Last week was a big week for oil, and the Stockhouse Bullboards took notice. First came a wave of fiscal quarter results being released, which sent shares of major companies every which way. But the bigger story was towards the end of the week, as the Canadian energy sector was up big (and brought the TSX upwards with it).
After a long time of stagnant activity in the industry, what changed? It seems like a combination of widespread rig shutdowns, higher prices, and measured actions by oil producers have revitalized interest in the sector. It’s as if the market is finally saying enough is enough.
But the story wasn’t the same across the board. Some companies didn’t ride the wave, and most operators are still staying passive as they wait for better times. This week, we dive into discussions of investors on the Stockhouse Bullboards trying to figure which companies will make it (and make for valuable investments in the process).
It seems like not that long ago we were looking at
Vermillion Energy Inc. (
TSX:VET,
Forum) on the top of the energy Bullboards, and it has continued to solidify it’s hold. Last week was a rough ride for the company however, and the chart below illustrates how wild the week was for the energy sector. VET closed at $20.09 on Oct. 29, dropped to $17.40 on Oct. 31, then climbed back up to $20.14 on Nov. 5.
The drop is easily explained, as on Oct. 31 Vermilion
announced its fiscal results for the last three and nine months. While the results didn’t hit the mark, we can see that the company then went on to ride the sector wave all the way back to previous levels. Does that mean the market overreacted, and many realized later that the company’s poorer than expected results were a small blip on the radar? Or, more likely, that the sector (and Vermilion) looked like they had good value to offer.
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Investors on the VET Bullboards have long loved the company for its high-yield dividend offerings, so the up-and-down-and-up week was tough to make sense of. People wondered how Vermilion was going to recover if the company paid out large dividends regardless of performance. But Stockhouse Member
farmboy75 reiterated wisdom that the major companies seem to be following: if you play it responsibly, you’ll recover over time.
“While many of us worry about our nice juicy dividend, some are worried about a cutback in capex and a lack of growth. But growth at all costs is the reason our oil companies are in the current situation of low oil prices. Overproduction at a loss does not make sense in any commodity, be it wheat, potatoes or gas and oil. Lending institutions and investors are finally waking up to this cold hard fact. As I have stated in past posts,of the hundreds of shale drillers in Canada and the US, only a few have been cash flow positive. That cannot continue for obvious reasons. So our only hope as I see it is for companies to cut back capex and eventually bring production and prices back into balance…”
(Po?st: RE: Dividend and growth)
On the other side of the spectrum was
Pengrowth Energy Corp. (
TSX:PGF,
Forum), a name that non-institutional investors may recognize as the former sponsor of Calgary’s Saddledome arena. Unfortunately for PGF, the downturn in oil combined with mistimed major projects have left the company dwindling with a lot of debt. Some investors believed it could bounce back, but last week puts a hamper in those beliefs as PGF plummeted from $0.20 to $0.05.
Why didn’t Pengrowth recover like Vermilion? Because $0.05 wasn’t a random number, it was the price per share at which
Cona Resources Ltd. had
agreed to purchase PGF and take on all of its assets and debt. Since the announcement on Nov. 1, most of the company’s shareholders have been quiet, including Canadian billionaire Seymour Schulich, who owns a 28.5% share of Pengrowth.
But the sale came at a weird time for the PGF Bullboard. Naturally, many people had invested like Schulich in the company’s recovery and expected it to turn around, but given the sector’s positive performance last week, many believe that the $0.05 price tag is too low. As Stockhouse Member
Hendrick3 illustrated, now that the floor has been established, investors don’t have much more to lose.
“There are a number of valid reasons that traders are buying over 5 cents. Often the first offer is intentionally low and then they bring it up a bit to make people feel they got a reasonable price. There is also the possibility of a competing bid or Schulich declaring he won't sell at 5 cents such that the bid might be raised. I think the people who might feel they reacted irrationally are those that sold at 5 cents. That's the offer price. Why take yourself out of any upside by taking that now. You will be able to get 5 cents anytime through the process...”
(Po?st: RE:Who's buying at .055 to sell at .05)
As tempting as it is to look at more of the winners in Energy, we needed to talk about
Wallbridge Mining Co Ltd. (
TSX:WM,
Forum) this week. We haven’t touched on the company since August but it has rocketed to the top of the metals and mining Bullboards and gained a sizeable following on the back of a solid few weeks.
Shares have doubled, from $0.35 on Oct. 18 up to $0.72 on Nov. 6.
The big news? Strong drill assay results
released on Oct. 21, including 27.00 g/t Au over 38.39 metres, followed on Oct. 29 by Wallbridge being appointed as
operator and 20% owner of a promising base metals property in Sudbury.
But why the continued rise? On the WM Bullboard, the message of rising prices and high volume was simple: the market was figuring out the true value of Wallbridge. Naturally some expected an eventual pullback or correction, but Stockhouse Member
jefedeoro was confident in their speculation that Wallbridge was simply becoming a more and more attractive investment.
“Some posters are thinking we may have a pullback given we have come so far so fast. And while that is generally solid logic (profits will be taken that is just part of the game), I don't see a big pull back coming, just the opposite actually.
I think it’s pretty obvious that with what we have, and that it is continuing to expand in all directions, that the institutional buying is going to continue for the near future. It's pretty much a guarantee that we will be bought out for dollars (plural), so everyone who sees that will want to acquire as much as possible as fast as possible for the eventual sale, especially institutional buying.
Drills will continue to push it onward and upward, and the possibility of it being one of the biggest discoveries in the world will fuel that fire even more. I predict we hit a dollar before Christmas and between 1-2 dollars by the AGM in the spring...”
(Po?st: Sunday Speculation.......)
Last week was a big one for energy, but next week is bigger for another sector near and dear to the heart of Stockhouse: cannabis. We’ve been asking which Canadian LP will be the next to post a profitable quarter as investors in the sector are looking for a stronger recovery, and next week we’ll see some of the first major releases. For now, our Stockhouse readers are going to keep their eye on
Aurora Cannabis Inc. and
Aphria Inc. to turn the cannabis tide.
It’s clear from Bullboard discussions which sectors matter to Stockhouse users, but we want to make sure that we’re covering the right tracks. Our new Investor Pulse Poll asks you which investment topics you need more information on, so head
over the homepage or click the image below to let us know what you’d like to see more of!
(Click image to go to the poll)
Next week might be a long weekend for some, but Canadian investors will be in for a ride on the cannabis front. Expect big news, big results, and lots of discussions after the fact breaking everything down on the Stockhouse Bullboards. For previous editions of Buzz on the Bullboards:
click here.