Teal Linde -BNN - TOP PICK ENSIGN (ESI TSX)
The latest playbook in the oil patch has been to pay down debt and then return capital to shareholders. Ensign is now halfway through its three-year goal of paying down $600 million of debt, or roughly $200 million per year. A key question becomes, what will the company do once the $600 million is paid? If we assume the current market cap of $450 million, and sustainability of $200 million in annual free cash flow, Ensign will have considerable optionality. Theoretically, at today’s share price, a return of $100 million in capital to shareholders via a dividend would result in a dividend yield of 22 per cent. The other $100 million could be used for buybacks to reduce the share count by 22 per cent. As Ensign approaches the final stages of its $600 million debt paydown, we suspect the market will start to price in this significant potential optionality by next year.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
| GOOGL NASD | Y | Y | Y |
| DAL NYSE | Y | Y | Y |
| ESI TSX | Y | Y | Y |