The Canadian oil and gas stocks we’ve dug up are set to benefit most from a rising oil price
SmallCapPower | April 24, 2019: Oil prices rose to a six-month high as the Trump administration decided end sanction exemptions for importers of Iranian crude oil. The U.S. imposed sanctions last year against Iran as retaliation to the country’s nuclear weapons program, but certain countries were allowed to import oil from Iran. The two global benchmarks for oil prices are Western Texas Intermediate, which rose to US$66.15 per barrel and Brent Crude, which increased to US$74.22 per barrel, rallying ~3% higher. The benchmark for Canadian oil prices is Western Canada Select (WCS). WCS was trading at US$55.15, ~20% discount to WTI. The reason WCS trades at a discount is the quality and isolation for major markets. WCS is composed primarily of heavy oil in need of more refinement and purification, compared to WTI, which is lighter. The ease of transportation and reach of market is another aspect, with Brent having ease of accessibility to coastal ports, causing WCS to trade at a discount. Today we have identified four Canadian oil and gas stocks that are poised to benefit most from an increase in oil prices.
Operating Netback = Price – royalties expense – production expense – transportation expense
*Share prices as at close April 23, 2019, data obtained from S&P Capital IQ
Perisson Petroleum Corporation (TSXV:POG) – $0.16
Oil and Gas Exploration and Production
Perisson is a Canada-based oil exploration and production company with operations in Canada and Columbia. In May 2016, POG acquired assets that produce oil and gas in the Twining area of Alberta, which now generates 175 barrels of oil equivalent per day (BOE/D). The Company also has operations in Colombia through its subsidiaries within the oldest oil producing basin in Colombia. The average price per BOE is listed at $75.04, giving them a comfortable netback BOE of $54.15.
- Market Cap: $139.0M
- Average Selling Price of Barrel of Oil: $75.04
- Operating Netback: $54.15
- 5 Day Return: 3.3%
- 30 Day Average Trading Volume: 10,000
PetroShale Inc. (TSXV:PSH) – $1.11
Oil and Gas Exploration and Production
PetroShale is a junior oil and natural gas company based out of Calgary, Alberta. The Company specializes in the acquisition, development, and consolidation of oil and gas producing assets primarily in North Dakota. PetroShale owns a total of 3,724 acres of oil fields in North Dakota. PHS reported an average price of crude oil per barrel at $77.53, allowing them to achieve netback BOE of $59.27. Production is set to increase throughout 2019 as PSH will increase drilling during 2019 with approximately 20 gross wells, operating 6.77 net wells.
- Market Cap: $212.9M
- Average Selling Price of Barrel of Oil 77.53
- Operating Netback: $59.27
- 5 Day Return: -7.5%
- 30 Day Average Trading Volume: 51,000
Pipestone Energy Corp. (TSXV:PIPE) – $1.87
Oil and Gas Exploration and Production
Pipestone is a Canada-based oil and gas exploration company headquartered in Calgary, Alberta. During Q3 2018 PIPE generated sales of $7.4M, where 68% of its sales came from oil, with the remainder coming from natural gas liquids, natural gas, and non core. The average price of oil per barrel was listed at $76.57 with a netback BOE of $46.31. The slight decrease in netback can be attributed to their higher transportation and processing expenses. However, we saw an 120% increase in the production of oil between 2017 (328 bbls/d) and 2018 (723 bbls/d).
- Market Cap: $268.4M
- Average Price of Oil/Barrel: $76.57
- Operating Netback: $46.31
- 5 Day Trading Average: -3.6%
- 30 Day Average Trading Volume: 51,000
Altura Energy Inc. (TSXV:ATU) – $0.50
Oil and Gas Exploration and Production
Altura engages in the exploration, development, and production of oil and natural gas in Alberta, Canada. Over the past two years, the Company increased oil and gas revenues by 100% from 8.4M in 2016 to 16.8M in 2018. Production volumes saw an increase of 17% YoY from Q4/17 to Q4/18, due primarily to increased production from the Leduc-Woodbend area. ATU’s January 2019 production averaged 2,000 BOE/d.
- Market Cap: $51.2M
- Average Price of Oil/Barrel: 51.44
- Operating Netback: $12.56
- Operating Cash Flow: 9.787M
- 5 Day Return: 11.11%
- 30 Day Average Trading Volume: 61,000
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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