Eric Nuttall is a portfolio manager with Sprott Asset Management. His focus is oil and gas stocks.
Torc Oil & Gas
Most recent purchase was January 10 at $10.35
Spending less than 1-times cash flow, TORC is set to grow production by 10% and pay a dividend equivalent to a 5.3% yield. Exploration results if positive in the next 2 months could lead to an increase to guidance and a dividend increase later in 2014.
Most recent purchase was December 21, 2013 at $0.49
A bet on the team, this is their third iteration after successfully building and selling two oil companies. Expect this team to use their currency to exploit the over-saturated divestiture market and be able to make several highly accretive deals in 2014. This is a stock to own for a few years.
Most recent purchase was December 17, 2013 at $11.33
Cardinal IPO’d in December so remains under the radar screen of many dividend funds and trades at a discount valuation of 5.4 times EV/CF. Spending 82% of their cash flow they should grow production by 9% and pay a dividend equivalent to a 5.5% yield. Look for a meaningful dividend increase and/or increase to their production growth rate after a few quarters of drilling.
Past Picks: January 9, 2013
Crescent Point Energy
Then: $37.55; Now: $39.63; Total return: +13.33%
Then: $8.84; Now: $12.12; Total return: +45.07%
Then: $33.27; Now: $37.25; Total return: +14.41%
Total return average: +24.27%
Misplaced fear of the world oil market becoming flooded has created a headwind for global oil stocks, however in 2014 Canadian oil stocks may finally have their day in the sun as they benefit from a shrinking differential to WTI, improving access to U.S. markets, and a weakening loonie. For the first time in many quarters adjusted for currency Canadian oil is now more valuable than US oil…the market so far has failed to reflect this dynamic.