Why analysts like Crew Energy, Delphi Energy, High Arctic Energy Services and Pulse Seismic
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 firstname.lastname@example.org
by Max Fawcett
Altacorp Capital’s Jeremy McCrea came out with an aggressively bullish note on Crew Energy (TSE:CR) earlier this week, and it’s worth a closer look. In short, he said, the market isn’t properly accounting for the improvements in Crew’s operations – improvements that have made its well economics far more attractive. “Overall, the significant improvement Crew has made over the two years (let alone the last few months), we believe, have not been fully reflected in Crew’s share price. With an upcoming 40 stage frac job with results in Q3, a successful outcome should put its well economics in the top decile of our coverage list. This finally could be the catalyst that also moves Crew’s multiple in line with other Montney players too. The combination of a multiple expansion and expanding CFPS growth into 2015 and 2016 could make Crew one of the top performers over the next 18 months. “ He has a $12 price target on its shares (up from $10, and a nearly 50 per cent premium on where it’s trading as of Thursday morning).
Meanwhile, on Tuesday, Jason Donville of Donville Kent Asset Management appeared on BNN’s Market Call and came with some under-the-radar energy picks. First up was High Arctic Energy Services (TSE:HWO), a company that recently raised its dividend and that he think is a strong buy. “We were buying it today on our desk, so that gives you a pretty good idea what our current thinking is on it,” he said. “We like it, and we’re adding to our position. It’s not as well known in terms of oil and gas service stocks, but this company is really, really profitable, and I think for the next two to three years this company is going to have a really good run.” It’s currently trading around the $4.50 level, but Donville thinks it could move to $6 “really quickly.”
Two of his top picks were also Alberta-based energy companies. First up was Delphi Energy (TSE:DEE), a gas-weighted producer that he thinks offers investors great exposure to what may well be a rising price environment over the next 18 to 24 months. “Delphi’s got a great profile in northwestern Alberta. I think the market is starting to recognize that. Production is ramping up, and it’s all fully-funded, so I’m not looking at a lot of dilution going forward.”
He also liked Pulse Seismic (TSE:PSD), a service company that’s been beaten up a bit of late. That’s created a buying opportunity for investors, Donville said. “This is a great company, and a long-term play. If you look at the last six months the share price has done terribly, but that creates an opportunity. We don’t really know what kind of a year 2014 and 2015 will be, but last year was incredibly quiet and it’s hard to imagine it’ll stay that quiet.” The time to buy, he says, is right now, before its medium-term prospects get clarified. “You can’t wait until somebody announces a big order for seismic data – you have to get in when people are saying nobody’s going to order seismic data again. I think in a year’s time we’ll have a smile on our face.”