BNN - Thursday, May 23, 2024 - 01:00 p.m. (ET) - Segment #8

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.

>>> 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 Closed captioning of this bnn Bloomberg program is brought to you by Avenue Living Asset Management. Investing in the Everyday. We were born from a deep desire to create positive change, together. One-hundred-fifteen years later, that impact is felt everywhere. It's where we've made innovations accessible to those who need it most. Where we've championed truth and justice... for all. Where we've mapped out futures... we're already living. From here to here and even here. We're not just transforming lives. We're shaping the world. What will you dowhen the power goes out?Power outagescan be unpredictable and inconvenient, but with a GeneracHome Standby generator, your life goeson uninterrupted because you'll have power when you need it the most. The number one thingto prepare for is extended power outages. Don't make itso hard on yourself. Have a Generac HomeStandby generator and if youcall now, you willreceive a free five yearwarranty. Call or go online now to request yourfree quote. Power your lifewith Generac. Find a great deal foryour ideal hotel.Open trivago, type inwhere you want t select your check-in andcheck-out dates and search. Compare prices forthe same hotel and save up to $50 a night. Hotel? trivago. 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. (Upbeat electronic music) Closed captioning of this bnn Bloomberg Program is brought to you by Scotia iTRADE. Everything you need to direct invest. Scotia iTRADE. It's every investor's dream. >> 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

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