolio. Exposure to condensates, but it's really a gas play. Outlook for Canadian nat gas is meaningfully improving as LNG Canada comes on. (This is as long as producers show discipline and don't flood the market.) Conservative management, which is what you want in this climate.
Stands out as a really good value proposition, which he thinks will attract US investors when they realize there's nothing left to buy in the USA. Believes embedded resource value will be realized by somebody down the road. Yield is 2.96%.
No debt. Roughly $134M net cash. Business model is defendable down to $50 oil. Purish-play, oil sands name. Very clean story. Modest growth, 50+ years of stay-flat inventory. Residual free cashflow dollars are being used to buy back shares. In March alone, bought back 2% of shares outstanding. Management team is underestimated, has done a fantastic job. Gives you exposure to better days ahead for oil. No dividend.
(Analysts’ price target is $6.19)
Unfortunately, fatality overnight; will have only a short-term impact, weak today. Despite the name, a natural gas company. Trades at highest premium relative to peers. Management and resource depth are solid. Backdrop is bullish for Canadian natural gas producers, but he'd prefer other names.