BNN - Thursday, May 23, 2024 - 12:00 p.m. (ET) - Segment #4

>>> Eric I have built an energy portfolio based on your advice over the past three years and I have done very well and I appreciate your knowledge. My question is on enerplus. ' one one of my largest holdings and I am wondering about this cord deal whether I should hold it until it's finalized and they are talking about 1.84 a share payment I guess or whether to sell now and reinvest in the canadian oil patch. >> I would view it you probably owned enerplus for a really competent management team and primarily exposure to the north dakota balkan play with some gas in the marsalis. You effectively get that in cord. [indiscernible] you are getting a larger entity which with the greater ability to attract institutional investors which should lead to a re-rating. We have actually we have ownedcord now. We have been buying it the past month or so. It's been one of the names that we have bought. So we have a full position now it's about a 4% weight for the fund. We have it trading at 3.6 times cash flow and a 13% free cash flow yield. They are returning 75% of that back in the form of buy-backsment raymond james came out with the research report this morning where they did a deep dive and they had a cord -- the buyer of ener plus having the deepest inventory in the balkan of any producer. They had about nine years of core plus tier one inventory. So again that speaks to the very underlying positive macro where shale companies have a lot less inventories than what many people believe. So we think cord has the ability to drive a re-rating over time. We are carrying about a five multiple now which honestly look at that that looks low. Our target price now would be about $243. That's 37% up side. But I think that's probably a little on the low side. So call it likely 50% up side what a reasonable valuation should be. I've met the cord's management team several times in the past couple of years. I think I am seeing in new york in a few weeks' time. They have done exactly what they have said they have done. >> Andrew: okay. Faizal in toronto. Go ahead, please. >> Caller: hi, good afternoon, gentlemen. I hope all is well. Eric, you are one of the most educated expert and respected voices in the oil industry. You know, remember in 2020 you were in a pariah status where nobody wanted to touch oil so you've gone from a pariah to rock star, my friend. Congratulations. >> Thanks very much. >> Caller: keep up the good work. We have to have you more on the program. Congratulations on your past picks also. I am calling on advantage energy. Get your opinion on it and if you hold it in the fund and I will throw in a bonus the tmx pipeline which of the companies do you think will benefit more from that. Thank you again and I will hang up and listen. >> One question per caller. I'll stick with advantage. We like advantage. The ceo has fire in his belly. He is able to communicate clearly. He can answer questions unlike some of his peers which seems simple but you would be shocked if you ask some other CEOs how much of the inventory do you have and they stare at you with a blank question. We look at advantage. They have several -- many decades of inventory. It's like 70 officially. Whatever it is. Inventory is not -- they believe drilling by the time you and I are both no longer in this world. Inventory is not a problem. You get very, very good optionality to our bullish view on natural gas in 2025 and beyond. Key beneficiary of lng canada coming online by the end of this year. Do you get optionality which we are not giving a lot of value to. Brookfield valued it at 300 million. We cut it by 150 million by half. Subtract that from the market cap and trading at 3.6 times and 1% cash flow yield. They are growing at the same time. We think it's closer to 20% when you adjust for the cap with the growth capital. You get entropy to us whatever if it works wonderful. If not we are not paying for it. We are getting really good gas sensitivity to a ceo that we have come to like quite a bit. And it's a small cap names. 1.8 million. That's falling because they are buying back shares so aggressively. We see good up side roughly 40% about $16 target be at $4 gas. >> Andrew: why has the stock been doing so well, advantage? >> We may have been part of that. We bought a block this morning as well from a fund that we think is winding up. I think people are getting bullish on gas increasingly. Trying to get timing right. Gals right now is not at robust levels. There is this belief that because of lng canada gulf coast lng capacity, weather, these different things that the outlook for next year is much better. We are trying to get our timing right it. Feels like now is the time to start accumulating. We probably have about a 25% weight in natural gas now. Plus about a 10% weight in services which for susan indirect way a cheaper way to get access to a bullish call on natural gas. I know everybody is chasing

