Investment Q&A

Q: Hi 5iR Team, TD puts out a monthly consolidated report of its stock coverage universe. In the Sept. 30th report I looked at their Junior/Intermediate O&G stocks. I noticed that if I arbitrarily picked an upside % of 70% i.e. current price and TD's Target Price there were 13 stocks. The lowest was TOG at 70% upside and the highest NVA at 152%. In addition, some of the stocks like WCP and FRU are yielding 8%+. For me as an investor this is compelling data. Lastly, reading further into the report TD's O&G sector thinking as stated by their senior analyst is not Bullish. In other words TD does not appear to be exaggerating the facts, attempting to make some case for investors buying O&G stocks.........but the analysts in the field certainly feel incredibly positive on a number of Junior/Intermediate names.
How do I sort this out??
What would be 5iR's top Jr/Int. O&G picks?
Thanks team. Cheers, Chris

Q: I am seeking dividends. What do you thunk of FRU?

Q: I picked up some FRU on the recent sell off. At the time I thought PSK was the more stable stock! How does FRU compare to PSK now? Is FRU in danger of succumbing to the same problems that have just hit PSK? Which do you consider the better stock?

Q: At around $7 it looks as tho FRU is heading for its IPO price almost 20 years ago, and PSK is not much better. the question seems to be - is this an indicator of future oil price and its value to the economy? Both these equities used to be considered relatively stable and possessing underlying value, current and future. Is this no longer true?

Q: Any thoughts on why this one is dropping so much lately?

Q: Is Teine Energy financially sound, and has it been a consistently solid, private energy producer over the years? Does 5i consider them to be a good, and sustainable, partner for Freehold Royalty? Thank you for your comments.

Q: I've been looking over FRU since I saw your most recent answer to a Q about it. Seems remarkable the it is now trading at a price last seen in 2000! It is trading below it's 2008 low. My question is: Considering that oil is a declining asset has this company managed to increase its land holdings in oil over the last 20 years or is it on a slow decline? Also, how did it perform in the 2008 Great Recession?

Q: Peter; Which of these two would be suitable for a senior looking for safety and income? Thanks.
Rod

Q: What do you think of this stock at current level
Phil

Q: At $50ish WTI, if all I cared about was the DIV. sustainability and no bankruptcy, which of the above would you list as best.
thanks
Yossi

Q: Your thoughts on buying this stock for eventual rebound in the oil industry. Good div. that looks sustainable. Can you list the companies fru holds in their royalty play.

Q: Good Morning 5i,

So on this fine Friday long weekend morning, I'd like to pick the brains of people who've "been there and done that" much longer and more successfully than I, and have seen some things in the financial world first hand that I have not.

I want your opinion on oil and gas. Are we not watching one of these classic "blood in the streets" scenarios you always read about as investors and wish you'd had the fortitude to plug your nose and dive in? The shares of almost every publicly traded company in the space are being thrown away for nothing. The good ones, the bad ones, the ones making money, the ones losing money, good balance sheets, bad balance sheets - it's almost irrelevant. If they're in the space they're being slaughtered.

So if the thesis is:

a) it will take a lot longer to power the world with worm casings, pixie dust, and unicorn farts than some would have us believe (i.e. hydrocarbons are not going anywhere in the foreseeable future)

b) a surprising number of these companies have solid balance sheets

c) a surprising number of these companies are earning profits hand over fist, doom and gloom aside

If a, b, and c are indeed true, you'd have to believe a lot of these companies trading at historic lows will eventually make investors a lot of money. Like buying Florida real estate in 2009.

What am I missing? What holes can be shot in this thesis, looking at it objectively?

I take the point that there is no catalyst to change things or excite investors in this space (although I do get surprised from time to time that the fact that a company can throw off ridiculous amounts of profit and return it to shareholders via dividends and buybacks doesn't itself become a catalyst, but I digress...)

I also take the point that these scenarios can persist for a lot longer than people think they can before things change.

Single-company risk is always there, I understand that, but I reject the idea that all of these companies are headed for bankruptcy.

Aside from patience and the stomach to watch your investment get hammered in the short term - where exactly are the risks?? This seems like such a great buying opportunity that I feel I have to be missing something.

Thank you for whatever insight you can share, and happy long weekend to you and your families!

Ryan

Q: Which of these companies do you think has the highest dividend safety? Regarding VET, I am reminded that yield is a function of price and not directly related to performance - a company does not reduce its dividend just because the yield jumps - more likely a buyback if the fundamentals are reasonable.

Q: Good morning
As retirees, and still with a longer-term horizon, my wife and I own (and like) Suncor (integrated), Prairie Sky (no debt) and Peyto (low cost producer) for minimal risk; second, dividend income, and third, capital growth. Oil & Gas is 4% of our diversified portfolio. We plan to keep Suncor. I am considering Freehold Royalty, Tourmaline, and Ensign Energy Services as possible replacements for PSK and PEY.
Q1: Do you feel the stock price declines in the Canadian oil and gas sector represent investor capitulation?
Q2: I would appreciate your comments on the 3 stocks being considered. Would any of TOU, FRU or ESI better meet our investment objectives, compared to our current holdings, PSK and PEY?
Thank you for your advice on this.
Edward

Q: It's been said that this name has the best balance sheet in the producer business - would you agree and if so, would that make a dividend cut less likely, come what may?

Q: Good morning. Would you mind ranking, regarding future prospects, the companies listed. Hold or sell advice would be appreciated. I plan on buying KL and AEM with any proceeds.

Q: How would you value fru and how relevant are those metrics to todays price?

Q: How much growth (price + dividend growth) are you expecting individually from these dividend stocks in the next 3-5 years? Please arrange these stocks with the most growth to the least growth.

Q: You have noted that sector weakness is a factor in the decline in this equity due to long term factors weakening the oil price. Two questions - I) how much of our sector weakness is due to the price differential suffered by Canadian operators from the inability to get their product to world markets, and ii) while in the long run oil pricing may weaken for the reasons stated, the current situation - both short and medium term - appear likely to support the price of oil, perhaps as a minimum, Can you comment please.

Q: What is your view on the price of oil going forward and how do you view the prospects of FRU and PSK ? Thank you.