DON'T BUY

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. 

SELL

Yield is 13%. Dividend not sustainable. Great candidate for tax-loss selling, and buy another high yielder (such as WCP) with the proceeds. WCP has meaningfully better assets, reliable management, with no Colombian geopolitical risk. 

PAST TOP PICK
(A Top Pick Apr 02/24, Down 26%)

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.

PAST TOP PICK
(A Top Pick Apr 02/24, Down 56%)

Drawdown 100% connected to price of oil. More debt than average. Risk-off market. Totally fine on liquidity. Deep value, but needs oil at $65-70 to really start humming.

PAST TOP PICK
(A Top Pick Apr 02/24, Down 40%)

He sold. Service sector has been completely eviscerated. Capex is being cut everywhere, as low oil price isn't motivating for drilling. Won't do well if market continues to be risk-off.

BUY

Boring name that pays you a 9.5% dividend yield, sustainable down to about $46 WTI. Not on anyone's radar screen. Asset quality not outstanding, but trades at half the multiple of other names. No exploration risk.

DON'T BUY

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.

SELL

Nothing wrong with the assets or management. It's just the market cap. Current environment is not conducive to meaningful outperformance by small caps. Small-cap model in Canada is essentially obsolete, they just can't afford to drill. Consider taking the tax loss. See his Top Picks.

BUY

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.

COMMENT
Low oil price encouraging share buybacks?

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.

WATCH

High beta service name, so can be volatile on a tweet. CEO is honourable, respected, and a good operator. Healthy stock buybacks have supported the stock. Net cash lets them survive anything. May see weakness in FCF. He's cautious on the services sector, owns none right now.

DON'T BUY
Why did Warren Buffett buy so much of it?

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.

TOP PICK

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.

(Analysts’ price target is $17.08)
TOP PICK

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%.

(Analysts’ price target is $32.80)
TOP PICK

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)