nvidia and whatnot and A.I. will be huge. If you are bullish nvidia you should be bullish natural gas because it will three-day a 7 to 14% increase in gas demand between now and 2030. >> Andrew: can you remind me advantage are they weighted to pure natural gas or are they condensate? >> They are fairly linked. 88% dry gas. >> Andrew: 88%. >> Very very good leverage to a bullish gas thesis in 2025. >> Andrew: right. And they also involved until carbon capture. >> Entropy subsidiary. When brookfield invested. >> Andrew: oh, yeah. >> They put a 300 million . Firefighters... What we do is hard. It's not enough to be strong. You have to be tough. Let's move! Get down! Get into a new station 19 on ctv Hi, I'm Jessica Katrichak. Coming up on btv. Casino right now has a full feasibility on it. It was done in mid 2022. So quite current. We're taking the project through the permitting stage. It is a very important asset globally. That's what attracted me to the company. It's about 11 billion pounds of copper, a 20,000,000oz of gold. I think this is something that could really put Yukon on the map and would be a driving force of its economy and its prosperity for a very, very long time. Watch us online or here on bnn Bloomberg. Looking to maximize your monthly income? Our yield maximizer your ETFs, combine your favorite sectors with a high yielding, income first strategy to help you meet your goals. More income every month from Hamilton ETFs. At the cse, we're always invested in public markets, in business, in growth, in you. 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. (Upbeat electronic music) >> Andrew: keith is calling from toronto. Go ahead, keith, please. >> Caller: yeah, hi eric. It looks like surge energy sold to nine core assets so debt target 50% free cash flow back to buy-backs and that. Your views on that. >> Andrew: >> Sure. So again we mentioned you have to decide is a small cap stock with a market cap of 700 million there is not a lot of people on the planet that are interested in a company so small when they can just go buy cnq presume little bit. So when we look at it it, yes, it is very inexpensive. Yes, it's trading at a significant discount to what it should its asset value. It's generating gobs of free cash flow, et cetera. I am challenged given the market cap to see how these guys get on the radar screens. Yes, you can drive a re-rating from being significant share buyers. I want that in addition to being big enough to allow invest horse to take a decent enough stake and have an interest in the name. We think surge is a classic example of where they should find someone else to merge with, gain economies of scale, gain larger market cap, gain larger relevance and I think that's their sure path to drive it higher multiple from 2.5. because you know it's clearly what they have been doing recently is not working so it's time to take another approach. >> Andrew: they are too small to really interest investors. >> 700 million is very, very small for the vast majority of institutional investors. 6% yield very defendable. Probably you've got a loyal retail following from that. They are buying back stock with an 18% free cash flow yield so that's working. But we just -- I want names with meaningful up side but I have confidence that I can actually achieve that meaningful up side. One thing that has a spreadsheet to tell me but you need reasons to care to make the people to care that the stock goes up. >> John is in sudbury, ontario. Go ahead, please. >> Caller: hi, good afternoon. Xeg which is an etf in about three years now and it's done well. Look forward to the next, say, 12 to 18 months. Would you suggest holding on to that or would you suggest peeling some of that back. 0% of my portfolio. I like energy but I am thinking

maybe I am missing out on insurance. >> I am not a financial consultant or advisor. I am not one to tell what you your allocation would be. My recommendation wok for xeg. There are alternatives. Some funds that have beaten the xeg on a 10, 15 year basis after fees. You have to recognize now. I think the entire planet owns cnq. Cnq is the largest constituent of the tsx energy index, the xeg. It's done very, very well as it should. It doesn't have near the up side we think as other mid-cap names. The spread between large caps and small mid caps is the widest in history. And so we think that if you are looking for meaningful up side there is a greater likelihood of achieving that in the mid caps than the large. We don't own cnq. Currently we don't own suncor. That's well over half of the xeg. We think there are better opportunities. >> Andrew: yeah, the latest I have cnq is about a quarter of that etf. Suncor is about almost a quarter. And then cenovus is another 12%. Yeah. So you are very weighted to just three names. Yes. We are out of time for your calls. We will get eric's top picks after this. [ ] In an ever changing market, invest in the essentials because there was always a need for multi residential, warehousing and logistics, essential retail, and renewable infrastructure assets. Build your client's portfolio with an investment strategy grounded in the needs of Canadians. Access tax efficient, institutional quality hard assets backed by a track record of steady performance and consistent distributions. Contact a Skyline Advisor today. Text on ScreenText on ScreenText on ScreenText on ScreenText on ScreenText o >> Andrew: join us on "market call" tomorrow. Ryan bushell is our guest. He is talking canadian dividend stocks. - [Narrator] The Ninepoint Web3 Innovators Fund. Get exposure to digital assets and to innovative companies leveraging Web3 technologies today. The Ninepoint Web3 Innovators Fund. Available on the tsx, ticker tkn. Ninepoint. It's all right here for you to see and try at VectorVest.ca Market timing indicators that work. Simpler, clearer advice. Strategies that pay off. And analysis tools second to none. Try it risk free, Take advantage of historically high yields while reducing risk. Td Asset Management offers a large suite of active and passive fixed income investment solutions that can provide income and stability to your portfolio. Td Asset Management. Money is a thing. You're told to make money, invest money, save money. While others are encouraging you to spend your money. You might even be planning your money ...based on someone else's plan. Maybe it's time to do things...differently. And get obsessed over something other than money. Like building a path based on what's important to you. ( ) we understand money's a thing, but it's not everything. Edward Jones. We do money differently. Top Picks is brought to you by Questrade, now offering instant deposit of up to 10 Thousand Dollars. >> Andrew: it let's get to eric anticipate first idea and it's baytex energy. It's been a long time holding. >> Long time holding. >> Andrew: they did that big acquisition ranger in the united states. >> Yeah, so we think there is a massive kiss connect between the fair value for baytex versus what it's trading at. I am the first to admit THEREth has been a terrible experience. Not terrible. Not a great experience for investors over the past year. I think there is a tremendous amount of confusion around this name. To boil it down what I am getting ten years of stay flat inventory. A lot of it is in the eagle ford where they did add to their position. There was scepticism around the quality of that asset. Fast forward a year later they are drilling some of the best wells ever drilled not just on

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