WHERE TO FIND OPPORTUNITIES IN CANADA’S JUNIOR ENERGY SECTOR

Weak oil and gas prices are an obvious challenge for Canada’s energy juniors, but not every one of them is 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 are made in downcycles,” he said in a note to clients that initiated coverage on 11 Canadian companies.

Kubik said the energy sector in Canada is accustomed to navigating through price cycles and well-positioned companies often “shake loose opportunities” that would not otherwise be available in better commodity price environments.

“It is 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 in both “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 worldclass resource play” — in British Columbia 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 range of plays capable of delivering strong returns, the Montney offers some muscle in a tough environment,” he said.