5 TSX Oil Stocks With the Lowest Production Costs

The TSX oil stocks on our list have netbacks of over $25 per barrel of oil equivalent

SmallCapPower | April 6, 2017: With the oil price hitting a one-month high on Wednesday after industry figures showed a draw in U.S. stockpiles, we examine those oil producers that have the lowest production costs per barrel of oil. The lower the cost to extract oil, the higher the operating cash flows a company generates. A common term used in the oil and gas industry is netback, which refers to the revenue of one BOE (barrel of oil equivalent) after all the costs associated with bringing one unit of oil to the market. In short, netback is the profit per barrel of oil. Today we have identified fiveTSX oil stocks that have industry-leading netbacks of above $25, and could power even higher with increasing crude oil prices.

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Spartan Energy Corp. (TSX: SPE) – $2.01
Oil & Gas Exploration and Production

Spartan Energy Corp, formerly Alexander Energy Ltd., is a Canada-based oil and natural gas exploration and production company with producing properties focused in Saskatchewan. The Company’s properties include Southeast Saskatchewan, West Central Saskatchewan and Alexander Alberta. The Southeast Saskatchewan property focuses on conventional Mississippian targets, primarily in the Frobisher/Alida and Midale formations. The West Central Saskatchewan property consists of approximately 100 net drilling locations in the Dodsland area of Saskatchewan.

  • Market Cap: $1,059.4 million
  • Revenue (NTM): $346.0 million
  • EV/EBITDA (NTM): 7.0x
  • 2017E Netback ($/BOE): $27.04

Bonterra Energy Corp. (TSX: BNE) – $17.39
Oil & Gas Exploration and Production

Bonterra Energy Corp. (Bonterra) is an oil and gas company that is focused on the development of its Cardium land within the Pembina and Willesden Green areas located in central Alberta. Its oil and gas properties include Pembina and Willesden Green Area, Shaunavon Area and Prespatou Area. The Pembina and Willesden Green Cardium fields are its properties located in central Alberta. Bonterra’s oil and natural gas properties yielded average production is 12,650 barrels of oil equivalent (BOE) per day.

  • Market Cap: $579.4 million
  • Revenue (NTM): $186.0 million
  • EV/EBITDA (NTM): 7.3x
  • 2017E Netback ($/BOE): $26.44

Freehold Royalties Ltd. (TSX: FRU) – $10.12
Oil & Gas Exploration and Production

Freehold Royalties Ltd. is a Canada-based company engaged in the development and production of oil and natural gas, predominantly in western Canada. The Company’s total land holdings encompass approximately 3.7 million gross acres, over 90% of which are royalties. Of this, its mineral title lands (including royalty assumption lands), which it owns in perpetuity, cover approximately 750,000 acres. It also has interests in over 36,000 wells (of which over 34,000 are royalty wells, including over 18,000 unitized wells).

  • Market Cap: $1,193.2 million
  • Revenue (NTM): $126.1 million
  • EV/EBITDA (NTM): 12.3x
  • 2017E Netback ($/BOE): $28.77

Parex Resources Inc. (TSX: PXT) – $12.96
Oil & Gas Exploration and Production

Parex Resources, Inc. is a Canada-based oil and gas company engaged in crude oil exploration, development and production in Colombia. The Company, through its foreign subsidiaries, holds interests in onshore exploration and production blocks totaling approximately 1,870,120 gross acres. The Company’s annual oil production is approximately 27,430 barrels per day.

  • Market Cap: $1,989.7 million
  • Revenue (NTM): $691.4 million
  • EV/EBITDA (NTM): 5.0x
  • 2017E Netback ($/BOE): $26.38

Whitecap Resources Inc. (TSX: WCP) – $7.69
Oil & Gas Exploration and Production

Whitecap Resources Inc is a Canada-based oil-weighted growth company focused on its existing assets enhanced by oil-based acquisitions. Its assets include Boundary Lake property, which is located in northeast British Columbia; Valhalla North property, which is located in the Peace River Arch area of Alberta and is characterized by shallow declines and a production base, and Deep Basin properties, which include Karr, Simonette, Kakwa, Elmworth and Wapiti, which are located southwest of Grande Prairie, Alberta. The primary reservoirs being developed are the Dunvegan and Cardium.

  • Market Cap: $2,838.3 million
  • Revenue (NTM): $770.1 million
  • EV/EBITDA (NTM): 7.2x
  • 2017E Netback ($/BOE): $25.90

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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