- Last week’s sell-off was a one time event: Stability in the oil market should return.
- Selling overleveraged and low netbacks oil producers.
- Adding to my favorite Canadian E&Ps.
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.
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.