Sunday, April 05, 2020 11:26:40 PM
Eric Nuttall & Canada O&G Again (@Tim Lamb)
It is a bit tricky to find since Bloomberg bought BNN but if you go to April 3rd Market Call you'll find Eric's segment:
Market Call
Two of his top picks, similar to when he was on last December are Crecent Point (CPG/CPG.TO) and MEG Energy (MEG).
Here are my notes! I'm thinking of swinging for the fence with some of Eric's top picks sometime in April as think we'll get another bottom before any coordinated global production cut. The comparison here is December 22, 2008, which was, prior to 2020, the biggest one-day increase in oil prices in history, but, if you look at a long term brent chart, there was a secondary bottom in early 2009
Source is 3/4 way down this page
Eric's Call:
- Demand drop of 25mbbl/day is largest in history by order of - magnitude.
- We're set in 2020 to have a strong year of oil pricing as offshore production was set to begin a terminal decline due to under investments and that is 1-in-4 global barrels produced.
- Every oil company in the world is bankrupt at this cost. Not sustainable.
- He thinks shut-ins and curtailments the market reacts with will “blow people’s mind’s”. My interpretation is that we won’t cut 25 mmbl/day (which is current demand shock) but we will cut a lot.
- Canada’s base decline rate is 24-25%. This is one of lowest and reason why Eric is 100% invested in Canadian producers now.
- TORC – doesn’t have a large enough hedge book for him to buy now, but will be fine.
- “The best have fallen as much as the junk” Only need to buy the quality
- Enerplus – has 50% of production hedged for 2020. 20% at $57. 22% at $11 premium to WTI. 0.2X Debt to cash flow at WTI $50 so balance sheet is rock solid here. See very meaningful upside.
- At start of 2020, Canadian stocks were already valued at some of cheapest multiples in history.
- Sounds like a US fund bought 20 million shares of XEG (ishares Canadian oil producers ETF). Eric’s names will do better though. He has a history of doing this.
- Whitecap has had a bunch of insider buying in last couple weeks per a caller.
- Caller on Suncor. Suncor is burning cash and should cut most of dividend. Has liquidity to get through next year and half. Thinks you can do way better on other names. Cash burn is $4.1Bn at WTI $30.
- Baytex is down at $0.40! He sold it on the way down. They are 48% hedged. They are only drawn 15% on their bank lines and they did a big refinancing right before Covid broke. No reason to own now. Can buy names with better balance sheets.
- Crescent Point Energy (I bought $5k worth today): Still a core holding. 10% of his fund in it this one stock. Rock solid balance sheet monetized assets late 2019. Hedged very aggressively at $60 WTI. 17-18% of oil hedged at $WTI 54. 38% gets a $10 premium to WTI. At WTI $25 oil they will only cash burn $100 million dollars That is Debt to cash flow of 3.7X at WTI $25. Have $2B of liquidity on credit line. They will survive.
- MEG Energy Top Pick – 2/3 of volumes to be shipped by rail in a couple months to gulf coast. 55$ hdge at $59 WTI. Would have generated $700mm of free cash. Top takeout Target in Canada. High Quality asset base.
- Nuvista NVA Top Pick – 34% hedged at $C 76/bbl. 24% of liquids stream gets a premium to WTI. They raised $600m in August 2018 and now market cap is $150mm! They can survive the storm and rerate should be “incredible”. This is Eric’s Biggest Position.
- Cenovus Top Pick – Cash burn at $30 oil is 1l1bn on 4Bn of liquidity. This is the only large cap Eric owns and it should be a multi bagger.
It is a bit tricky to find since Bloomberg bought BNN but if you go to April 3rd Market Call you'll find Eric's segment:
Market Call
Two of his top picks, similar to when he was on last December are Crecent Point (CPG/CPG.TO) and MEG Energy (MEG).
Here are my notes! I'm thinking of swinging for the fence with some of Eric's top picks sometime in April as think we'll get another bottom before any coordinated global production cut. The comparison here is December 22, 2008, which was, prior to 2020, the biggest one-day increase in oil prices in history, but, if you look at a long term brent chart, there was a secondary bottom in early 2009
Source is 3/4 way down this page
Eric's Call:
- Demand drop of 25mbbl/day is largest in history by order of - magnitude.
- We're set in 2020 to have a strong year of oil pricing as offshore production was set to begin a terminal decline due to under investments and that is 1-in-4 global barrels produced.
- Every oil company in the world is bankrupt at this cost. Not sustainable.
- He thinks shut-ins and curtailments the market reacts with will “blow people’s mind’s”. My interpretation is that we won’t cut 25 mmbl/day (which is current demand shock) but we will cut a lot.
- Canada’s base decline rate is 24-25%. This is one of lowest and reason why Eric is 100% invested in Canadian producers now.
- TORC – doesn’t have a large enough hedge book for him to buy now, but will be fine.
- “The best have fallen as much as the junk” Only need to buy the quality
- Enerplus – has 50% of production hedged for 2020. 20% at $57. 22% at $11 premium to WTI. 0.2X Debt to cash flow at WTI $50 so balance sheet is rock solid here. See very meaningful upside.
- At start of 2020, Canadian stocks were already valued at some of cheapest multiples in history.
- Sounds like a US fund bought 20 million shares of XEG (ishares Canadian oil producers ETF). Eric’s names will do better though. He has a history of doing this.
- Whitecap has had a bunch of insider buying in last couple weeks per a caller.
- Caller on Suncor. Suncor is burning cash and should cut most of dividend. Has liquidity to get through next year and half. Thinks you can do way better on other names. Cash burn is $4.1Bn at WTI $30.
- Baytex is down at $0.40! He sold it on the way down. They are 48% hedged. They are only drawn 15% on their bank lines and they did a big refinancing right before Covid broke. No reason to own now. Can buy names with better balance sheets.
- Crescent Point Energy (I bought $5k worth today): Still a core holding. 10% of his fund in it this one stock. Rock solid balance sheet monetized assets late 2019. Hedged very aggressively at $60 WTI. 17-18% of oil hedged at $WTI 54. 38% gets a $10 premium to WTI. At WTI $25 oil they will only cash burn $100 million dollars That is Debt to cash flow of 3.7X at WTI $25. Have $2B of liquidity on credit line. They will survive.
- MEG Energy Top Pick – 2/3 of volumes to be shipped by rail in a couple months to gulf coast. 55$ hdge at $59 WTI. Would have generated $700mm of free cash. Top takeout Target in Canada. High Quality asset base.
- Nuvista NVA Top Pick – 34% hedged at $C 76/bbl. 24% of liquids stream gets a premium to WTI. They raised $600m in August 2018 and now market cap is $150mm! They can survive the storm and rerate should be “incredible”. This is Eric’s Biggest Position.
- Cenovus Top Pick – Cash burn at $30 oil is 1l1bn on 4Bn of liquidity. This is the only large cap Eric owns and it should be a multi bagger.
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