The Stars Group: What Now?

So I reduce my position, and then…


The weekly isn’t better for me.

TSGI Weekly December 3


I’ll still be patient before buying back shares. Let’s see what happens at C$30.

Disclosure: I am long TSGI. Not for republication on Seeking Alpha.

Granite Oil: Still Bullish

Temporary operational setbacks have sent the stock to the cave.

Tighter well spacing wasn’t optimal after all.

In 2017, the Company tested further down‐spacing, with infill drilling on 100 and 133 meter intervals (see May 9, 2017 press release). These wells initially tested at rates comparable to wells drilled on 200  meter spacing, and while economic, have proved to be less productive over time.

Granite Oil Press Release, November 9, 2017

Well spacing will be 200 meters from now on.

Despite these setbacks, Granite is still one of my favorite oil stocks.

  • The company will spend over C$10M in growth capital in 2018. This will grow production 600 barrels per day year-over-year.
  • Cash netbacks are high.
  • The dividend is safe at current WTI prices.
  • Some of the decrease in production is due to conversion of producing wells to gas injectors.

Plus there are still 80 drilling opportunities to further grow production and oil recovery. The next area of focus is delimited in purple, with approximately 10 drilling locations

Drilling Development GXO December 03

Source: Granite Oil, December 2017 Corporate Presentation

I added to my position on November 15, 2017.

Disclosure: I am long GXO. Not for republication on Seeking Alpha.

Granite Oil: I Should Stop

The next resistance level is at C$4 per share.

Cadotte Capital Partners, November 7, 2017.


GXO November 13


GXO November 13


Yeah, I should stop. But it’s still a great time to buy the stock. For better or worse, management is keeping the dividend. Warning: The dividend will be cut should oil drops below $50 again.

Disclosure: I am long GXO. Not for republication on Seeking Alpha.

Corridor Resources: CSEM Survey Almost Underway

Electromagnetic Geoservices ASA and its wholly owned subsidiary Electromagnetic Geoservices Canada Inc. (together, “EMGS”) have initiated preparations for carrying out a pre-funded multi-client survey west of Newfoundland, Canada. The survey represents a minimum level of revenues to EMGS of approx. USD 2.5 million.

The survey is expected to be executed in the fourth quarter of 2017.

EMGS Press Release, October 17, 2017

Corridor hired EMGS, from Norway, to do the study. The work amounts to C$3.3M, as disclosed previously by Corridor.

The study is almost underway. The vessel Atlantic Guardian is sailing to the Old Harry site. The vessel crossed the Atlantic earlier in October. It was moored of St-John’s until last week when it sailed to the Gulf of St-Lawrence. It is now off the coast of Nova Scotia, near Cape North.

Atlantic Guardian Location November 11


There were many studies realized throughout the years in the Western Newfoundland and Labrador Region (Petro-Canada, Mobil Oil, Marathon Petroleum, Talisman Energy, BHP Petroleum, etc). Petro-Canada wasn’t far from the underground structure in 1981.

Petro-Canada Survey 1981 November 11

Source: C-NLOPB

Corridor has done a very similar study in 1998.

Corridor Resources Survey 1998 November 11

Source: C-NLOPB

The focus was on the Western structure of Old Harry, in Quebec’s territory. This time, Corridor will focus on the Eastern structure.

Corridor has now C$47M in working capital, or C$0.53 per share. I am still holding a reduced position in Corridor since Value Digger’s article on August 3.

Disclosure: I am long CDH. Not for republication on Seeking Alpha.

What’s Up With Granite Oil

It doesn’t look good from a daily point of view.

GXO October 7


And the weeklies aren’t looking good either.

GXO October 7


So what’s up? Well, we are back to the lower for longer rhetoric.

And if oil prices are lower for longer, then Granite Oil’s whole business model is in big trouble. Especially if we look at current and past guidance from management.

GXO September Presentation October 7

Source: Granite Oil, September 2017 Corporate Presentation

GXO August Presentation October 7

Source: Granite Oil, August 2017 Corporate Presentation

GXO May Presentation October 7

Source: Granite Oil, May 2017 Corporate Presentation

What can we see:

  • We know management is planning for lower for longer;
  • $55 WTI is expected until 2021 compared to 2018 before;
  • Capital expenditures are lower, and therefore production growth is almost nonexistent;
  • And… The juicy dividend is maintained nonetheless.

This is the reason the market is reacting: Management is definitively holding the dividend steady. This is big trouble for Granite Oil’s business model, should oil prices hold $50 in the long-term.

GXO Free Cash Flow Projections February 3

Source: Cadotte Capital Partners

As we can see in the graph, free cash flow is negative years out using $50 WTI. Debt will increase, and there won’t be any cash to make up for it.

Not to mention bullish assumptions, including a tight WTI/WCS differential and an advantageous foreign exchange rate.

In all, Granite Oil will need higher oil prices for the stock to be worth something. $50 WTI isn’t enough, and it’s the price the market expects in the medium to long-term.

Disclosure: I am long GXO.