The TSX oil & gas juniors on our list appear cheap relative to their peers, with industry-low debt levels
SmallCapPower | April 19, 2017: Crude oil (WTI) rose to a four-week high recently, above the psychological US$50/barrel mark again as OPEC cuts are expected to outdo the U.S. production boom. With increasing demand from the summer driving season, refineries are boosting petroleum production, which means increasing withdrawals from crude oil inventories. Today we have identified some TSX oil & gas juniors that are trading at, or below, their industry peer forward 2017 P/CF and D/CF averages of 7.5x and 1.2x, respectively. The price-to-cash-flow (P/CF) ratio is a widely-used valuation metric that compares the stock’s market price to the amount of cash flow the company generates on a per-share basis, while the debt-to-cash flow (D/CF) multiple compares a company’s debt to the cash flow it generates.
Tamarack Valley Energy Ltd. (TSX: TVE) – $2.86
Oil & Gas Exploration and Production
Tamarack Valley Energy Ltd. (Tamarack) is a Canada-based oil and natural gas company with working interests in petroleum and natural gas properties in the Alder Flats area. Tamarack has interests in over 220 sections of land in the Wilson Creek and Alder Flats area of Alberta. The Company operates a range of oil batteries, which have capacities of approximately 3,800 barrels per day (bbl/d) capacity and approximately 1,000 bbl/d; an approximately 30 million cubic feet per day (mmcf/d) gas plant, and an approximately six mmcf/d gas plant. Tamarack has interests in approximately 50 sections of land in the Pembina, Garrington and Lochend areas of Alberta.
- Market Cap: $650.6 million
- Revenue (LTM): $78.6 million
- P/CF (2017E): 4.0x
- D/CF (2017E): 1.2x
Spartan Energy Corp. (TSX: SPE) – $2.59
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.
- Market Cap: $1,360.9 million
- Revenue (LTM): $129.8 million
- P/CF (2017E): 6.0x
- D/CF (2017E): 0.6x
Whitecap Resources Inc. (TSX: WCP) – $10.12
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.
- Market Cap: $3,733.5 million
- Revenue (LTM): $406.7 million
- P/CF (2017E): 6.6x
- D/CF (2017E): 1.0x
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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