The TSX oil and gas stocks we’ve identified have higher free cash flow yields than the 2.7% average of the 30 largest companies in the industry
SmallCapPower | September 26, 2018: Free cash flow (FCF) is a useful metric to identify a company’s profitability within an industry. FCF is calculated by subtracting capital investment from operating cash flow, giving investors an accurate view of a company’s actual profit margins. FCF Yield is calculated by dividing FCF by Market Cap, making the metric useful for comparing companies of varying sizes. Today, we have dug up four TSX oil and gas stocks that have overperformed the average FCF Yield of 2.7% generated by the largest 30 companies in the industry.
Parex Resource Inc. (TSX:PXT) – $20.68
Oil & Gas Exploration and Production
Parex Resources is a crude oil exploration company focused on developing assets in South America. The Company’s primary assets are in Colombia’s Llano and Magdalena Basins and cover a total area of 1.6M gross acres. As of Q2/2018, Parex has 38 active drilling sites yielding a daily production of 42,625 Boe/d. On September 10, the Company increased its Q4 production guidance to 48,000 boe/d after discovering potential hydrocarbon-bearing zones within the Capachos Andina Discovery.
- Market Cap: $3,335.6 Million
- Free Cash Flow (Last Twelve Months): $359.7 Million
- Free Cash Flow Yield: 10.8%
- YTD Total Return: 15.3%
Baytex Energy Corp. (TSX:BTE) – $3.46
Oil & Gas Exploration and Production
Baytex Energy operates in Alberta and Texas, producing 51% of its oil from its Eagle Ford asset in Texas and the remainder from its Peace River and Lloydminster heavy oil fields. On August 22, 2018, the Company closed its agreement to merge with Raging River Exploration (TSX:RRX). The combined Company will have an enterprise value of approximately $5B and will continue to operate under the Baytex name. Following the merger, average annual production is expected to range between 100,000 – 105,000 boe/d.
- Market Cap: $2,120.1 Million
- Free Cash Flow (Last Twelve Months): $192 Million
- Free Cash Flow Yield: 9.1%
- YTD Total Return: -1.3%
Canadian Natural Resources Ltd. (TSX:CNQ) – $41.89
Oil & Gas Exploration and Production
Canadian Natural Resources is a producer with assets in North America, the U.K. North Sea, and offshore West Africa. The Company is the largest producer of natural gas in Western Canada, with five core drilling sites in British Columbia, Alberta, and Saskatchewan, producing 1,485 Mcf/d. Canadian Natural’s heavy oil production comes primarily from assets along the Alberta-Saskatchewan border while assets in the North Sea and Offshore Africa yield light-crude oil. Currently, the Company has production guidance for 2018 forecasted at 1,073 – 1,152 Mboe/d. On September 14, the Company completed its acquisition of Laricina Energy in a deal estimated to be worth more than $46M.
- Market Cap: $52,137.6 Million
- Free Cash Flow (Last Twelve Months): $3,140.1 Million
- Free Cash Flow Yield: 6.2%
- YTD Total Return: -6.67%
Shawcor Ltd. (TSX:SCL) – $25.00
Oil & Gas
Shawcor is a Canada-based energy services company. Its primary offerings are in pipe coating services, flexible composite pipe, onshore and offshore pipeline corrosion and thermal protection, and ultrasonic and radiographic inspection services. The Company has locations in 19 countries spanning North America, Europe, South America, and Central Asia. On August 9, Shawcor announced that Q2/2018 revenue had increased 2% quarter-over-quarter to $358M.
- Market Cap: $1,790.1 Million
- Free Cash Flow (Last Twelve Months): $118.5 Million
- Free Cash Flow Yield: 6.6%
- YTD Total Return: -7.26%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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