Value Microcaps Junior Energy

[dr_airtime]

I’ve minted a small fortune so far....

...haven’t posted in a while but if you remember from Nov/Dec 2019 I put on a big Canadian O&G producer trade I sold out of a month later. That set the stage for buying a lot of the Canadian oil producers once the Covid bottom was in. I bought mostly gold producers out of Covid bottom but then caught the early summer O&G high and then have bought a huge position in last couple months leading up to huge rally in last 3 weeks.

I followed Eric Nuttall on BNN Bloomberg (Canada’s financial network) all year and basically bought his top 10 holdings and top picks which have changed a bit over the last 6 months. The low decline Canadian producer where at their cheapest valuations pretty much ever even after the bottom.

No brainer positions are CPG.TO/CPG, MEG.TO, FRU.TO (Canadian oil royalty play), and VET.TO which is the Canada small cap international play. VET.TO was a no brainer when I bought as maybe 20-30% of revenues is strategic Netherdlands Groningen natural gas where spot prices doubled and VET.TO hadn’t moved.

WCP.TO is now the ‘blue chip’ pure play small cap oil producer in Canada that institutions can buy. Carbon neutral as they inject C02 into old field I thought WCP was too pricey and had moved too high but it has almost doubled again in last two weeks. Shoot!

So anyways - I didn’t buy WCP.TO as I thought these smalller cap Canada Oil producers would have much more upside: TOG.TO, KEL.TO, ERF.TO and BTE.TO.

I think it makes sense to still buy ERF.TO as it had and still has lowest debt out of most oil producers in Canada (and North America). They were like 0.3X debt:CF a few months ago.

My ‘swing for fence’ bet is BTE.TO which is a Canadian Heavy Oil Producer with Way too much debt. All the comp sets were showing BTE would have most upside on a move from WTI $40 to WTI $60 though. It could still triple from here (back over $C 2.00 from 0.70 now) if WTI goes from $50 to $60.

Those all above are majority (>60% production) oil producers and my only gassy holding is NVA.TO which has a ton of liquids/condensate production and Eric Nuttal really likes for the long run. Condensate pricing will go up as Canada Oil Sands productiom comes back with higher prices. I actually bought this last week as chart looks set for a nice run.

Don’t buy WCP.TO after the double but the next most logical parking spot for funds is CPG.TO which you can buy on the US exchanges as CPG. 120,00 bopd producer and is higher cost so actually has huge leverage here. Eric Nuttal mentioned this a few times over the year, but with WTI at $50 CPG’s cash flow maybe doubled compared to WTI $40 and CPG can easily double again here if WTI goes to $60.

All the Canadian producers are lower decline and valuations were at generational lows over the last 15 months that I never looked at US producers.

Eric’s top holdings are here. Don’t own his two big gas holdings Arc and 7 Generations.

https://www.ninepoint.com/funds/ninepoint-energy-fund/

Now I should go look at oil service stocks!