Article (Alberta Oil Magazine): The Best Little Oil Companies in Canada

Date of Source: 21 Oct 2016

Summary:
Fifteen years ago it was common knowledge that oil and gas production in North America was in terminal decline. After decades of exploration, all of the profitable onshore oil and gas in Canada and the U.S. had already been discovered… While the attention of the majors was elsewhere, close to home something happened. Small companies run by entrepreneurial management teams cracked the code on vast amounts of oil and gas located here in North America. […]

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Seeking Alpha: Imperial Oil — Levered Exposure To Oil Prices At A Fair Price

Image source: Imperial Oil Corp. Corporate Overview – Winter-Spring 2017. pg. 5

  • Imperial Oil Corp is a rationally integrated enterprise — assessing any given business segment in isolation ignores synergies which are especially important during the lower half of the commodities cycle.
  • The upstream business segment, by far the largest in terms of capital investment, is heavily exposed to Canadian oil sands projects which are marginal in the current commodity prices environment.
  • Yet, records profits from the downstream and chemical business segments demonstrate how they have benefited from cost advantaged feeds.
  • In the current commodity price environment, IMO’s common shares are likely fairly valued $22 to $32 per share; there is significant uncertainty in that estimate.
  • Given non-compelling valuation and risks, I do not hold the equity outright. However, I believe that call options may provide favorable risk-reward characteristics given their leverage to crude oil prices.

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Seeking Alpha: Cenovus’ Consolidation Offers Counter-Cyclical Upside

Source: CVE Corporation Presentation. Cenovus announces acquisition of Western Canadian assets. Pg 4. 29 Mar 2017. available: http://www.cenovus.com/invest/docs/2017/acquisition-western-canadian-assets-presentation.pdf

  • Cenovus’ expanded asset base, following the $C17.7 Bn acquisition from ConocoPhillips, will be largely of high quality and is expected to more than double 2017 production.
  • Its oil sands position is not terribly exciting in terms of growth, but it does promise commodity-price resilient cash flows which can be used to fund future growth.
  • The companies largely expanded position in the Canadian Deep Basin may be largely under-recognized as a leading foothold in what my be aptly called “The Permian in the North”.
  • Pre-acquisition, I posit that the current stock price of around $10 moderately undervalues the company and largely discounts potential commodity price driven and/or geological upside.
  • Given the dearth of apparent opportunity in the upstream oil and gas space, CVE is favorite yet long idea of 2017.

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