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Green Friday

A look at a few picks by Aston Hill Financial's Joanne Hruska and a link to some interesting reading

Nov 23, 2012

by Max Fawcett

While shoppers in the United States are out beating the stuffing that they ate last night out of each other in search of the biggest Black Friday deals, investors there are bidding up stocks after the markets closed for Thanksgiving. Canadian energy stocks have participated in the rally to a lesser degree, and Joanne Hruska, the vice-president of management for Aston Hill Financial, made an appearance on BNN to talk about a few that she likes right now. One of those is Long Run Exploration, a company that’s a product of a merger between WestFire Energy and Guide Exploration (which used to be known as Galleon Energy). Despite the apparent identity crisis, Hruska says that the company now has a solid management team in place – one that helped build up Penn West Energy, although that’s not quite the badge of honour that it would have been 12 months ago – and a portfolio of assets located in the Viking and Montney plays that should give it plenty of room to run. “We’re current long and looking to add,” Hruska said. She also gave Whitecap Resources a nod, saying that it has a “wonderful suite” of light oil assets. It recently initiated a dividend, and Hruska said she’ll be looking to add to her position in the company going forward.

One stock she didn’t particularly like was Renegade Petroleum, another junior mid cap that’s repackaged itself as a dividend paying company. Her concern, she said, was that the company’s debt load was too high to be paying out such a generous dividend – the company’s shares yield upward of nine per cent right now – and that any operational miss, however slight, might put its balance sheet in jeopardy. She’s not alone in worrying about this, either. In a recent note, FirstEnergy said that “under our revised outlook we show a business plan offering a compelling yield as sustainable, however, leaving very little room for error given slightly aggressive decline assumptions and reinvestment efficiencies in the context of a relatively levered pro forma balance sheet.” That, along with the recent dilution of shareholders that was the byproduct of the company’s reorientation (it raised approximately $260 million through an equity issue, a private placement and bought-deal financing) caused FirstEnergy to lower its price target from $4 to $2.90 per share.

Finally, if you’re looking for the next great play, you might want to look south of the border – way, way south. Calgary companies have been operating in Colombia for some time now, but the Calgary Herald published an interesting piece that looks at the challenges associated with operating in that country along with the potential long-term upside. It’s definitely worth a look.

 

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