Weak oil and gas prices are an obvious challenge for Canada\’s energy juniors, but not every one of them is really a loser, says Jamie Kubik, analyst at Desjardins Securities Inc.
\”While there are reasons to be cautious at current commodity prices, opportunity abounds and winners come in downcycles,\” he said in a note to clients that initiated coverage on 11 Canadian companies.
Kubik said the power sector in Canada is familiar with navigating through price cycles and well-positioned companies often \”shake loose opportunities\” that will not otherwise be available in better commodity price environments.
\”It is definitely an environment where junior energy companies are often disproportionately affected,\” he said.
The Desjardins analyst recommends investors look at companies with high-quality management teams and solid track records of delivering returns both in \”defensive and offensive\” commodity cycles.
Strong assets are also a must, he added, noting his preference for companies that have exposure to the Montney – \”a world class resource play\” – in Bc and Alberta.
He has buy ratings on Advantage Oil & Gas Ltd., Kelt Exploration Ltd., Painted Pony Petroleum Ltd. and Storm Resources Ltd.
\”While commodity prices have narrowed the plethora of plays able to deliver strong returns, the Montney offers some muscle inside a tough environment,\” he said.