TransGlobe Energy: I Bought Some

Added a small position this morning.

What I’ll be looking for in the coming months:

  • Funds flow from operations, meaning healthy heavy oil discount (management expectation: $10 per barrel).
  • Performance of the Canadian asset (management expectation: very bullish).
  • Egyptian oil production (management expectation: increasing production with the new drilling crew).

Some more info to look out for:

TGL November Presentation November 9

Source: TransGlobe Energy, November 2017 Corporate Presentation

I now have skin in the game.

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

Portfolio Update: Adding To My Energy Holdings

Last Wednesday was a test for energy investors. Did you resist the urge of following the masses by selling your energy holdings?

I resisted. I added to my favorite energy holdings last Wednesday, which are Gear Energy, Point Loma Resources and Raging River Exploration. Those companies can survive low oil prices and then thrive once oil prices rise.

Here are my recent moves in the market.

First, I sold all the lithium explorers I bought last month: Critical Elements, Nemaska Lithium and Natan Resources, now Enforcer Gold. I was lucky to turn out a profit on this: Critical Elements skyrocketed 50% after investors learned the company had hired a communication firm for a year.

This experience would be cash neutral at best if it wasn’t for this gain. Just for example: Enforcer Gold switched its focus to gold exploration after I bought the stock for its lithium properties. All in all, this is another point to not speculate on the market.

Second, I sold TransGlobe Energy. It turns out the Canadian assets aren’t as transformative as I thought they would be. I first estimated netbacks at C$11.50 per barrel for total consideration of 6X 2017 FFO. Instead, netbacks were as low as C$6 per barrel in Q4, which implies an estimated price tag of over 10X 2017 FFO.

The Cardium light oil acreage should provide interesting returns according to past presentations from Angle Energy. Management will drill these lands only in late 2017. Therefore it will take some time before shareholders see something good from these assets.

I sold what was left of my position in MEG Energy for a sub-50% gain. WTI at sub-$50 won’t be enough for MEG to sell its pipeline at a good price. Hence share price appreciation will be limited in the short-term.

I added massively to my positions in Point Loma Resources, Gear Energy and Raging River Exploration using these gains.

I bought back Tidewater Midstream and Infrastructure on Friday after selling the stock two weeks ago. Support was limited below the 200-day moving average.

TWM March 13


Low AECO prices in Western Canada may delay growth projects by producers and lower flows in pipelines owned by TWM in the short-term.

I am now heavily positioned in the oil and gas sector with a strong presence in junior Canadian E&Ps with low leverage and high netbacks. Those companies can survive at $50 WTI and thrive at higher prices.

Disclosure: I am long GXE, PLX, RRX, TWM. Not for republication on Seeking Alpha.

Portfolio Update: Moving Chips To My Winners

I am now well positioned for 2017 after another series of move in my portfolio.

  • I added to my positions in Painted Pony Petroleum and in Gear Energy by selling part of my position in MEG Energy. I am preparing my portfolio for lower oil prices.
  • I opened a position in Tidewater Midstream & Infrastructure.
  • I bought back shares in TransGlobe Energy. TransGlobe’s Canadian transformation is a game changer to me. Plus the acquisition metrics are very good for TransGlobe shareholders.
  • I opened a position in Point Loma Resources.

I made a quick analysis for Point Loma Resources after hearing about the stock on Seeking Alpha. The stock is indeed trading at a very low 6.3X Year-End 2016 FFO. I estimate FFO of C$17.92 per barrel at year-end 2016. Furthermore, the company holds no debt except for convertible debentures and plans to grow production aggressively next year. In other words, the multiple should be higher.

Other interesting news for Canadian oil and gas producers: lower oil exports from Venezuela and possibly lower transport tariffs from TransCanada.

Lower heavy crude from Venezuela will benefit Canadian heavy oil and tighten the price differential of Canadian heavy oil versus WTI.

Finally, the new push for natural gas pipelines in the Northeastern US will force TransCanada to lower its transportation tariffs. Else it will face a severe decrease in its market share in Eastern Canada.

Disclosure: I am long GXE, MEG, PLX, PPY, TGL, TWM. Not for republication on Seeking Alpha.

TransGlobe Energy: Buying Back Shares I Sold Last Spring

TransGlobe Energy recently abruptly crashed at the C$3.50 per share mark. The stock tried to stay over the 200-day moving average. However, the bears got too strong.

TGL July 31


This recent decline is a great opportunity for me to rebuild the small position I had last spring. I believe the company is undervalued at this level. On the other hand, I will keep this position small compared to my portfolio because of the obvious risks of operating in Egypt.

Disclosure: I am long TGL.

TransGlobe Energy: It Is Difficult To Get Technical With Stocks

Remember when I called a sort-term pullback in the price of TransGlobe on April 24? It turned out well, but not for the good reasons.

TGL June 10


The stock did break the C$5.40 mark. However, the stock experienced a strong pullback because of the 1Q earnings. Getting technical with stocks can be rewarding. In the end, my reading turned out to be right.

Expect the company to trade in the C$4.80 to C$5.30 range until the fundamentals of the oil market recover. Be patient, it is only a matter of time.

Disclosure: I am long TGL.