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Strategies & Market Trends : Dino's Bar & Grill

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To: Goose94 who wrote (53905)	3/8/2019 8:46:40 PM
From: Goose94	Read Replies (1) of 202704

MEG Energy (MEG-T) revisited top pick from Eric Nuttall on BNN.ca Market Call Friday Mar 8th @ 1200ET This stock to me demonstrates how broken sentiment towards the Canadian heavy oil space is. At $60 WTI and a $17.50 WCS differential MEG would generate $527 million of free cash flow (excess cash flow after spending to keep production flat and satisfy interest payments), resulting in a current 35 per cent free cash flow yield. While their priority is to use free cash flow to pay down debt (it has a debt to EBITDA of 3.1 times in 2020 at $60 WTI), MEG has 6.5 years of proved developed producing reserves with only $610 million of related future spending so over the next six years. The company could effectively buy back $2.5 billion of stock (170 per cent of all of their outstanding shares) while being left with 27 years or remaining proved reserves. At an EV/EBITDA multiple resembling their proved developed producing reserve life index (6) and $60 WTI, the stock would trade at $10.94 per share, a 119 per cent upside. This is ludicrous.

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