The TSX-listed Canadian energy stocks we’ve dug up have unlevered free cash flow growth of at least 35% annually over the past five years
SmallCapPower | September 27, 2021: Unlevered free cash flow is the free cash flow available to pay all stakeholders in a firm, including debt holders as well as equity holders. Non-cash expenses such as depreciation and amortization are added back to earnings to arrive at the firm’s unlevered free cash flow. It is an important metric for investors, as it is a measure of the amount of cash that a company can use to pay dividends to shareholders and/or to make further investments in growing the company’s business. Today we have identified four TSX-listed Canadian energy stocks with market caps below $3.0B that have annualized unlevered free cash flow growth of more than 35% per year over the past five years.
*Share price data and other metrics as of September 24, 2021
MEG Energy Corp. (TSX:MEG) – $8.91
Oil and Gas
MEG Energy is a pure play Canadian oil sands producer engaged in exploration in northern Alberta. All of its oil reserves are more than 1,000 feet below the surface and so they depend on steam-assisted gravity drainage and associated technology to produce. The Company’s main thermal project is Christina Lake. 85-megawatt cogeneration plants are used to produce the steam used in SAGD, which is required to bring bitumen to the surface. The excess heat and electricity produced at its plants is then sold to Alberta’s power grid. Its proven reserves have been independently pegged at 1.7 billion barrels and probable reserves 3.7 billion barrels; that’s significant considering only 300 billion barrels of the 1.6 trillion barrels of bitumen in Alberta is considered recoverable under current technology. The value of those reserves is over $19.8 billion.
- Market Cap: $2,733.0M
- 30-Day Return: +12.1%
- YTD-Return: +100.2%
- 30-Day Average Trading Volume: 1,486,960
- 5-Year Free Cash Flow CAGR: 40.6%
Enerplus Corporation (TSX:ERF) – $9.09
Oil and Gas
Enerplus, together with its subsidiaries, engages in the exploration and development of crude oil and natural gas in the United States and Canada. The Company’s oil and natural gas properties are located primarily in North Dakota, Montana, Colorado, and Pennsylvania; and Alberta, British Columbia, and Saskatchewan. As of December 31, 2019, it had proved plus probable gross reserves of approximately 9.0 million barrels (MMbbls) of light and medium crude oil; 22.3 MMbbls of heavy crude oil; 170.1 MMbbls of tight oil; 23.5 MMbbls of natural gas liquids; 23.2 billion cubic feet (Bcf) of conventional natural gas; and 1,173.9 Bcf of shale gas.
- Market Cap: $2,333.9M
- 30-Day Return: +29.9%
- YTD-Return: +128.4%
- 30-Day Average Trading Volume: 1,208,100
- 5-Year Free Cash Flow CAGR: +67.9%
Baytex Energy Corp. (TSX:BTE) – $3.17
Oil and Gas
Baytex Energy is an oil and gas corporation based in Calgary, Alberta. The Company is engaged in the acquisition, development and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States. Approximately 81% of Baytex’s production is weighted toward crude oil and natural gas liquids.
- Market Cap: $1,788.6M
- 30-Day Return: +51.7%
- YTD-Return: +359.4%
- 30-Day Average Trading Volume: 4,892,240
- 5-Year Free Cash Flow CAGR: +34.5%
Vermilion Energy Inc. (TSX:VET) – $10.83
Oil and Gas
Vermilion is an international energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing assets in North America, Europe and Australia. The Company’s business model emphasizes free cash flow generation and returning capital to investors when economically warranted, augmented by value-adding acquisitions. Vermilion’s operations are focused on the exploitation of light oil and liquids-rich natural gas conventional resource plays in North America and the exploration and development of conventional natural gas and oil opportunities in Europe and Australia.
- Market Cap: $1,753.9M
- 30-Day Return: +34.2%
- YTD-Return: +90.7%
- 30-Day Average Trading Volume: 1,743,610
- 5-Year Free Cash Flow CAGR: +50.1%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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