Wednesday, July 26, 2017

Obsidian Energy Ltd

Sound bite for Twitter and StockTwits is: Recovering Resource Stock. It seems to be recovering and paying off its debt. It is still a speculative buy. Price is probably cheap. See my spreadsheet on Obsidian Energy Ltd .

I do not own this stock of Obsidian Energy Ltd (TSX-OBE, NYSE-OBE). I bought this stock as Maximum Energy Trust (MXT.UN) in 1998. In November 2001, there was a stock exchange and stock became Ultimate Energy Fund. In June 2004 fund changed from Ultimate Energy Income Trust to Petrofund Energy. Petrofund Energy merged with Penn West in July 2006 and I got .6 of a share for each share I had.

I sold this stock of Penn West in 2010 as it was changing to a corporation, but they are also getting back into exploration, rather than just selling oil from their wells. They also just reduced their dividends from $.15 per share per month to $.09 per share per month.

This company changed its name and symbols from Penn West Petroleum Ltd. (TSX-PWT, NYSE-PWE) on June 22, 2017 to Obsidian Energy Ltd TSX-OBE, NYSE-OBE). There is a News Release on Cision.

What I noticed is that there is lots of insider buying. Insider Buy at a percentage of the market cap is at 0.25%. This is high. Generally you have Net Insider Selling at a rate of 0.02%.

They have cut their dividends more often than they have raised then. In 2016, dividends were suspended. The company has had earning losses since 2013 and they are not expected to earn a profit until 2019.

They have been paying down the debt and selling off parts of the company. The Long Term Debt/Market Cap Ratio in 2015 was 3.30 and in 2016 was 0.39. The current one is 0.51 but debt is down but so is the Market Cap. The Liquidity Ratio at 0.99 in 2016 is a good improvement as the 5 year median is 0.61. The current one is better at 1.06. I prefer this to be 1.50, but it is going in the right direction. When this ratio is below 1.00, it means that current assets cannot cover current liabilities.

Almost all I see on my spreadsheet is red. I color code my growth values and red is negative growth. That means that Revenue, Earnings, Share Price, Cash Flow and Net Income all have negative growth, or values that are declining. However, declines are less or there is some improvement for 2016.

For example, the earnings loss for the last 12 month to the end of the first quarter is $1.14, for 2016 was $1.39 and for 2015 was $5.27. The current stock price is $1.50. For the end of 2016 it was $2.37 and for the end of 2015 it was $1.17. The end of the year was better but it is currently also higher than 2015.

It is not easy to do any Price/Earnings per Share stock price testing as this stock has too many EPS losses lately. However, if you ignore the last 5 years, I get historical low, median and high median P/E Ratios of 10.49, 11.36 and 14.03. Unfortunately, the EPS estimate for 2017 and 2018 are negative. So that knocks out this stock price testing.

I get a Graham Price of $1.75. The 10 year low, median and high median Price/Graham Price Ratios are 0.62, 0.96 and 1.25. The current P/GP Ratio is 0.86 based on a stock price of $1.50. This stock price testing suggests that the stock price is reasonable and below the median.

The 10 year Price/Book Value per Share Ratio is 0.82. The current P/B Ratio is 0.33 a value some 60% lower. The current P/B Ratio is based on a stock price of $1.50, Book Value of $2275M and BVPS of $4.52. Note that book value has been falling since 2012 and has its first increase in the first quarter of 2017. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median P/S (or Price/Revenue) Ratio is 1.67. The current P/S Ratio is 1.73 based on a stock price of $1.50, 2017 Revenue estimate for 2017 of $436M and Revenue per Share estimate of $3.02. Revenue has been falling since 2012 and is estimated to fall another 28% in 2017. This stock price suggests that the stock price is relatively reasonable but above the median.

When I look at analysts' recommendations, I find Buy, Hold and Underperform Recommendations. The vast majority of the recommendations are a Hold and the consensus is a Hold. The 12 month consensus target price is $2.19. This implies a total return of 46% all from capital gains.

Mikael Kjellstrom via the Calgary Herald on Financial Post talks about how Penn West is changing its name and downsizing in a bid to turn the page on its troubled past. Geoffrey Morgan talks about the finding of accounting errors in previous years' financial stations on Financial Post. Kelly Cryderman on the Globe and Mail talks about US charging the company with Fraud 3 years after company found and fix the problem. And this helps shareholders how? Samantha Guadardo on Week Herald talks about Barclays PLC lowering Price Target to $2.00. See what analysts are saying about this company on Stock Chase. Most of the analysts like the fact that it is paying down the debt and moving on.

Obsidian Energy Ltd is a Canada-based conventional oil and natural gas producer and development and production company. The Company operates a portfolio of opportunities with an oil position in the Cardium, Viking and Peace River areas of Alberta. Its web site is here Obsidian Energy Ltd.

The last stock I wrote about was about was Lassonde Industries Inc. (TSX-LAS.A, OTC-LSDAF)... learn more. The next stock I will write about will be Dorel Industries Inc. (TSX-DII.B, OTC-DIIBF)... learn more on Friday, July 28, 2017 around 5 pm. Tomorrow on my other blog I will write about Diversification... learn more on Thursday, July 27m 2017around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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