I do not own this stock of Obsidian Energy Ltd (TSX-OBE, OTC-OBELF). I bought this stock as Maximum Energy Trust (MXT.UN) in 1998. In November 2001, there was a stock exchange and the 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. The company changed its name from Penn West Petroleum Ltd. (TSX-PWT, NYSE-PWE) to Obsidian Energy Ltd (TSX-OBE, NYSE-OBE) in 2017.
When I was updating my spreadsheet, I noticed that this stock’s price is still some 97% off it high. However, it has increased this year by 420%.
This stock has not paid a dividend since 2015. As you can see from above this stock has gone through a number of changes over the years. It used to be an Income Trust company and therefore in the past has quite high yields. However, oil and gas companies have not done well for awhile and it is hard to know what the future holds in dividends for this company in the future. I am curious what will happen to this company, so I am still tracking it.
Debt Ratios are awful for 2020, but are greatly improved in the first quarter of 2021. The Long Term Debt/Market Cap for 2020 is far to high at 7.11. It improves greatly at present at 1.32 because of the increase in the stock price. The Asset/Current Liabilities Ratio for 2020 is too low in 2020 at 1.76 but is a lot better currently at 9.75. This is because the majority of their debt was classified in 2020 as short term and now is classified as long term.
The Liquidity Ratio for 2020 is just 0.11 and if you add in cash flow after dividends it is still just 0.25. If this not 1.00 at least it means that current assets cannot coverage current liabilities. The current Liquidity Ratio is much better at 0.66 with cash flow after liabilities it is 2.50. The Debt Ratio for 2020 is fine at 1.50.
The Total Return per year is shown below for years of 5 to 25 to the end of 2020. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | -20.00% | -36.14% | -36.14% | 0.00% |
| 2010 | 10 | -24.72% | -36.20% | -40.88% | 4.68% |
| 2005 | 15 | -19.49% | -12.79% | -31.23% | 19.41% |
| 2000 | 20 | -16.51% | 4.25% | -24.20% | 44.02% |
| 1995 | 25 | -7.86% | 8.79% | -19.81% | 29.05% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are all negative. The corresponding 10 year ratios are also all negative. The corresponding historical ratios are 4.66, 9.39 and 9.81. The current P/E Ratio is 5.55 based on a stock price of $4.22 and EPS estimate for 2021 of $0.76. The current ratio is between the low and median historical P/E Ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. However, a P/E Ratio of 5.55 is a very low P/E Ratio.
I guessed at too many Graham Prices so I cannot do a valid Graham Price test on this stock.
I get a 10 year median Price/Book Value per Share Ratio of 0.40. The current P/B Ratio is 0.90 based on a stock price of $4.22, Book Value of $347M, and a Book Value per Share of $4.71. The current ratio is 126% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, the P/E Ratio of 0.90 is a very low one. Also, the BVPS has been declining by 36% per year over the past 5 years. This calls into question how valid this test is.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.27. The current P/CF Ratio is 1.67 based on a stock price of $4.22, Cash Flow per Share estimate for 2021 of $2.52 and Cash Flow of $185M. The current ratio is 73% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I cannot do any dividend yield test because this stock does not currently have a dividend.
The 10 year median Price/Sales (Revenue) Ratio is 1.06. The current P/S Ratio is 0.84 based on a stock price of $4.22 and Revenue estimate for 2021 of $370M. The current ratio is 21% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. I think that there is only two valid tests of the P/B Ratio and the P/S Ratio and both these say that the stock is current relatively cheap.
Is it a good company at a reasonable price? First the stock price is reasonable if not cheap. This company is into oil and gas and therefore the stock price is always going to be volatile and any investment would be at risk.
When I look at analysts’ recommendations, I find Hold (1), and Underperform (1). The consensus would be Underperform. The 12 months stock price consensus is $3.63. This implies a total loss of 13.98% all from a capital loss.
Analysts on Stock Chase have not been interested in this company since 2019. You know a company is in trouble when analysts are no longer interested in it. The executive summary on Simply Wall Street gives this stock 2 stars out of 5 and list one risk. The company puts out information on its second quarter on Newsfile. The latest news on this company is on CBC where the company let their hostile takeover offer for Bonterra Energy to expire. John Zechner on BNN Bloomberg talks about Canadian Energy and value traps.
Obsidian Energy Ltd is an intermediate-sized oil and gas producer with strategic assets in Alberta. Its web site is here Obsidian Energy Ltd.
The last stock I wrote about was about was TMX Group Ltd (TSX-X, OTC-TMXXF) ... learn more. The next stock I will write about will be Artis REIT (TSX-AX.UN, OTC-ARESF) ... learn more on Friday, July 16, 2021 around 5 pm. Tomorrow on my other blog I will write about Maxar Technologies Ltd.... learn more on Thursday, July 15, 2021 around 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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