In short: Lead example of the reserve-life screen: a natural gas producer with a PDP reserve life of 7.2 years and a 2P of 31 years "but it trades only at 2.8 times" cash flow — the multiple should rise toward PDP now and toward 2P late in the cycle. CEO Chris Carlson presents at his October conference.
Birchcliff produces natural gas in Alberta. Schachter uses it to show his main valuation test. Companies report their reserves in layers: "PDP" (proved developed producing) is gas from wells already flowing — the conservative number banks will lend against; "2P" adds reserves that are proved or probable but not yet developed. Dividing those reserves by annual production gives a reserve life in years.
Birchcliff has about 7 years of already-producing reserves and about 31 years including probable ones, yet the market values it at only 2.8 times its yearly cash flow. His rule of thumb is that at this stage of the cycle the multiple should at least match the producing reserve life (so roughly 7 times), and later in the cycle move toward the bigger 2P number — which implies a lot of room for the share price to rise if gas prices hold.
23:38that's not producing; and then there's 2P which you hear a lot about which is proved plus probable. So for example, Birchcliff, which is a natural gas producer, has a PDP of 7.2 years, a 2P of 31 years, but it trades only at 2.8 times. Normally, you want to see the PDP number and the cash flow number around the same level at this point in the market.
In short: Owned, with the condition stated plainly: "To own Birchcliff, you need to be a continued bull on North American, but particularly Canadian natural gas. And you have to believe that the impediments involved in moving more Canadian natural gas to liquefied natural gas export facilities on BC is going to go ahead." He continues to hold both Birchcliff and Peyto, "which are gassy names."
Birchcliff is a smaller, gas-focused Canadian producer that Rick owns alongside Peyto. Because it's almost purely gas (rather than oil with gas as a by-product), it is a direct bet on the Canadian gas price rather than a diversified energy holding.
He states the entry conditions rather than a target: "to own Birchcliff, you need to be a continued bull on North American, but particularly Canadian natural gas. And you have to believe that the impediments involved in moving more Canadian natural gas to liquefied natural gas export facilities on BC is going to go ahead." If you don't believe both, you shouldn't own it.
12:55I own Tourmaline and Birchcliff. I have a reasonably high regard for Strathcona. I just don't see them performing as well as Tourmaline. To own Birchcliff, you need to be a continued bull on North American, but particularly Canadian natural gas. And you have to believe that the impediments involved in moving more Canadian natural gas to liquefied natural gas export facilities on BC is going to go ahead.
In short: One of the smaller Canadian names he prefers — "Birchcliff, Peyto, PrairieSky Royalty" — with the explicit condition attached to the whole list: hold to 2030, accept headline political risk and operational risk, and do some work.
Birchcliff is one of the smaller Canadian producers Rick says he personally prefers to the large caps, named alongside Peyto and PrairieSky.
The trade-off is explicit and applies to the whole small-cap list: you get a deeper discount and Canadian terrain that is "much less drilled than in the United States but has the infrastructure," in exchange for operational risk and the requirement that you actually do some work on the individual company. The holding period is the other condition — hold to 2030.
36:24Birchcliff, Peyto, PrairieSky Royalty. There's seven or eight names up there that if somebody is willing to hold them till 2030 will by then think that you and I were very good guys for having talked about them now.
36:48All right, that's a lot of names. Thank you. I may have recommended about half of them in various places in my newsletters. Good. Well, it will inure to your benefit over the next five years. Yeah, we actually had ARC right up until it was taken over. That was a good one.
In short: One of "the two gas-centric players in Canada" (with Peyto).
Birchcliff is one of the two "gas-centric" Canadian names on Rick's list (with Peyto) — a producer weighted toward natural gas, so a more direct bet on Canadian gas prices firming as the North American glut clears.
46:23and an odd special situation called International Petroleum, a heavy oil producer controlled by the Lundines, whose major capital investments are behind them, just starting to absolutely gush cash. If Mr. Carney and Mr. Trump can agree on debottlenecking the Keystone pipeline, enabling the sales of more Canadian heavy oil to heavy oil starved US Gulf Coast refiners.
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Verbatim excerpts from the public transcripts (auto-pulled at each mention's timestamp, lightly cleaned). Timestamps link into the video; "source page" opens that commentator's full analysis at this row. Click a mention's header line to expand it (one open at a time). For personal study — not investment advice.