Bonavista Energy Corp. a good long term prospect

May 25th, 2011 – Comment

BNP is a good hold and a good long term prospect.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Hi Lou,

Sometime back I had a choice of either buying Crescent Point or Bonavista Energy. I chose Bonavista as I felt that it would outperform and payout more in the long run. While the two shares have basically tracked each other, the payout in the case of Bonavista has always been lower than Crescent point. My question to you is that should I continue to hold Bonavista, is it a good long term prospect?

Thank you,

Huneid

Hi Huneid,

Bonavista Energy Corp. ( BNP TSX) was one of the many energy trusts that converted back to a corporate structure as we came into 2011. The focus of the organization is to continue to offer an attractive yield of 5.15% on its dividend while also pursuing growth opportunities.

The company has set a 2011 capital expenditures budget of  between $345- $375 million. Given the subdued price for natural gas, to which BNP is leveraged at 66% of current production, there will be a shift towards development of light oil targets through the year.

Lets review the charts to gain some insight into the potential for investors.

The three year chart depicts the pattern of growth that the shares have exhibited as they moved off the March 2009 lows of $12.00. The stock has established a cycle of moving higher, then building a base along a higher plateau before rising again. Over the course of the advance the stock has tested but not breached support along the 200 day moving average. We are off the $32.00 highs of February 2011 and holding onto support at $28.00.

The six month chart highlights the value of the MACD as a signal generator. It indicated a buy in late January, a sell in late February at the $32.00 high, a buy in mid March, and a sell just before mid April. Currently the there doesn’t appear to be a definitive signal emanating from the MACD or the RSI.

BNP has a lot of the things one would look for in an investment. It has been in business since 1997 and has been able to overcome a variety of challenges. In 2010 they produced 66,259 barrels of oil equivalent per day and have forecast production of between 69,000 and 71,000 boe/d in 2011. They have a large land base and lots of drilling targets to work with. They exploit advanced energy technology to increase production and reserves while continuing to reduce costs. Finally they have a management team that is flexible enough to recognize the need to adapt to market conditions.

BNP is a good hold and a good long term prospect.

Categories: Energy
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