4 Canadian Oil and Gas Stocks with Impressive FCF Growth

The Canadian oil and gas stocks we’ve identified have a three-year compound annual growth rate (CAGR) of unlevered free cash flow (UFCF) of more than 20%

SmallCapPower | September 18, 2019: On September 16, 2019, the Brent Crude oil price closed at $69.02, up 15% and was the highest one-day percentage change in 11 years. The increase in the oil price was due to a 50% decrease in oil production at one Saudi Arabian oil fields following a drone attack. The closure impacted 5.7M barrels of crude oil production per day, or roughly 5% of the daily global output. Today we have drilled down and discovered four Canadian oil and gas stocks that could see share price appreciation as a result of increased oil prices. The oil and gas companies on our list have market caps under $2.0B and at least a 20% three-year compound annual growth rate (CAGR) in unlevered free cash flow (UFCF).

*For reference, UFCF is defined as EBIT – Tax + D&A – Capex + ∆Non-Cash Working Capital

**Share price data as at September 16, 2019, data obtained from S&P Capital IQ

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MEG Energy Corp. (TSX:MEG) – $6.59
Oil and Gas

MEG Energy is a Canada-based oil sands company. The Company has the two main properties: the Christina Lake Project and the Surmont Project, both located in the Athabasca oil sands region of Alberta. The Christina Lake Project is situated on over 80 square miles of the oil sands. Additionally, the Surmont Project comprises over 30 square miles of lands in the southern part of the Athabasca oil sands. On July 30, 2019, MEG announced Q2/19 financial results, highlighted by unlevered free cash flow of $535.7M, and production of 92,228 boe/d with an operating netback of $33.98/barrel.

  • Market Cap: $1,971.9M
  • 90-Day Return: 24.3%
  • YTD-Return: -18.4%
  • 90-Day Average Trading Volume: 13,178,300
  • Q2/19 Unlevered FCF: $535.7M
  • Q2/16 Unlevered FCF: $143.4M
  • Unlevered FCF (3-Year CAGR): 55.2%

TORC Oil & Gas Ltd. (TSX:TOG) – $4.16
Oil and Gas

TORC Oil & Gas is a Canada-based company, which explores for and produces oil and gas in the Western Canadian sedimentary basin. The Company’s principal properties include: Cardium and Monarch properties in West Central Alberta and properties in southeast Saskatchewan as well as Manitoba. The Cardium properties include approximately 140 gross producing light oil wells and over 30 gross producing gas wells. The Monarch properties include approximately 20 gross producing light oil wells. The southeast Saskatchewan and Manitoba assets include approximately 1,565 gross producing light oil wells. On July 31, 2019, TORC reported Q2/19 financial results, highlighted by unlevered free cash flow of $59.2M. The Company is producing 28,326 boe/d with an operating netback of $34.35/barrel.

  • Market Cap: $912.5M
  • 90-Day Return: -4.5%
  • YTD-Return: -8.7%
  • 90-Day Average Trading Volume: 2,942,400
  • Q2/19 Unlevered FCF: $59.2M
  • Q2/16 Unlevered FCF: $23.8M
  • Unlevered FCF (3-Year CAGR): 35.5%

Cardinal Energy Ltd. (TSX:CJ) – $2.70
Oil and Gas

Cardinal Energy is a Canada-based oil and natural gas company operating in Alberta and Saskatchewan. The Company has four main properties producing oil. The Wainwright properties are located near Edmonton, Alberta and produce approximately 4,500 barrels of oil equivalent per day (boe/d) of heavy crude oil and natural gas. The Bantry property is located near Brooks, Alberta and produces medium crude oil and natural gas, with production of ~4,400 boe/d. The Slave Lake property is located near Edmonton, Alberta and produces approximately 3,600 boe/d. The Chauvin property is located in Wainwright, Alberta. On July 30, 2019, Cardinal Energy reported Q2/19 financial results, with unlevered free cash flow coming in at $18.1M on revenue of $90.2M. During the quarter, Cardinal produced 20,587 boe/d with an operating netback of $26.93/barrel.

  • Market Cap: $311.2M
  • 90-Day Return: 3.2%
  • YTD-Return: 17.6%
  • 90-Day Average Trading Volume: 769,760
  • Q2/19 Unlevered FCF: $18.1M
  • Q2/16 Unlevered FCF: $9.1M
  • Unlevered FCF (3-Year CAGR): 25.8%

Gear Energy Ltd. (TSX:GXE) – $0.52
Oil and Gas

Gear Energy acquires, develops, and holds interests in petroleum and natural gas properties and assets in Canada. Its oil-focused operations are located: in Lloydminster, Alberta, producing heavy oil; Central Alberta, producing light/medium oil; and southeast Saskatchewan, producing light oil. On August 7, 2019, the Company reported Q2/19 financial results, highlighted by production of 7,161-barrels equivalent per day (boe/d) of oil and an operating netback of $28.3/barrel. Revenue came in at $32.8M and unlevered free cash flow was $12.8M for the quarter.

  • Market Cap: $113.9M
  • 90-Day Return: -14.7%
  • YTD-Return: -13.2%
  • 90-Day Average Trading Volume: 124,160
  • Q2/19 Unlevered FCF: $12.8M
  • Q2/16 Unlevered FCF: $6.8M
  • Unlevered FCF (3-Year CAGR): 23.5%

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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