Eric Nuttall’s Top 5 Energy Picks

Here’s why this top energy investor likes Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG), Baytex Energy Corp. (TSX:BTE)(NYSE:BTE), and Bonterra Energy Corp. (TSX:BNE), among others.

| More on:
The Motley Fool

Portfolio manager Eric Nuttall of Sprott Asset Management has one of the strongest track records of any energy-focused investor. And now he’s very confident we’re in for a big rally in oil stocks. He’s even predicting a WTI oil price of US$50 per barrel by the end of the year.

So how exactly is he positioning his portfolio? We take a look at his five top holdings in reverse order below.

5. Bonterra

Bonterra Energy Corp. (TSX:BNE) is one of many big dividend payers that have been crushed by high oil prices. The company’s $0.30 monthly payout was cut to $0.15 early in 2015, then down to $0.10 more recently. And even this payout requires roughly US$40 WTI.

At the same time, Bonterra’s share price has fallen to around $13, down about 80% since August 2014. The dividend now yields 9%. So if there’s even a modest recovery, Bonterra should do very well for Mr. Nuttall.

4. Cardinal

Cardinal Energy Ltd. (TSX:CJ) has a lot in common with Bonterra. The company pays a big monthly dividend, but recently had to cut this payout in half due to low oil prices.

Yet there are some things to like about Cardinal. The company has very prolific assets with low decline rates. Cardinal also has a reasonable balance sheet with net debt equal to just 1.4 times cash flow from operations. And, of course, the company has plenty of torque to oil prices.

3. Baytex

By now you should be seeing a very strong theme. Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) is yet another high-yielding energy producer that was forced to cut its dividend. In fact, the company suspended its payout altogether in August.

Unlike Cardinal, Baytex has a very shaky balance sheet with debt of more than two times cash flow from operations. But the company has $850 million of unused credit capacity and no significant debt maturities until 2021. Better yet, Baytex has very prolific assets in Alberta and Texas. The company is well positioned to benefit from a recovering oil price.

2. Northern Blizzard

Continuing the theme of dividend cuts, Northern Blizzard Resources Inc. (TSX:NBZ) slashed its monthly payout in half back in August. Yet the stock still yields 15%, indicating that investors can expect another cut.

However, there’s reason to believe the dividend can be maintained. Like the other companies on this list, Northern Blizzard has fantastic assets with low decline rates. Its debt is long term and covenant-lite. The company has $475 million of undrawn credit capacity. And according to its corporate presentation, the company only needs US$37 WTI to sustainably pay the dividend.

1. Crescent Point

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) is easily the largest and best-known company on this list. Otherwise, it looks just like the other four companies.

It has a big dividend, even after a 57% cut last year. It has fantastic assets with low decline rates. It has an excellent balance sheet. And, of course, the company is very well positioned to benefit from rising oil prices.

Time will tell how well Mr. Nuttall’s picks work out. But he has an excellent track record, and all of these stocks are far cheaper than they were when he first bought them. It’s certainly not too late to ride his coattails.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Energy Stocks

oil and gas pipeline
Energy Stocks

TC Energy Stock Is Starting to Get Ridiculously Oversold

TC Energy (TSX:TRP) stock is one of those deep-value dividend plays for the next decade and beyond.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

3 Top Energy Stocks With High Dividends

Investors looking for big dividends in the energy sector can explore these top energy stocks.

Read more »

Dollar symbol and Canadian flag on keyboard
Energy Stocks

3 Canadian Stocks You Can Confidently Buy Now and Hold Forever

You don’t need to think twice about loading up on these three top stocks.

Read more »

Aerial view of a wind farm
Energy Stocks

Is There Any Hope for Brookfield Renewable Stock?

Brookfield Renewable stock (TSX:BEP.UN) may be going through a rough patch, but recent moves suggest more is yet to come.

Read more »

edit Balloon shaped as a heart
Energy Stocks

If You Like Enbridge Stock, Then You’ll Love These High-Yield Energy Stocks

Do you like Enbridge (TSX:ENB) stock for its dividend but not the share growth? Consider these two top monthly payers…

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Clean Energy Play: Is Brookfield Renewable a Good Stock for a TFSA?

Add this top renewable energy stock to your self-directed TFSA portfolio for significant long-term and tax-free wealth growth.

Read more »

grow dividends
Top TSX Stocks

Enbridge Stock Pays a Massive 7 Percent Dividend and Now is a Great Time to Buy  

Have you considered buying Enbridge stock lately? If not, you may want to buy this long-term gem to start earning…

Read more »

edit Woman calculating figures next to a laptop
Energy Stocks

Better Buy: Cameco Stock or Brookfield Renewable Stock?

If you're looking for a strong future, clean energy is the answer -- especially if you're looking at a strong…

Read more »