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Everybody loves Tourmaline

Also: Bankers Petroleum was one of the best performing stocks on the TSX in 2013. Why 2014 might be just as good - or maybe even better

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 mfawcett@albertaventure.com

Jan 9, 2014

by Max Fawcett

Mike Rose has a history of delivering winners for his investors, but Tourmaline Oil (TSE:TOU) may prove to be the biggest one yet. Despite growing its production at a brisk pace in 2013, the company appears to be poised for even better results in 2014. As FirstEnergy’s Robert Fitzmartyn wrote in a recent update, the company posted record 2013 exit production volumes of 111,200 boe/d, and it expects to push that to 118,000 boe/d by the second half of February with more production to come online in March. FirstEnergy has a top pick rating and $60 target on its shares. And as the Calgary Herald’s Dan Healing noted in a recent story, Fitzmartyn isn’t the only analyst who’s taken a shine to Tourmaline’s latest results.

It’s not just volume that’s improving for the company, either. As Brickburn Asset Management’s Martin Davies said during an appearance on BNN’s Market Call (in which he tabbed Tourmaline as one of his three top picks), the company’s netbacks could be poised to grow in 2014 as the company’s production profile shifts towards more natural gas liquids and condensate. Those growing netbacks, combined with one of the lowest costs of capital in the industry, makes the company a top pick for Davies – even in spite of its recent run. “The company’s growth has taken place, and expectations have been dampened over the last little while,” he said. “[But] I think this is one of those golden moments to go ahead and buy it.”

He also liked Gibson Energy (TSE:GEI), a story that he said still isn’t well understood by the market or investors. “The North American continent for them is where they’re able to extract value, because there are pricing differences between the different geographies and products. They make a tremendous amount of money over a sustained period of time. It’s a very [well] managed company that produces a good distribution level and has a good growth rate.” With a payout ratio under 100 per cent and plenty of growth ahead of it, Davies thinks there’s still plenty of runway left for Gibson.

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And speaking of additional runway, FirstEnergy’s Darren Engels thinks Bankers Petroleum (TSE:BNK) – one of the top performers on the TSX in 2013 – has plenty of it left itself. The company continued its recent string of production beats, delivering 4Q13 production of 19,303 bbl/d. That’s why, despite the stock’s strong performance of late, Engels thinks additional gains could be in store. “The company is currently trading at a price to core NAV ratio of 68 per cent. The company’s 1P reserves NAV is $5.08 per share; therefore, the market is not ascribing any value to the company’s probable reserves or potential upside from secondary and tertiary recovery. Given the company’s repeatable drilling inventory and stable production growth, we are of the view that Bankers Petroleum is a low risk investment with the potential for above average returns. Given the company’s consistent production growth that we estimate will result in year-over-year production growth of 16 per cent from 2013 to 2014e, as well as the ability to self-finance, we are of the opinion that Bankers is poised for multiple expansion.”

 

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