Interview with Eric Nuttall talking about LEG...
For those interested, here is the link:
https://seekingalpha.com/article/277710-eric-nuttall-looking-for-oil-and-gas-values-not-value-traps
EN: Well, we could walk through some of my top holdings. That's probably the best way to understand my style.
TER: Sure.
EN: In terms of size, my largest current position is Legacy Oil & Gas Inc. It's a $2 billion-market cap light oil company, and it's a case study of how we try to look at things differently. There was a management change within a major shareholder, Fidelity Investments, and the manager had to blow out 18 million shares. That took the share price from $17.50 down to around $11.50; not for any fundamental reason — it was due to fund flow. The stock trades at around $12 today, but I was aggressively buying at around $12.50 and was buying every share I could at around $11.50.
When I started buying LEG, I was paying the lowest multiple of price-to-cash flow in its corporate history. and I thought my downside was limited to commodity and market risk. I knew the company had very significant exposure to several emerging plays, including the Spearfish in North Dakota and the Alberta Bakken, which is an emerging tight oil play. So, I paid a very low multiple and got all of the upside free. I could see the stock at $16. So, while a 33% upside from today's level doesn't sound super sexy, it's decent; and I think my downside risk is very low. The company is managed by, in my opinion, one of the best light oil teams in the business, which is comprised of proven value creators; and the balance sheet is very clean.