Today we have discovered some Canadian oil and gas stocks with free cash flow yields greater than 5%
SmallCapPower | February 7, 2019: Free cash flow yield is a financial metric that measures how well a company generates cash from its current operations. It is calculated by dividing the company’s free cash flow per share by the current share price. When analyzing oil and gas companies, this can be a good metric to look at compared with commonly-used metrics, such as EPS. This is because net income can be distorted for oil and gas companies, due to effects of non-cash expenses, such as depreciation and stock-based compensation, and unexpected write-downs. As opposed to many other metrics, free cash flow yield is a quick method of showing a company’s value relative to its current stock price. The three Canadian oil and gas stocks on our list have free cash flow yields greater than 5%. For reference, the average free cash flow yield for TSX listed oil and gas companies with a market cap under $5B is -22.3%.
*Share prices as at close February 5, 2019, data obtained from S&P Capital IQ.
Parex Resources Inc. (TSX:PXT) – $19.47
Oil and Gas Exploration and Production
Parex Resources is a natural gas and oil exploration, development, production and marketing company in Colombia. The Company holds interests in approximately 1.5 million acres of production and exploration blocks. As of December 2017, the Company has reported about 162 million barrels of probable reserves. On January 24, 2018, the Company announced the approval of its automatic share purchase plan of up to 11.4 million of its common shares.
- Market Cap: $3.02 Billion
- Free Cash Flow Yield: 5.4%
- Free Cash Flow Per Share: $1.06
- 5-Day Return: 0.8%
- 1-Month Return: +12.9%
Petrus Resources Ltd. (TSX:PRQ) – $0.48
Oil and Gas Exploration and Production
Petrus Resources is an energy company that engages in the acquisition, exploration, development, and exploitation of gas and oil assets in Canada. The Company focuses its efforts on the exploration of crude oil, natural gas, and natural gas liquids. It holds 55% of working interest in the Ferrier/Strachan area, West Alberta. On November 8, 2018, the Company released its Q3/18 financial and operating results highlighted by a net debt reduction of 11% since December 2017.
- Market Cap: $24.0 Million
- Free Cash Flow Yield: 25.6%
- Free Cash Flow Per Share: $0.124
- 5-Day Return: -3.0%
- 1-Month Return: -23.4%
Frontera Energy Corporation (TSX:FEC) – $11.40
Oil and Gas Exploration and Production
Frontera Energy is a Canada-based company that explores, develops, and produces crude oil and natural gas in Peru and Colombia. The Company has interests in 38 production and exploration blocks and a net total of 154.3 million barrels of proved probable gas and oil reserves as of December 2017. On February 1, Frontera announced its execution of a farm-in joint venture agreement with CGX Energy Inc. (TSXV:OYL), to cover CGX’s two shallow water offshore Petroleum Prospecting Licenses in Guyana.
- Market Cap: $1.12 Billion
- Free Cash Flow Yield: 11.0%
- Free Cash Flow Per Share: $1.25
- 5-Day Return: -2.15%
- 1-Month Return: -7.2%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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