On election day when we don’t want to talk politics, we
check in with
Keith Schaefer, editor of the Oil and Gas Investments
to hear what has his interest in the junior oil
patch. He says investors should pay attention to last week’s
announcement by Renegade that they’re changing focus.
There’s a lesson there for the retail crowd.
Renegade Petroleum announced they were buying
oil production, will start paying a dividend and become a mostly
income-oriented company. I think the market missed the significance
of the Renegade Petroleum transaction last week. This is
a heavily oil weighted junior that attracted a lot of research.
They threw up the white flag on growth last week, and transformed
into an income vehicle—and saved their shareholders in
the process. Even though they had to dilute—and didn’t improve
per share production or cash flow much at all—they did
the right thing here.
History is telling us that very few management teams in the
junior oil patch have the fiscal discipline to make resource
plays work for shareholders, and Renegade is only the latest
They’re developing a Viking play in western Canada, which is
small cost wells for small production wells. Their Souris play in
Saskatchewan is similar. Debt levels are OK.
So we ask Keith—given that little rant, what would be
his favourite pick right now? He says, “I like the
story more and more. Again, this is NOT a resource
play—which is hard to find, especially domestically.
They’re drilling in the Alberta foothills for oil. Nobody
else is looking there, as it’s known as a gassy area,
so they were able to get the ground cheap. They have yet
to miss on a well and they have a great shot at going from
3500 boe/d now to 5000 boe/d by the end of March. Even
at 50% gas, their current valuation is cheap. And look at
the chart. You want to own a stock chart that goes
up. When a chart isn’t going up on seemingly good
growth story, you need to sell it, sit on the sidelines and
figure out what the market knows that you don’t.”