Cardinal Energy Ltd (CJ.TO)

They are on her watch list. They have a very low decline rate compared to peers, but they are not as light oil-focused as she likes. They want to move this way as well as to reduce debt. She is waiting to see what happens after a CFO change.

The company is exceptionally strong. The last time he stress tested the dividend, it was sustainable down to about $47 WTI, so at the current $59, not only can they pay the dividend, but can grow production. However, you could massively underperform by having money in a name that is going to languish, such as this name. It is absolutely cheap, and thinks they can grow production by 12% and pay the 8.5% dividend and still generate free cash flow. They are trying to monetize more royalties, hopefully by the end of this quarter. Because it is going to underperform other names he does not have any shares.

They started looking at oil & gas a little bit more. This would be on the riskier side of centre. Thinks it’s a little bit too early. Return on capital still negative. Looks cheap but there is quite a bit of debt. A lot of things could go in their favor or a lot of things could go the other way. That’s going to be one of those that’s either going to be spectacular or it’s going to flame out. Depending on your risk tolerance it’s probably best to take a small position and see how it goes.

(A Top Pick Oct 7/16. Down 44%.) One of the few Canadian names he has actually added to recently. Oil is down about 1%, while this name is down 57%. Over that time period, they did an acquisition. The balance sheet has always been pretty good. Yielding 8.9%, which is sustainable.

If looking to clip a dividend coupon, the estimate is that it is sustainable down to about $45 oil. The dividend yield is high, because the stock’s been slaughtered on an overhang. The overhang was because RBC determined there was enough demand to do a fairly significant bought deal at $5.50, for them to buy an asset off of Husky. RBC had overestimated the market’s demand for Canadian small caps. It is back to a level now where it is extraordinarily cheap. He struggles trying to figure out where the big guys want to come in and bid it up. They’ve had too many stumbling blocks in order for you to get super excited. Dividend yield of 9.74%.

It pays a 9.8% dividend. They bought a company a few months ago and did a big capital raise. With these companies you need the energy price to support you. They can pay out this dividend for a few more quarters yet. He anticipates some relief this winter.

It is an oversold E&P. They did a financing that got messed up and then repriced. The circumstances really floored the stock price. It has almost a 10% yield, but it is not a red flag. The issue was at $5.75. Fundamentals will drive it higher. (Analysts’ target: $6.75).

They did an acquisition, which was the right thing for them to do. They needed to get more light oil. They got bigger, lighter and got more drilling locations. Energy is out of favour. The underwriters judged the market incorrectly. Given how much the stock has pulled back, he sees tremendous value here. It has a 10% dividend. If oil gets above $50 you have a lot of torque and there has been a lot of insider buying in the last few days. (Analysts’ target: $7.00).

(A Top Pick July 29/16. Down 42.97%.) If you believe in $55 oil, $9 would be a very reasonable price for the stock. The company just did an acquisition which was not very well received. Selling at really cheap levels.

The stock has fallen below his last line, and once that happens it is un-investable for him. He would wait until after they have their write offs.

As long as oil prices stay over $40, the dividend should be safe. They are leveraged to oil prices, which have not done very well. Recently did an acquisition and had to issue a bunch of stock to finance it, which didn’t really go as well is what they had hoped. He likes management and the low-cost operating base. With anything over $50 in oil prices, this thing runs. Dividend yield of 9.09%.

After they made their large acquisition of assets in Western Canada, they did a reasonably large financing that didn’t go particularly well. The financing was only half sold. Financing was at $5.50, and the stock is at $4.71, so that block of stocks still needs to come out. Until you see that happen, there is not much point in buying this.

They just did a deal where they acquired some conventional assets, and the deal hasn’t gone that well. Energy prices hasn’t helped them. Traditionally this has been a pretty conservative company but on the lower end of things. He would rather have half their yield in something that was a little bigger and a little more diversified. There is no use in trying to be a hero in picking some of these smaller companies. 9.4% dividend yield.

Has done a very good job, but probably need a slightly higher oil price to make the numbers work. They just completely blew the financing. When that happens and there is nothing particularly wrong with the company or the acquisition, it’s a “prove me” acquisition and you need a slightly higher oil price. This could go sideways for a bit or go lower.

Technically, this is not looking good. It is in a downward trend and has actually been to new lows today. Wait until the stock shows signs of bottoming. Historically, energy stocks do not do well from around now until approximately October. Now is not a good time to own the stock and it is probably best to take your money off the table.