Oil Stocks: David Cockfield, Leon Frazer & Associates
David Cockfield, senior VP, Leon Frazer & Associates
On Oil:
we are through shoulder season, into heating season..I think we are going to see some better pricing into commodities...feed into stocks..I think things are firming up right now..I think acquisitions may play out this year..prices for large Canadian stocks like ENCANA (NYSE:ECA TSE:ECA) reasonable..US guys have had record earnings, have the cash..I think odds are pretty good 1 or 2 takeovers in the oil patch this winter..TALISMAN (NYSE:TLM TSE:TLM), Encana, CNQ (NYSE:CNQ TSE:CNQ) all targets
HIGHPINE OIL & GAS (TSE:HPX): Highpine has continued to have problems..in one area oil, other area gas..gas has sulfur content..missed objectives..complex structures that they are drilling..always huge promise in stock (I own personally)..certainly wish to have sold it when it was in $20s..great promise, no delivery..all their eggs in one basket..area fairly heavily populated..if you are drilling gas with sulfur content, must get licenses..also Highpine went through period of buying everyone around it..I am willing to wait, they have the potential..light oil..easily delivered..I think you just have to hang in there a little longer..lots of juniors struggling these days..
ATLAS ENERGY (TSE:AED): reasonable bounce..we do own it..good management..heavy oil, got some gas..continue to extend field..you never will get burned on exploration, however, whole pricing structure of the juniors went through decline and they got caught in downdraft..it is good to have bigger company (Pearl) there..seem to be getting along well..starting to bounce..good back to at least $5..relatively low multiples..nice assured expansion of production
GALLEON ENERGY (TSE:GO.A): same old story..construction delays..huge shortage of personnel in Alberta..they have had good success and good growth in 2007..if you are into juniors, going to have to grit your teeth and wait a little longer..winter drilling season better than last year..more drills available..
PETRO-CANADA (NYSE:PCZ TSE:PCA): always have been a fan..there has been some lagging in production..if you want good long-term investment..multiples are there..if they ever get McKenzie pipeline..will run on commodity as well..core stock..not going to give you spectacular performance
PROEX ENERGY (TSE:PXE): we do own the company in Leon Frazer, own shares myself..Q3 production down as expected..in Q4 we are expecting new highs in production..good spread of properties, balance sheet okay..efficient operators..good record in the past..they will do okay..solid junior
UTS ENERGY (TSE:UTS): if people have watched me before, this stock has come up..we owned it at $2 at one time, missed the top..this is over the horizons oil sands project..they have good sponsors now..problems with oil sands projects over the horizons is cost..now I think this stock around $4 is a reasonable buy..it got a little expensive, drifted back down..you have to recognize it will be long time before you see cash flow..
PENNWEST ENERGY (NYSE:PWE TSE:PWT.UN): still like it..low payout..could convert back to oil and gas company..have not expressed any comments one way or another..they get 5 million acres undeveloped land..good management..it bounced quite nicely even with mess of income trusts..
TALISMAN ENERGY (NYSE:TLM TSE:TLM): I like them and put them on my pick list..potential takeover target..considerable amount of assets outside of Western Canada..Indonesia, North Sea..right now relatively flat production from North Sea..2008 production better..alot of people will look the dispersion of properties..Indonesian production flat but stable..Western Canadian properties good, excellent gas production..active even in New York State..
TRINIDAD ENERGY (TSE:TDG.UN): when we looked at it, we just decided as a driller, not income trust..junior, not that large..equipment up to date..tend to be fully booked because right kind of drilling..sold off with income trusts, we still like it..
BOW VALLEY ENERGY (TSE:BVX): Canadian properties are not doing well..North Sea stuff starting to come through, production showing in 2007..company came to talk to us, good handle North Sea side but certainly disappointing on Canadian side..
KERECO ENERGY (TSE:KCO): they had great drilling success but numbers still came through pretty ho-hum..revised fourth quarter down, production down..they do have good spread of assets in Alberta..they got about 300 drilling prospects..just have to wait until these properties integrated, do not sell them now..probably seeing the lows now..get into winter drilling season, interest will pick up
ENCANA (NYSE:ECA TSE:ECA): I think stock is at buy spot right now, particularly as we come into heating season..would have been a better buy under $50 and lots of selling, but could see stock moving back up to old high in October 2005..good company, production should be going up next year..we own lots of it
EXALTA ENERGY (TSE:EXA): Q3 results disappointing..equipment failures, forecasts reduced..that is why stock acting the way it is..not high on my list
HUSKY ENERGY (TSE:HSE): I suggest hold position..been reasonably volatile..not expensive, will run with rest of oil stocks..always chance that Chinese will come in..active in China seas..
TOP PICK ENSIGN ENERGY SERVICES (TSE:ESI): service drilling stock..stock has come off quite nicely..under $20 it is a buy..excellent fleet, excellent dividend, one of the largest in Western Canada..I think service companies will do very well..last year an anomaly..
TOP PICK CYRIES ENERGY (TSE:CYS): junior oil stock..started with 1000 barrels daily, up to 11,000..excellent operator, good land position..high success ratio..3-4 rigs, stock has come down into buying range..there are some juniors out there well capitalized, have rigs, good drilling program this winter..
