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Opinions Paul Tepsich
Athabasca Oil Sands CorpATH.TOTOP PICKApr 25, 2016
Paul TepsichStock price when the opinion was issued
As of Jun 19, 2026. Market Open.
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Roughly 40 years of inventory. Successful at using free cashflow to pay down debt. Paying more to shareholders. 17% free cashflow next year, trades at 3.5x cashflow. WCS differential should shrink next year. Still very good upside.
Eric NuttallOwns ~9.9% in fund.
Offers highest leverage to narrowing Canadian differential in oil price.
40 years of Proved Reserves.
Trading at 3x cash flow.
Expecting move to 75% return of capital.
Expecting a ~$6 share price.
Company is now debt free.
Eric NuttallSome companies can be very specific in outlning their plans for capital, but others stay quiet. There is no 'requirement' to disclose plans but the majority typically provide some guidance on this. As of June 30, ATH has about $80M net debt. It will likely be in a net cash position by year end. But ATH has discussed its plans. In a recent press release, it noted: the Company intends to direct a portion of free cash flow to its shareholders. The Company will assess market conditions to determine the best method to enhance shareholder returns, which could include a dividend, or share buybacks. We also note that it bought back $46M in stock in the 2Q, and $14M subsequent to the end of the quarter.
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Close to bankruptcy 3 years ago, made it around the corner, and paid off debt. Now a cashflow machine. Be aware that it's a high-cost producer, so if oil goes back to $40 this stock is going way down. This could happen, for example, if China's in a huge recession. Great levered play if you want leverage to oil. See his Top Picks.
A 10% weight for his fund. At $80 oil, trades at 19% free cashflow yield. Prudent divestments mean 75% minimum free cashflow is returned to shareholders. Aggressively buying back stock. Exposure to WCS, which he's very bullish on. 35+ years of inventory. Should be debt-free by year's end, so lots of optionality. No dividend.
(Analysts’ price target is $4.33)Eric Nuttall
Doesn't own either. Usually sticks with light oil, but see his Top Picks. If he had to choose, he'd pick MEG: larger market cap, better liquidity and institutional ownership.
ATH is more focused on debt reduction. It does buybacks, and he prefers dividends for income. Rocky stock performance.
High exposure to rising oil prices.
Excellent prospects going forward.
Major tax loses will cover any tax expenses going forward.
~30 years of proved reserves.
Starting share buyback next month.
Expecting more than 100% upside potential for the share price.
Eric Nuttall
Largest shareholder in company.
Very large reserve life index.
Company is now debt free.
Will return 75% of free cash flow starting in April.
Expecting major share buybacks.
Trading at 1.8x cash flow @ $100 oil.
Tax losses worth $0.44 per share.
5x multiple would suggest a $6 share price.
Eric Nuttall
Eric Nuttall
7.5% bond maturing Nov 19/17. Probably one of the only exploration/production companies on the continent that is in a net cash position. It will have about $900 million in cash when they do the Murphy Oil joint venture, and have about $800 million of debt. The bond is worth $550 million. More senior to it is a bank debt of about $250 million. The $250 million debt matures after the bond in 2019, which is not a position that bankers usually like. The loan has a “springing” maturity, which means if any of the bonds are outstanding 6 months before they are due, the bank debt becomes due immediately. The company likes the bank debt which has a very attractive terms. Thinks the company is going to do a combination of paying down all this bond and maybe refinance with the new bond for $150 million.