Arc Resources Ltd (ARX.TO)

Combined with Seven Generations, will be a very strong company. Very reasonable multiple of earnings and cashflow. One of his favourites in the oil patch. Yield of 3.2%.

A mispriced stock. It is being held back from forced selling from Seven Gens holders due to a mandate. This used to be the tier one quality name in Canada that traded at a huge premium. It is trading at 3.2x cashflow. Sign of an inefficient market. 8 - 8.5% weight for him. Would expect a 6x multiple, which would be a 119% upside.

Likes the merger with Seven Generations. As a senior player, it will get more recognition. Likes the balance sheet. Yield is 3.09%. (Analysts’ price target is $11.11)

Extremely well run. The deal with Seven Generations creates greater scale and more capital flexibility. It's a major player in the Montney region. Production is expected to rise, with the combined companies means 340,000 barrels a day. He predicts this will be cash flow positive by year's end. It trades at 3-4x cash flow which will grow in coming years. Will enjoy synergies from the merger. He hopes that cash will quickly pay down debt. Carries a not-bad 3% dividend yield. (Analysts’ price target is $10.97)

Natural gas is 80% of their production stream. Their liquids weighting is falling more than he thought in 2021. This erodes the free cashflow the company is able to generate. It is not as attractive relative to other names. It would have to fall 10% more from here to be a buy. Tourmaline is a better buy.

He used to own it to get exposure to Canadian natural gas. Assets and management are superb, and pays a fine dividend. However, at the start of March, he changed his outlook given how tough a sector energy was and gas demand was uncertain. He sold all his energy stocks and put his money into CNQ. Arc is still a good company. If you hold, be patient. When energy improves, so will Arc's stock.