Cardinal Energy Ltd (CJ.TO)

We are still not out of the oil environment, and all things could happen. When the commodity is low he likes to buy something, and as clean a company as possible. This one has a great team and great producing assets in Western Canada. They’ve done a great job and brought down costs. If oil stays down longer and lower, it kind of gets in trouble on obscure things that normally wouldn’t matter. This has a bunch of old producing assets and they are going to reinvigorate the plays. Has a massive amount of environmental abandonment liability, which might never be an issue, but it is out there, so he goes for companies that are a little bigger.

A very low beta way to have energy. A Western Canadian oil producer with low decline. They are 60% hedged this year and 35% next. Good balance sheet. If he is wrong and oil goes down to $30, this will go down, but not as much as others. Dividend yield of 4.57%.

A medium gravity oil producer in Alberta. They were liked because of low debt and low decline rates. As oil fell, they got penalized because their oil sells at a discount. They have one of the highest leverages to the increasing price of oil. He has a 10% weighting. More than 5% dividend. They should be one of the first to increase their dividend.

A medium quality producer, not heavy oil bitumen and not light oil. There is a differential discount for their oil, which is why the stock has come off. If they didn’t have hedges today, they would have zero margins. They are protected for the remainder of this year with a decent hedge book, but are largely naked next year. His call is on an oil price recovery. They have very little debt. The model of their company is based on very low cost to bring on oil combined with low corporate decline rates. The only thing working against them today is the price of oil. Dividend yield of 6.69%.

(A Top Pick June 12/15. Down 29.88%.) In June oil prices were $60 and there was some optimism at the point that the end of the downside was over on the oil side. When oil rolled again, it hurt the smaller producers especially. This is a medium gravity producer, so oil is a little heavier than most. That means they have pretty high operating costs. When oil prices drop a lot, their margins get really squeezed, but they have been able to maintain a very sound balance sheet and have also been able to work on operating costs. Recently acquired some assets from Penn West (PWT-T) which will really help their growth profile. Likes what management is doing and thinks this is an excellent company and a great Buy at this time.

Has fallen slightly more than others, and hasn’t rallied quite to the same extent of a Penn West (PWT-T) or a Surge (SGY-T) or some others. Views their recent acquisition as quite good. The dividend is one of the most sustainable of any oil/gas company that he looks at. They are roughly 25% hedged next year.

The market is so focused on the commodity that it is reflected in all the energy players. WTI has been hanging around $45. There has been a lot of damage done. He is not excited about it. He owns no oil. It is not seasonally in play right now.

Likes and owns it. Is a good quality company. They have done very well in amassing assents, to replace their production runs. The reason the stock is down, is their operating costs are a little high, which means it's difficult in this environment. But they have really solid payout ratios. A great place to hide, you can wait for opportunity and you get a nice dividend.

(A Top Pick Aug 22/14. Down 35.1%.) At the smaller end of the market cap spectrum, but one of the better setups for a dividend model. Very, very low decline rate. Their assets are under water flood and he thinks they have a polymer flood coming up. This is a company that he thinks will benefit from this downturn as prices between buyers and sellers of land packages gets better, as he expects them to be acquisitive.

Has done very well with their model. A very low decline rate of about 15%. A low decline rate means they don’t have to spend very much capital in order to maintain their production. This means there is a lot of excess capital to grow their production. Payout ratio is less than 100%. They will continue to buy tuck-in acquisitions that have low decline rates. Dividend yield of 5.72%.

About a 12,000 a day oil producer. Kind of medium to light gravity. Probably has the lowest payout ratio at today’s oil prices. When you look at sustaining capital on the dividend, it is probably around 75% of their cash flow, so they actually have free cash flow which is rare in the energy sector. Debt is about a half a year of cash flow, which is unique. Very conservative management and in no rush to buy things. Great margins. Well-run company.

This company has done an absolutely outstanding job of executing on their Cardium drilling play. The dividend is absolutely secure. One of the lowest payout ratios of any of the dividend paying enterprises that he has looked at, and tons of room on their asset base. 5.7% dividend yield.

Has added to his portfolio this year at about $13.50. When oil was $80, this was a great company, but he had other companies with more torque to the upside. At $50 oil, this company can still make money because of their lower cost wells. There are very few companies that can make money at this level. A perfect stock to be in over 2015. Pays a dividend, has a clean balance sheet and good management that has access to capital to do deals.

One of those premier, smaller dividend payers producing around 11,000-12,000 BOE’s a day of medium gravity oil. Very cost-efficient and very efficient in general with their capital. Good margins. About 35% hedged, so they can withstand this downturn into 2016. A good defensive name to own. A little bit pricier compared to its peer group, but that is because of its low cost of capital, high-quality of assets and the ability to generate good margins. Dividend yield of about 6%.

A strong company. They acquired a good portfolio of assets with very low decline rates. Because of that, they are one of those companies that can actually stop drilling and nothing will happen to their production profile. Excellent balance sheet. Payout ratio is quite low. They stand in a good position to be able to pick up some assets from distressed sellers.