Five Energy Companies Make Paradigm Capital's Top Picks Cut


Analysts with Paradigm Capital selected a quartet of oil and natural gas companies and one energy services company to highlight in the firm's recently released Top Quarterly Picks Q3/16 report.

Analyst Ken Lin chose to spotlight Kelt Exploration Ltd. (KEL:TSE), a Canada-based company with natural gas operations in Alberta and British Columbia, and Pine Cliff Energy Ltd. (PNE:TSX.V), with energy assets in Alberta and Saskatchewan, and mineral assets in Canada and the U.S.

Analyst Ian Macqueen highlighted Parex Resources Inc. (PXT:TSX.V) and Seven Generations Energy Ltd. (VII:TSX). Parex is an explorer with what the company calls a "significant land base of 2.10 million gross acres" in Colombia. Seven Generations is focused on its Kakwa River project, a "large-scale, liquids-rich Montney natural gas property" located in Alberta, according to the company website.

Kelt is "less exposed to AECO [Hub pricing] than other natural gas names," Lin notes. In addition, the company is trading below its net asset value (NAV), which presents investors with "an attractive entry point given the company's high historical premium to NAV and massive resource potential."

Pine Cliff, while "highly sensitive to AECO," has yet to follow on a recent AECO rally, thus also offering a "compelling entry point," for investors, according to Lin.

Macqueen is modeling 81% year-over-year growth for Seven Generations in 2016, "to 109 mboe/d based on 65 new wells." Given that the company is "drilling better wells more affordably and commodity prices are improving," Macqueen believes the company's "hypergrowth profile will continue."

Parex, with "$80 million ($80M) in positive working capital and an undrawn $200M line," is prepared to "[expose] itself to ~110 MMbbl of resources," Macqueen notes, adding "success at Aguas Blancas could more than triple its inventory."

Analyst Jason Tucker added a pick in the Canadian energy services sector: Secure Energy Services Inc. (SES:TSX), which provides processing, recovery, disposal, drilling and production services in Canada and the U.S. Tucker notes that higher oil prices should "positively impact both Secure's PRD (Processing, Recovery and Disposal) and DPS (Drilling and Production Services) divisions." In addition, Tucker expects a "positive impact" into 2017 and 2018 from sales of production and enhanced oil recovery (EOR) chemicals, which is slated to begin in Q3/16.

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