BNN - Thursday, May 23, 2024 - 12:00 p.m. (ET) - Segment #3

cash flow. Employing the eric nuttall buy-back model, we think. We don't see a meaningful increase in the dividend because they want to have it a at a very defendable oil price. We think buy-backs especially given the valuation. At $80, $4 gas trading at 4.6 times we have them trading. Enterprise to cash flow that's a discount to their canadian peers. Certainly a discount to U.S. peers as well. >>> We think this sector will trade the large guys will eventually trade to an 8% free cash flow yield. It's less than a biggest struggle over the past a couple of months is what's the ultimate valuation target that we should be using because price to cash flow enterprise to cash flow is very nebulous. In a sector where model is going to be low to no growth, maximize free cash flow give it back buy-back eventually dividend yield we think 8% is pretty reasonable. 10 to 12 for small guys. 8% free cash flow yield on cenovus that's a $43 share price. 58% up side. We feel confident now that the steps necessary to have taken to fix their down stream reliability issues have been taken. Management team is laser focused on hitting their final debt target and we await that press release once they announce the inflection of a hundred per cent. We have seen companies like suncor they had investor call on tuesday this week. They increased the pails of which they will be able to return more of that free cash flow back. The stock react what had we think cenovus and some other names have become a catalyst in the next a couple of months. For us this is our favourite large cap about 9.5% weight. >> Andrew: in the fund. >> Yes. >> Andrew: headwater exploration hwx. This one modestly. Has it had problems or setbacks in. >> It's had a large sell-off in the past month or so from 8.50 down to 7.22 now. When oil started rallying going a month and-a-half ago what we saw was every bank, every broker in canada was calling us trying to see if we wanted to sell some stock to them. I think there is a bit of chase where generalist investors and momentum investors who they may know the ticker symbol they don't even know what they do were chasing the stock and pushed it in the short-term beyond levels which it should have gotten to. It has sold off. We have been buying from those sellers and we have added for 5 million shares in the past week, week and-a-half. It's sitting at 5 1/2%% weight for us. We look at it. People are forgetting that everybody's chasing athabasca and cnq for the heavy oil exposure. They are a heavy oil producer. For all the tmx benefits and differentials down below $12 their key benefactor, benefiter from that. We are paying 3.7 times cash flow. 11% free cash flow yield yield in addition to production growth 5.6% yield. A chairman, ceo, ceo who we think are very, very good at finding oil and they have been proving themselves not just in the clearwater trend but outside of the clearwater trend using more modern multi-lateral technology. We think 6 multiple given it is a small cap there is not a lot of people on the plan that's want to own these things. We do. We think 6 multiple about $11 share price a 1% up side and you get a 5.5% dividend yield which will grow over time. Drull your final idea was whitecap resources. -- >> Andrew: . This one lagging the energy group, too. Because I am calculating since the end of may of last year total return from the energy index which of course includes pipelines and stuff about 33%. >> Yeah, so this is underperformed the index certainly underperformed our fund as well. We have sold it in our main fund. We continue to hold it in our income fund because we view the dividend as very defendable. We are able to get a lot of healthy option premiums by selling covered calls on a monthly basis which is part of our strategy in the nine point energy income fund. We are concerned that the market just that is proc solid view that they want to always go and buy things. And what we have seen from -- >> Andrew: sorry, been very aggressive have they? >> Yeah. And so what that creates is overhangs. People are just sick and tired of having stereo deal with overhangs I think. The baytexs, tamarack valley. Overhangs we have had to deal with. >> Andrew: they issue a bunch of stock. >> Eventually that stock comes to the market. No doubt especially if you are doing it at a bottom of cycle, you are buying -- you are taking advantage of timing. Crescent point, baron has done a great job of this. The market is sick of having these positions where they bought something now we have to wait six, nine months foreign the share price to actually do something. That's plaguing the up side potential in this name. So we look at it. .6 times cash flow. 13.5% free cash flow yield. A lot of that is being used for the dividend because it's yielding 7%. We think 5 multiple about $15 share price is reasonable. But for capital appreciation we think there are other names that will likely outperform until

