Surge Energy Inc (SGY.TO)

The entire group has sold off largely because oil prices have dropped from over $100 to below $90. This company made several acquisitions in order to beef up the size of the company and pay a nice dividend. The knock on it would be that they have made so many acquisitions they don’t necessarily have one contiguous core asset to be built around. (See Top Picks.)

They are aggressive acquisitionists. Very comfortable with the sustainability of the dividend. Acquisitions are accretive every time. It helps NAV and cash flow. They are stopping acquiring and starting drilling. 8.8% dividend is tremendous for a premium while you wait.

He owns CPG-T. Growth and relatively high yield. Made acquisitions successfully. Management is well respected. It is a good entry point longer term. It will be fine.

The dividend is very secure. This is the downturn that everyone has been waiting for. It is time to start picking up these things.

(Market Call Minute.) Would be a buyer on pullbacks and it is in a pullback now.

Had a very nice rally but he is of the view that it is now fully valued. What gives him pause is that it has grown over the last 2 years, in terms of its production and footprint, and is now kind of relying on consolidating the yield producers rather than focusing on the drill bit. The decline rate is roughly 24%.

Thinks cash flow growth is going to be 15% over the next couple of years. Sees their balance sheet debt to cash flow improving from 2.6 to about 1.4. Very strong production growth. Did 16,400 in Q2 and is expecting 21,400 exit rate for the end of this year. Sees their “all in effective” payout ratio at 96% for 2014. Insiders have been buying. This is one you should be accumulating on these pullbacks.

A very good energy company. Thinks the dividend is sustainable. Excellent management team that is very astute at picking up under-valued assets. They are building the company around a portfolio of lower decline assets that have high returns on invested capital. Sees this as a $10 stock in the next 12-24 months.

(Market Call Minute.) Their refining margins should benefit from energy prices. They will trade like the rest of the integrated oil companies. Will be somewhat dependent on the price of oil. You could buy it here, but the risk is falling prices.

This could be a takeover candidate at some time. This is not imminent so he is not looking for it. Expects they will continue to grow out their production and when they get to a certain size, that’s when they will sell. He is seeing a ton of insider buying on this, so even at current prices management continues to Buy. That’s always a good sign.

Longer term he does not think they can maintain the metrics they are putting to the street. He moved to TOU-T for the long term.

7.4% dividend is primarily all of the total return. It is okay in terms of safety, but their cost is expensive and decline rates concern him. It is sustainable, but there is not much growth over the yield. You are probably better off with something else.

Thinks there will be growth, but it will be financed by diluting shareholders because it pays out such a big dividend. The growth of production per share would be inferior if the company was not paying such a large dividend. Production per share growth has not been all that spectacular. 7.3% dividend.

Surge Energy (SGY-T) or Lundin Mining (LUN-T) for a long-term hold? Likes the dividend on this. These are "two different animals", and he would suggest you go back to asset allocation. With this, you would have so much in energy and so much in base metals.

This is a fine junior oil and gas company. Sees nothing wrong with it. The chart is showing no correction whatsoever. 7.3% yield. This has a good chance to continue.