On Oil:
we are through shoulder season, into heating season..I think we are going to see some better pricing into commodities...feed into stocks..I think things are firming up right now..I think acquisitions may play out this year..prices for large Canadian stocks like ENCANA (NYSE:ECA TSE:ECA) reasonable..US guys have had record earnings, have the cash..I think odds are pretty good 1 or 2 takeovers in the oil patch this winter..TALISMAN (NYSE:TLM TSE:TLM), Encana, CNQ (NYSE:CNQ TSE:CNQ) all targets
HIGHPINE OIL & GAS (TSE:HPX): Highpine has continued to have problems..in one area oil, other area gas..gas has sulfur content..missed objectives..complex structures that they are drilling..always huge promise in stock (I own personally)..certainly wish to have sold it when it was in $20s..great promise, no delivery..all their eggs in one basket..area fairly heavily populated..if you are drilling gas with sulfur content, must get licenses..also Highpine went through period of buying everyone around it..I am willing to wait, they have the potential..light oil..easily delivered..I think you just have to hang in there a little longer..lots of juniors struggling these days..
ATLAS ENERGY (TSE:AED): reasonable bounce..we do own it..good management..heavy oil, got some gas..continue to extend field..you never will get burned on exploration, however, whole pricing structure of the juniors went through decline and they got caught in downdraft..it is good to have bigger company (Pearl) there..seem to be getting along well..starting to bounce..good back to at least $5..relatively low multiples..nice assured expansion of production
GALLEON ENERGY (TSE:GO.A): same old story..construction delays..huge shortage of personnel in Alberta..they have had good success and good growth in 2007..if you are into juniors, going to have to grit your teeth and wait a little longer..winter drilling season better than last year..more drills available..
PETRO-CANADA (NYSE:PCZ TSE:PCA): always have been a fan..there has been some lagging in production..if you want good long-term investment..multiples are there..if they ever get McKenzie pipeline..will run on commodity as well..core stock..not going to give you spectacular performance
PROEX ENERGY (TSE:PXE): we do own the company in Leon Frazer, own shares myself..Q3 production down as expected..in Q4 we are expecting new highs in production..good spread of properties, balance sheet okay..efficient operators..good record in the past..they will do okay..solid junior
UTS ENERGY (TSE:UTS): if people have watched me before, this stock has come up..we owned it at $2 at one time, missed the top..this is over the horizons oil sands project..they have good sponsors now..problems with oil sands projects over the horizons is cost..now I think this stock around $4 is a reasonable buy..it got a little expensive, drifted back down..you have to recognize it will be long time before you see cash flow..
PENNWEST ENERGY (NYSE:PWE TSE:PWT.UN): still like it..low payout..could convert back to oil and gas company..have not expressed any comments one way or another..they get 5 million acres undeveloped land..good management..it bounced quite nicely even with mess of income trusts..
TALISMAN ENERGY (NYSE:TLM TSE:TLM): I like them and put them on my pick list..potential takeover target..considerable amount of assets outside of Western Canada..Indonesia, North Sea..right now relatively flat production from North Sea..2008 production better..alot of people will look the dispersion of properties..Indonesian production flat but stable..Western Canadian properties good, excellent gas production..active even in New York State..
TRINIDAD ENERGY (TSE:TDG.UN): when we looked at it, we just decided as a driller, not income trust..junior, not that large..equipment up to date..tend to be fully booked because right kind of drilling..sold off with income trusts, we still like it..
BOW VALLEY ENERGY (TSE:BVX): Canadian properties are not doing well..North Sea stuff starting to come through, production showing in 2007..company came to talk to us, good handle North Sea side but certainly disappointing on Canadian side..
KERECO ENERGY (TSE:KCO): they had great drilling success but numbers still came through pretty ho-hum..revised fourth quarter down, production down..they do have good spread of assets in Alberta..they got about 300 drilling prospects..just have to wait until these properties integrated, do not sell them now..probably seeing the lows now..get into winter drilling season, interest will pick up
ENCANA (NYSE:ECA TSE:ECA): I think stock is at buy spot right now, particularly as we come into heating season..would have been a better buy under $50 and lots of selling, but could see stock moving back up to old high in October 2005..good company, production should be going up next year..we own lots of it
EXALTA ENERGY (TSE:EXA): Q3 results disappointing..equipment failures, forecasts reduced..that is why stock acting the way it is..not high on my list
HUSKY ENERGY (TSE:HSE): I suggest hold position..been reasonably volatile..not expensive, will run with rest of oil stocks..always chance that Chinese will come in..active in China seas..
TOP PICK ENSIGN ENERGY SERVICES (TSE:ESI): service drilling stock..stock has come off quite nicely..under $20 it is a buy..excellent fleet, excellent dividend, one of the largest in Western Canada..I think service companies will do very well..last year an anomaly..
TOP PICK CYRIES ENERGY (TSE:CYS): junior oil stock..started with 1000 barrels daily, up to 11,000..excellent operator, good land position..high success ratio..3-4 rigs, stock has come down into buying range..there are some juniors out there well capitalized, have rigs, good drilling program this winter..
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