Enerplus Corp (ERF.TO) Buy, Sell or Hold

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Enerplus Corp (ERF.TO)

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26.78

-0.93 (3.36%)

as of Jun 3, 2024, 8:00:00 pm Market Open.

235 watching

DON'T BUY

The effect of the Transmountain pipeline? The sector is suffering from low oil prices and a lack of investor interest. He can't see any catalyst turning around this space, except lower oil supplies. Also factor the increase in e-cars plus ESG investing. ERF is very well-run along with Whitecap. Pipelines will help, but won't save the sector.

PAST TOP PICK

(A Top Pick Jul 19/19, Down 60%) A head scratcher for him. A strong balance sheet and low cost Marcellus natural gas production. They have a good inventory in the Bakken region as well. He likes the management team and the balance sheet is strong. He thinks they are under pressure to get something done, as private equities are hunting for assets. He thinks they are in a financial position to make some key acquisition.

PAST TOP PICK

(A Top Pick May 06/19, Down 75%) Oil was a poor sector choice. He was hoping this would be a trade, expecting oil prices to rise. Great balance sheet and managers, but oil price have just plunged. ERF will survive. He owns very little of ERF now. ERF has done what they could in this pandemic.

HOLD

It is astounding how good quality companies with good hedge books, like ERF, have fallen like all the other energy companies. They have about half of their production hedged for this year. They have 20% hedged at $57 and another 22% priced at $11 premium to spot prices. He sees meaningful upside once we pass the worst of the COVID influence.

PAST TOP PICK

(A Top Pick May 10/19, Down 75%) This looked better two days ago--all energy stocks have been hammered. ERF has a reasonable balance sheet. He sold this. It looked like this had found a bottom at a super cheap 2.5x valuation, cheaper now after the Oil Shock. Big question: When does price momentum start going down? Selling begets selling. He's sidelined on all oil stocks.

BUY

A name he continues to own and has been buying on weakness. It has simply fallen off the radar screen for many investors. He thinks it trades at 2.7 times value to cash flow and only 87% of the blow down value of the existing wells. It has a 10% free cash flow yield.

DON'T BUY

It held up better than other midcaps over the last 3 years, but he's focusing on renewable infrastructure. In producers of energy, he's sticking to large caps like BP, Shell and Chevron, or CNQ and SU-T here. That's where the money flows are going.

HOLD

A large holding for him and he is concerned about upcoming earnings. He sees it trading at 8-12% free cash flow next year based on his oil price outlook. They are doing share buybacks. They have 10 years of inventory in the US Bakken and you are only paying about half of historical valuation. He thinks this will be a company that reacts strongly when investors return to the space.

PAST TOP PICK

(A Top Pick May 06/19, Down 29%) He was looking for a seasonal trade in the summer. It is still making higher lows and has a good yield. If you don't own energies, this is a good one.

TOP PICK

A miss-priced US Bakken oil producer trading at just over 3 times cash flow and a pristine balance sheet. They have been buying back stock and increasing production with the free cash flow being generated. He would prefer to see them buy back more shares next year. Yield 1.36% (Analysts’ price target is $14.88)

BUY

Very well-run with a pristine balance sheet. They're buying back more shares than any other. But they're trading at only 2.5x next year's cash flow! Their debt + market cap is less than the value of their production stream (including a 10 year inventory in the Bakken). Excellent debt level. They should buyback shares with their 15% free cash yield. Deep value. A big holding of his.

PAST TOP PICK

(A Top Pick Oct 23/18, Down 38%) ERF is really a US oil producer, but the whole oil sector has come under fire. He sold ERF and a lot of his oil shares, down to a 4% weight.

TOP PICK

A big holding for him. They could buyback 5% of their stock, and he's advocating for buybacks in Canadian oil. Sits at only 0.6x debt-to-cash flow despite having a 10-year inventory in the Bakkan. Have very valuable free cash flow assets. (Analysts’ price target is $15.86)

WAIT

He is close to buying this one, but feels there is an overhang concern that they may divest or invest in something big. He needs to wait to see what will happen first. Their current assets are good and the balance sheet is in good shape.

SELL

He's trading this, hoping it reaches $10. It's trying. If it doesn't in the next few days, sell it.

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