Second Wave surfs off into the sunset
Also: quick hits on Crescent Point Energy and Vermilion Energy
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at email@example.com
by Max Fawcett
Second Wave Petroleum (TSE:SCS) is no more. The company has been taken private by its largest shareholder, Brookfield Bridge Lending Fund, and under the terms of the deal announced yesterday Brookfield will pay 30 cents for all of the outstanding shares it doesn’t control. That’s a tasty 131 per cent premium over where the stock was trading on May 3 (the last day before the offer was made), but a far cry from the levels it had been trading at recently. It opened the year at 50 cents, and was as high as $3.66 last March. In that light, it seems that Brookfield may have gotten itself a bargain here.
Michael Giordano, a portfolio manager at Stone Asset Management, was on BNN’s Market Call the other day, and he said he remains bullish about the rally in North American indices despite the run they’ve already had. The combination of rising house prices, gains in job data, increasing consumer confidence and the Federal Reserve’s liquidity working its way through the economy gives him hope that there’s still more to come. “I like this rally,” he said. “I do think it has legs. There may be a bit of a pullback here, but pullbacks should be bought.”
Two of his top picks were Alberta-based energy companies. He likes Crescent Point (TSE:CPG) for the same reasons that so many other portfolio managers do: a top-tier asset base, plenty of room to drill and a demonstrated track record of excellent management. He also thinks the company will refrain from making any more acquisitions – and diluting shareholders in the process, as the company has done time and again in the past – unless it sees something particularly tantalizing. “They continue to deliver on all metrics,” he said. “It has an excellent seven per cent yield and a top-notch management team. It’s finally trading down to a reasonable price-to-cash flow level, which is why I’ve been stepping in and buying.”
Giordano also likes Vermilion Energy (TSE:VET) for its geographic diversity, its exposure to Brent pricing (45 per cent of its portfolio is priced at Brent) and its portfolio of undeveloped assets, which includes a huge natural gas asset off the coast of Ireland. The 4.5 per cent dividend, and the fact that the company’s all-in payout ratio remains comfortably under 100 per cent, certainly doesn’t hurt.