management does something to change the perception that they always want to go out and buy something. >> Andrew: another thing we should always ask a ceo who has done a take-over of a stock or a lot of stock well, what about the overhang you are creating here? >> It. Do it's something that you just inevitably have to deal with. >> Andrew: yeah. Because it ends up saving r stay in institutional hands the new stock they will be maybe holding too much of the company then. >> Every situation is different. It depends where like I think about baytex bought an asset very good quality asset proven that now paid a very good price for it but it's private equity. A lot of private equity guys if you are a private equity fund you need to return that capital back to your share -- your unit holders within usually a knife to seven-year term and then you look at well the fund has a year left in its life you know they will be a seller. You have to be aware of each situation. >> Andrew: we will be back with eric nuttall taking your questions on energy stocks. 1-855-326-6266. Hi, I'm Jessica Katrichak. Coming up on btv. Very rare to find this type of mineralization in your first couple of holes. So usually copper gold porphyries take maybe 20, 30, 50 plus. Nobody had really systematically looked for these type of deposits in the Yukon. So we're the first movers that are really looking systematically in this terrain for copper gold projects. Watch us online or here on bnn Bloomberg. The main focus of Urbana is asset growth. Building the assets of this company. We invest in public securities. Everybody does that, but we also combine it with private equity investments, which is very, very important. And that's where you can make some real money. And the beauty is you're buying it at a discount a discount from asset value. I think we do contain risk extremely well. We have a very, very experienced team and we've got results over a long term period of time. Investing for monthly income made easy with hyld. A high income alternative to the s&p 500 and hdiv, outperforming the tsx 60 with a higher yield. Hyld and hdiv, more income every month. From Hamilton ETFs. Text on ScreenText on ScreenText on ScreenText on ScreenText on ScreenText o bmax is Canada's first enhanced multi-asset etf with high monthly distributions. Bmax blends multiple equity and fixed income strategies. All in one etf. Bmax on the tsx. (Dramatic music) I am Paul Atreides! Duke of Arrakis! Let me fight beside you. I'll show you the way. >> Andrew: email from john s birchcliff a buy? >> We don't own birchcliff. We have been buying all smaller natural gas names to barbell our arc and tourmaline and we own other name called chesapeake. Birchcliff they cut their dividend there. Was a huge short interest and it's good that they did because when you look at the payout ratio now it's about 93%. Capex. Right up against the line. They have been using debt to fund -- or they were using debt at least to fund their dividend. As we look to next year again this would be at $4 gas the payout ratio drops to 73% on our maths. More defendable. If you are looking at a current yield now of about 6.7% we think you can get a higher yield in a name -- even like a freehold frankly you can make 8% in freehold versus 6.7 in birchcliff where you don't have this concern about the drag on debt. Take-away capacity issues. Jeff tonken retired. You have somebody that will look [indiscernible] over time, I am sure. A few other names that we would prefer that we are actively accumulating literally right now. It's not a name for us. >> Andrew: luke is in toronto.

go ahead, luke, please. >> Caller: thanks, andy. >>> Eric, my question is on nuvista. How high is it going and more importantly when. >> When. >> Caller: I've owned these stocks since 2020. They were up huge between 2020 and 2022. Really flat the last few years. When is the next leg you? >> Well, you would be going on mu vista probably if it's gone from 14 cents to $13 so it's done okay. We think lng canada's going to be the next catalyst. You have to appreciate like natural gas we look at storage, storage in canada is about 61, 62% above the five-year average. This was the winter that never was there. Was no heating death. We have got a lot of gas. You are seeing that fixed. The forecast for the summer time in north america will be about 2° hotter than average. You've got producers curtailing volumes that's fallen from about 104 Bs to about 96. They are curtailing volumes. You've got lng projects hopefully coming online in the united states. There is potentially some delays. I think you have to be patient. We are adding. We are deploying capital in certain names like vista where you get the benefit of condensate now, strong optionality to gas prices later on. A concern for us remains in nuvista that paramount is their largest shareholder. We were at a time their second largest shareholderrer and with paramount owning over 10% there is this ongoing concern that they could be a seller any day kind of thing and it will drag the share price. We would love to be a part of the solution to that problem. I think certain people are aware of that. It will just be taking a bit of parables. We look at it as trading at 2.9 times cash flow and a 16% cash flow yield on our estimates. They returning that in the form of share buy-backs. We that I 10% free cash flow yield is appropriate. That gets us a $23 share price or potential up side. There is this overhang with paramount that I think is keeping the stock from doing what it could do. We think -- we have been not shy in this view. Paramount should sell their block and buy back their own stock. We say that is a very large paramount shareholder as well we say that as. >> Andrew: rob in toronto, go ahead, please. Or in ontario. Go ahead, please. >> Caller: yes. I am a first-time caller. >> Andrew: thanks for calling. >> Caller: great show, andy. Even great when her eric is on.

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