Paramount Resources (POU.TO)

(Market Call Minute.) Great assets and a great amount of debt. Feels they need to raise money here. If you own, Sell and buy it back closer to $6.50-$7.

Very gassy, but it is wet gas, so they have some cash flow that goes up and down with oil prices. Well-managed. It will have its time again. If he is right and there is a $4-$5 pullback, this will probably pull back to $7, which would be a better entry point. (He owns the bonds.)

They were building a massive facility to bring on a lot of natural gas, from the Montney, etc., and the problem was that they added a lot of debt. They finished 2015 at $1.7 billion of debt against $548 million of equity. Sold to Pembina under a contract basis to use the facilities, and they’ll pick up about $500 million which they can use to pay down some debt. On the positive side, it is trading at a significant discount to BV $5.18. His view is that the debt is still too high.

Needed to raise some cash, and it was just announced Pembina Pipelines would be picking up the Musreau facility for $556 million.

Had been waiting for quite some time for some conclusion to the sale of their Musreau deep cut facility, and it was just announced that Pembina Pipelines would be picking up that asset. The $556 million was to the lower end of the range. This company has some great assets and long-term optionality.

(Top Pick Nov 5/14, Down 91.09%) The main issue is debt. We had high expectations in 2015. They missed every quarter in meeting those growth expectations. The cash flow is behind and now the debt is relatively high.

A great long term resource company. Balance sheet is key in this business. The reason they are getting smoked right now is because they have a lot of debt. Offsetting that they have hidden assets, but they are all oil and gas holdings. It trades like a small cap because of the small float.

They have some challenges with cash flow because their plant is not ramping up as well as had been expected. This has created some production curtailment which has impacted their production numbers. Assets are excellent and she thinks their issues are temporary for the most part. At this valuation, she thinks it makes a lot of sense to consider the story. She is not bullish on natural gas, but if that changes this company would be a consideration.

(A Top Pick Nov 5/14. Down 77.57%.) Mostly natural gas although it’s liquids content will continue to increase with the new gas plant. The growth story is still intact, but the issue has been “missing targets”. He has reduced his position steadily over time.

Will Paramount Resources survive? They will survive. They are a very good quality company. Mainly natural gas. She is cautious on natural gas companies. They got great quality assets. They have their own infrastructure they have worked hard on. They have had some 3^rd party curtailment which has hurt their production, pushed their cash flow profile out a few months or few quarters. Overall, she doesn't think this is a company at risk. They have a lot of debt, but because they have a nice cash profile with core assets, investors are safe with this name.

So much depends on your view of the commodity sector. Unless you are positive on the energy’s complex going forward, you are better to keep your powder dry until things actually start to turn and show you some strength. This is more of a natural gas play, and he likes gas better than oil. The players that are left in the gas market are more likely to have their balance sheets fixed.

(Market Call Minute.) Staying away from this for now. Debt to cash flow next year is now in excess of 6 times. Debt is a little too high for his comfort level.

All energy is being very negatively impacted and he would suggest you look into energy infrastructure instead if you want to be in this sector. The debt is very high. This is potentially a Short candidate rather than a Long candidate.

(Top May 21/14, Down 62.14%) A good quality long term play. When LNG gets built out 5 years from now they will benefit. He would not be opposed to adding to your position.

(A Top Pick July 21/14. Down 64.63%.) Gas and there is a lot of growth coming. They are going to double production growth. Sold most of his energy, but decided to hold a couple, including this one. The next couple of quarters are going to be quite good. This is Shorted out of the US. We are having stabilization now and it is probably time to add to it now.