Oil prices are rising, and the TSX oil stocks on our list have the cheapest EV/Proven & Probable reserves in the sector
SmallCapPower | May 10, 2018: Oil prices jumped 3% on May 8, 2018, driven by the U.S. withdrawal from the Iranian nuclear deal. This has pushed oil to a three-and-a-half-year high, as Brent Crude and WTI futures reached $77.18/bbl and $71.24/bbl, respectively. Goldman Sachs issued a note on May 9, 2018, projecting oil prices will reach $82.50/bbl by summer 2018. The TSX oil stocks on our list today are considered the most undervalued in the sector based on their enterprise value (EV) compared to their proven and probable reserves (P2). The average EV/P2 of these companies is $4.73/bbl, while their peers have a median of $11.98/bbl.
Touchstone Exploration Inc. (TSX:TXP) – $0.27
Oil & Gas Exploration and Production
Touchstone Exploration is a Canada-based oil and gas producer with wells in Trinidad and Tobago. It focuses on onshore drilling, currently operating 11 producing blocks and 208 drilling locations. The Company’s properties host proven and probable reserves of 13 million bbl.
- Market Cap: $34.4 Million
- Enterprise Value/Proven & Probable Reserves: $3.48
- YTD Total Return: 18%
BlackPearl Resources Inc. (TSX:PXX) – $1.40
Oil & Gas Exploration and Production
BlackPearl is an oil producer operating in Western Canada. The Company’s flagship asset, Onion Lake, is guided to produce 11k – 12k boe/d in 2018. The Company plans to expand at another asset, the Blackrod operation, which could produce up to 100k boe/d when fully operational. The Company’s properties host proven and probable reserves of 129 million bbl.
- Market Cap: $473.6 Million
- Enterprise Value/Proven & Probable Reserves: $4.54
- YTD Total Return: 26%
Zargon Oil & Gas Ltd. (TSX:ZAR) – $0.50
Oil & Gas Exploration and Production
Zargon is a Calgary-based oil and gas producer. The Company focuses on enhancing recovery from its three properties in Western Canada and North Dakota. Zargon’s properties host proven and probable reserves of 11 million bbl.
- Market Cap: $15.4 Million
- Enterprise Value/Proven & Probable Reserves: $4.88
- YTD Total Return: 9%
Pengrowth Energy Corp. (TSX:PGF) – $1.06
Oil & Gas Exploration and Production
Pengrowth Energy is an Alberta-based oil producer, focused on growing its Lindbergh thermal oil property. The Company’s 2018 guidance estimates average daily production to be 23k-24k barrels of oil equivalent per day. Pengrowth’s properties host proven and probable reserves of 249 million bbl.
- Market Cap: $589.5 Million
- Enterprise Value/Proven & Probable Reserves: $5.17
- YTD Total Return: 6%
Journey Energy Inc. (TSX:JOY) – $2.05
Oil & Gas Exploration and Production
Journey Energy is a Canadian exploration, development and production company focused on Western Canada. The Company estimates 2018 production volumes to be 10k boe/d. In Q1 2018, Journey announced a significant expansion of its flagship Matziwin property. Journey Energy’s properties host proven and probable reserves of 30 million bbl.
- Market Cap: $79.0 Million
- Enterprise Value/Proven & Probable Reserves: $5.63
- YTD Total Return: 16%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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