Obsidian Energy (OBE.TO)

At one time this was an almost 200,000 barrel a day company. By the time the dust settles, this might be 30,000-40,000, focusing only on about 3 core plays. This isn’t even on his radar screen for investing.

Just went from being something you could not touch to something that is interesting. You have to believe oil prices are going higher, which he is not convinced of. Assuming they are, they have a debt to cash flow of 2.4X, which is really manageable at $40 WTI price for 2016. That is great. They have an effective payout ratio of 62%. Cheap relative to their peers. However, its production declines by 72% from 2015 to 2017. He would prefer Crescent Point (CPG-T).

They have pulled off $1.1 billion in asset sales in Saskatchewan and Alberta, and were upgraded by a number of analysts. Raymond James to $3 and BNS to $2.25. There is probably some additional upside looking out over the next year. However, there are a couple who are neutral to flat with lower price targets. He would suggest you try to read all the stories on why they have their various price targets. The chart shows a tremendous amount of resistance, and he believes in the idea of “lower for longer”. Oil should probably stabilize over the next few years in the $50-$60 range, but by no means whatsoever are we coming back into balance. Inventory levels are massive compared to the 5-10 year averages. Thinks that will be with us for years and years to come. Wouldn’t be a big investor yet, but more inclined to probably Sell into this.

(Market Call Minute.) This is an absolute Sell.

The big issue is that they have a lot of debt. As their problems occurred, they had to sell, sell and sell. They now have $1.94 billion of debt, which is $3.86. BV is $5.84, so it is trading at a significant discount. Has long term debt out to 2020-2025. The big issue is that they took out $700 million impairment last year, and $1.1 billion the year before. They need a $45 number at the end of the year to not have another impairment. 2015 operating costs are higher than they should be. This is a Lottery 649 ticket.

Have had challenges and is not a story she has invested in. Likes companies that grow value for shareholders, and this company has essentially done the opposite. You get less and less barrels per share, less NAV per share. Have some great assets and have done a lot to try to transition the company, however with oil prices, it makes it very difficult. They are going to have to sell a lot of assets to fix their balance sheet problems.

They bought companies and did not integrate them very well and then the oil price fell. They did well in selling off some properties. He thinks they will make it, but continue to be highly levered. They will do well when the price of oil goes up.

Why get into trouble if oil prices don’t recover. There are better companies out there. It has been a disaster in how they have managed their business.

It has exploded recently. It is a call on where energy prices are going. They are being forced to sell assets because of debt.

There is no question the assets are fabulous. The problem is the balance sheet that is causing them to sell off assets. It will probably react if oil prices go up. It may be good for a trade sometimes but he would not invest in it.

Struggles to see equity value in this company unless you are a really, really big oil bull. Operationally they have achieved inferior results in all of their operations compared to any other companies in their plays. Management has been a little aggressive in the use of financial leverage. They need to sell assets to pay down debt.

Has not owned it for 5 years. It has too much debt and equity is grinding toward zero. If oil spikes to $90 they could survive. Avoid it.

The worst stock he has chosen in years. He likes the new management and what they are doing. They still have a big debt load and have been selling off assets to bring it down. He changed it from a buy to a hold. They are in dangerous territory. They should not go bankrupt and they could have a big turnaround.

Their leverage is far too high. The market is being absolutely merciless with corporations where the balance sheet doesn’t look strong or pristine. Thinks this is going to be pretty dead money for a while.

It is quite a disaster technically. The downtrend is long and has accelerated. It is a falling wedge that broke out to the downside. Get out if it rallies. It is a very risky stock.