Eric Nuttall is portfolio manager at Sprott Asset Management. His focus is on oil and gas stocks.
Crescent Point Energy Corp.
Having captured a 20-year light oil drilling inventory, organic growth versus acquisitions will be the focus of 2013. Crescent Point has one of the most sustainable yield models in Canada, offering a 7.4-per-cent yield and trading at a 200-basis-point discount to its historical multiple.
Whitecap Resources Inc.
The king of dividend sustainability, Whitecap is set to grow production by 5 per cent while yielding 6.6 per cent. Trading at 5.4 times enterprise value/operating cash flow (EV/CF), look for multiple expansion to lift the stock over $10 early this year.
Suncor Energy Inc.
Protected from wide 2013 heavy oil differentials, Suncor will generate more than $2-billion of free cash flow, allowing it to increase its dividend by at least 50 per cent while growing production by 10 per cent.
Past picks: Jan. 24, 2012
Painted Pony Petroleum Ltd.
Total return: +19.35 per cent
Trican Well Service Ltd.
Total return: –18.91 per cent
Legacy Oil + Gas Inc.
Total return: –36.07 per cent
Total return average: –11.88 per cent
The challenges of 2012 are likely to persist during the first half of 2013. Energy is the most out-of-favour sector currently, offering compelling opportunities for patient investors. Tightening oil differentials in the second half of 2013 and a moderation in doomsday headlines should lead to renewed money flow into the sector.