In the Canadian oil and gas sector, there are many examples of companies trading at or near lows we haven’t seen in a long time, if ever. Valuation multiples have plummeted due to a broad view that oil and gas will likely continue to be under pressure over the long term. I share this view.
That said, not all companies are created equal. In this article, I want to highlight the value I see with Tourmaline Oil (TSX:TOU) right now. This natural gas and liquids producer has not seen a favourable bump in its stock price to the same degree as its oil-producing counterparts. This is due mainly to natural gas prices which have not recovered in the same way as oil, of late. Macroeconomic headwinds remain strong. Investors in Tourmaline will have to be in the trade for the long term for it to make sense, in my opinion.
Moreover, the company does have one of the best balance sheets of its peers, with only $1.6 billion in debt to approximately $7 billion in equity. The company has been reducing its debt load for some time and has a great management team which has guided the company through previous crises as well.
The company’s 40-cent dividend on a stock price of around $12 is excellent. Many believe this is likely to be maintained due to solid cash flow generation.
I’d recommend considering Tourmaline below $10 as I do see more pain on the horizon. But this company does show good value fundamentally today. Making a purchase today is not a bad idea, particularly if taken as a long-term position.
Invest wisely, my friends.
