RE:Top PickHere are more detailed comments from Bonner. GLTA
TOP PICKS:
Legacy Oil + Gas (LEG TSX)
Relative to its peers, LEG is a significantly undervalued light oil asset base you can now buy for 3 X cash flow. Compared to its peers the stock trades at a 40% to 50% discount. Production will reach 20,000 bopd…..cash flow will exceed $2 per share at $90 per bbl…….versus actual realizations closer to $100 per bbl. Cash flow could exceed our expectations. The stock also trades at a significant discount to the underlying $10 net asset value. Management and the board have a history of excellent performance in light oil operating areas. Trent Yanko and Paul Colborne built Mission Oil and Gas together, which was sold in 2007 for $670 million. Further, Trent was named Saskatchewan Oilman of the Year in 2007. This team knows how to make money for shareholders. The company has disclosed they have contemplated converting the company to a dividend paying model. The recent farm-out of a non-core cardium assets might be a cue that a dividend model may become a reality. Regardless, LEG is very close to becoming self-sustaining, wherein the company’s cash flow is more than sufficient to meet their capital spending programs. With over 2000 development drilling locations in their project inventory, a conservative balance sheet with lots of room, and a history of capital efficiency, LEG’s value proposition is unmatched for companies it’s size.