Legacy Oil + Gas (TSE:LEG) Trades Inexpensively; Has More than 85% Light-Oil Exposure

May 10, 2013

Legacy Oil + Gas (TSE:LEG) has seen its stock price decline despite having access to capital and good assets due to a general decline in prices, making this Canadian E&P attractive to investors looking to get midcap exposure to strong netbacks and light oil, says Don Rawson, Managing Director at AltaCorp Capital Inc.

“[Legacy] has really strong netbacks because it is light-oil-weighted, more than 85% oil. The valuation is very attractive now because these stocks have been pushed down indiscriminately, and this is one that’s come down with the market despite being well-managed, having access to capital and good assets. There is a lot of value out there, but I don’t think that you need to be a hero by buying the cheapest names — this is a quality name that’s been sold off heavily,” Rawson said.


Rawson looks for the ability to generate free cash flow in the midcap companies he covers, because he says this ultimately gives them flexibility to grow into a dividend-paying model, sell into a dividend-paying company or continue to grow at a good rate.

“As you get bigger and bigger, free cash flow is increasingly important, but you also still want some of the things we are looking for in the small-cap names in the midcap space. You want relatively concentrated positions in good economic plays, ones which are economically robust under lower commodity prices, typically high netback plays where there is lots of running room to grow,” Rawson said.