Eric Nuttall, a portfolio manager with Sprott Asset Management is bullish on the outlook for Canadian natural gas.
That is one reason why he sees more upside for shares of
Encana Corp. (
TSX: T.ECA,
Stock Forum)
Whitecap Resources Inc. (
TSX: T.WCP,
Stock Forum), and
Tourmaline Oil Corp. (
TSX: T.TOU,
Stock Forum).
In an interview with BNN on Monday morning' Nuttall outlined additional reasons why he would buy each of the three stocks.
Encana Corp. (
TSX: T.ECA,
Stock Forum):
1: President and CEO Doug Suttles has done a good job of selling non-core assets.
2: The spin-out of
PrairieSky Royalty Ltd. (
TSX: T.PSK,
Stock Forum) via an initial public offering of 52 million shares, priced at $28 has gone much better than anyone expected, Nuttall said. The stock traded Monday at $38, leaving PrairieSky with a market cap of $4.9 billion, based on 130 million shares outstanding. As Encana owns 60% of the royalty company, any dollar move in the price of PrairieSky, adds 10 cents to Encana’s share price, Nuttall said.
3: The street has been slow to recognized the improvements in Encana’s business model.
Target price. Nuttall said he sees the stock “catching up” to $28 over the next three to four months from $25.48 on Monday.
Tourmaline Oil Corp. (
TSX: T.TOU,
Stock Forum).
1:Insiders led by Chairman, President and CEO Mike Rose own a big chunk of the stock. Rose is thought to hold 5.5% of the company.
2: Management has done a good job of aggregating assets and seeing upside that others did not.
3. Tourmaline is a huge natural gas producer with good growth prospects. It is therefore exposed to the increase that Nuttall expects to see in the price of natural gas, likely later this year.
Target price: Nuttall sees the stock rising to $65 from $56.54 on Monday.
Whitecap Resources Inc. (
TSX: T.WCP,
Stock Forum)
1: Whitecap is "sleep at night story," capable of producing $124 million in free cash flow next year.
2: Investors can look forward to a potential 50% dividend increase if the cash flow is used for that purpose.
3: Nuttall forsees annual production growth of 14%.
Target price: Nuttall sees the stock rising to $17 or $17.50, from $15.50 on Monday.