Longview Oil Corp LGVWF

Longview remains deeply undervalued

[Nawaralsaadi]

Longview has risen quite a bit since I wrote about it in the summer, however I believe the stock remains deeply undervalued and there is no reason for the stock to yield 9.5% against an average sector yield of 6.8% (CIBC Sept 24^th), the stock is also much cheaper on EV/DACF basis 6.5 vs 9.7 for the sector for 2013. The recent dip from $6.6 to $6.2 is one of the last opportunities in my opinion to build a sizable position before a move to the $7-$8 range in the next couple of months.

It is worth noting that Advantage review process is closing on a conclusion, a certainty on the future of Advantage will have a positive impact on Longview.

As for short term catalysts, I expect Q3 cash flow numbers to come in very strong due to exceptionally high oil prices for most of the third quarter, oil prices have weakened lately but they remain healthy, meanwhile drilling in Q3 and Q4 should reflect positively on production levels and future cash flows.

Longview is not done correcting to the upside, the trend toward a dividend focused structure for oil and gas companies in western Canada continues unabated, Longview’s valuable collection of assets is suitable for both organic growth as a standalone dividend entity or as part of a bigger dividend paying entity (Whitecap, Torc,..etc) . Longview has the low decline oil weighted oil assets the market is craving, this will ultimately reflect in premium valuation or at least an inline valuation with its peers, meaning a likely 50% upside from here, while collecting a sustainable dividend.     

Regards,
Nawar