Freehold Royalties (FRU-T) top pick from Ryan Bushell on BNN.ca Market Call Jan 6th @ 1200ET
There are three reasons I’m positive on Canadian oil and gas producers this year. First, the geopolitical situation in the Middle East continues to deteriorate, especially as it relates to Iran. Crippling U.S. sanctions have resulted in more brazen and serious attacks abroad and the recent assassination of the second most powerful leader in Iran, Qassem Soleimani, only serves to escalate the situation further.
Second, U.S. shale producers have been forced into a more disciplined drilling outlook as capital has ceased to flow to the sector amid poor returns. Geological declines of shale wells brought on in the past five years will be difficult to overcome at the current rig count.
Finally, we’re expecting some long awaited positive news on crucial egress projects for Canadian producers this year, including the expected completion of Enbridge’s Line 3 replacement program as well as further progress on Trans Mountain and B.C. LNG. For all these reasons, I believe capital will flow toward Canadian energy producers in 2020, continuing a trend that began last fall. Only a small amount of investment capital is required to move these stocks significantly from current depressed levels. Freehold has not fully participated in the recent rally, boasts a 7 per cent yield and is likely to see a dividend increase in 2020. The company is very conservatively managed and with little debt, so it will likely hang in better on the downside if the outlook above does not materialize. |
