Twin Butte Energy (TBE.TO)

(Market Call Minute.) Cutting CapX to make the dividend sustainable. Risk is a little too high for him.

Had some difficulties in the spring with an asset because of a high level of water cut. Stabilized and fixed it but have now run into problems again and have written off the entire asset. He bought a little bit on the pullback. A little bit concerned going forward with replacing their production. Doing some horizontal drilling and if that comes on well, the dividend will be okay. Thinks this is going to be a “show me” story.

This has been a little bit of a challenging story for the last 6 months. Disappointments relate primarily to an asset that is called Primate. In the cold of January they had some production go down and had challenges getting production back and ended up spooking the market by shaving their guidance. Have announced they are having water incursion issues. He has added a little bit on this weakness. Feels the dividend is safe for now.

Just took a big drop which might be a touch of overreaction. Had a production cut back because of the wet season in Alberta but they also have a more fundamental problem in one of the other growth components. He advises clients to move out of this and into another oil company.

This company does have issues so doesn’t think it has been oversold. Once it is wounded and you see all the other companies not, you keep away from it. Yield is now up to 11% and people expect the dividend to be chopped.

Thinks this is one of the better names. These smaller energy companies are essentially going to run flat for a little while. He doesn’t see these taking off, especially the little ones, when there are so many concerns around financing.

Second-quarter average production was below the street’s view. If they are producing less than what was expected, that is going to kill the stock. Yield of nearly 10% and he questions if this yield is sustainable.

This company got penalized when the discount between WCS and WTI was expanded but now that it has come back in, it should have resulted in a bounce in the stock, but it hasn’t. Thinks the 8.5% yield is safe and the company continues to do well. Also has some potential for mergers and acquisitions.

A solid heavy oil name. Feels they are looking to expand their portfolio to include some light oil, which would mean an acquisition. That may require them to do a corporate purchase or raising money alternatively. Feels shares are fairly valued. Supports a yield of about 8.5% and with a 6X multiple there are other yield names that are cheaper. Not a bad bet.

Heavy oil producer quite focused. A well run company that fell on hard time earlier this year when they negatively surprised the market. The differential is an issue so it is one way to play it. Likes the asset. A little underappreciated because of higher than average dividend.

Not bad on fundamentals side. But it is not a big enough producer and the cycle is working against them.

600 Million Market Cap. Converted to dividend structure a year and half ago and did a number of tuck-in acquisitions. They stumbled a bit earlier on this year. Bought part of Emerge (Primate Asset). They had some issues with wells in the winter and lost about 900 barrels a day. They cut their capital program this year to be prudent but the market took them down. 8.4% yield is sustainable.

Will benefit from the reduction in heavy oils. Like Batex only with a smaller price. A long term hold. If oil stays at it's current levels, we could see $3 easily.

Does she still recommend Twin Butte Energy and is the distribution sustainable? She sold her holdings about 6 months ago because of their debt levels. Looking at getting back into it again. But Twin Butte just announced that they are having a weaker quarter so she is waiting a quarter or two before getting back into it. Looking for sustained production. The company's debt is getting smaller.

There are a handful of these companies that say they want to be dividend payers. They hit a hiccup. We have to see if they can execute the plan. See if they address their operational issues. They have a sustainable business.