Headwater Exploration (HWX) AI Stock Analysis

• Market Cap: C$2.63B
• Dividend Yield: 4.58%
• Average Volume (3M): 679.74K
• Price to Earnings (P/E): 15.1
• Beta (1Y): 1.13
• Revenue Growth: 6.44%
• EPS Growth: -6.74%
• Country: CA
• Employees: 38
• Sector: Energy
• Sector Strength: 52
• Industry: Oil & Gas Exploration & Production
• EPS (TTM): N/A
• Shares Outstanding: 238,762,880
• 10 Day Avg. Volume: 621,858
• 30 Day Avg. Volume: 679,737
• PEG Ratio: 0.39
• Price to Book (P/B): 2.23
• Price to Sales (P/S): 2.52
• P/FCF Ratio: 16.65
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: C$10.50
• Price Target Upside: -4.55% Downside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 4
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 79 Outperform
• Price Target: C$12.50 ▲(13.64% Upside)

Headwater Exploration's stock score is driven by strong technical indicators and solid financial performance. The company's low leverage and efficient operations are significant strengths, despite challenges in revenue and free cash flow growth. The valuation is reasonable with an attractive dividend yield, supporting a positive outlook.

Positive Factors

Very Low Leverage

An extremely low debt-to-equity ratio gives Headwater durable financial flexibility. Minimal leverage reduces bankruptcy risk, lowers interest burden, and preserves capacity to fund opportunistic acquisitions, sustain dividends, or withstand commodity downturns without heavy refinancing.

High Profitability and Margins

Consistently high EBIT and EBITDA margins indicate structurally efficient operations and low unit costs. This margin cushion supports cash generation in weaker cycles, funds reinvestment in core assets, and provides a competitive advantage in attractively priced basins over the medium term.

Strong Cash Generation

Operating cash flow well above net income shows high cash conversion from operations, providing a durable source of internal funding. Strong OCF supports maintenance capex and distributions, reduces reliance on capital markets, and underpins operational resilience across cycles.

Negative Factors

Large Recent Revenue Decline

A dramatic fall in reported revenue materially reduces scale and operational leverage, potentially reflecting production declines or asset sales. Sustained revenue contraction erodes margins over time, limits reinvestment capacity, and increases sensitivity to fixed costs and execution risk.

Negative Free Cash Flow Growth

Declining free cash flow growth suggests limited expansionary or discretionary funding capacity over the medium term. If this trend persists it can constrain capital allocation choices, limit funding for development projects, and pressure dividend sustainability or debt reduction priorities.

High Commodity Price Sensitivity

Revenue and earnings are structurally exposed to oil and gas price volatility. This cyclical dependence makes cash flows and investment plans less predictable, necessitating hedging or large liquidity buffers and increasing business risk across 2–6 month horizons and beyond.

Headwater Exploration Business Overview & Revenue Model

Company Description

Headwater Exploration Inc., a junior resource company, engages in the exploration, development, and production of petroleum and natural gas in the Western Canadian Sedimentary Basin and onshore in New Brunswick. It holds interests in the McCully Field located to the northeast of Sussex, New Brunswick; the Clearwater play located in the Marten Hills, Alberta; and the Frederick Brook shale gas prospect located in New Brunswick. The company was formerly known as Corridor Resources Inc. and changed its name to Headwater Exploration Inc. in March 2020. Headwater Exploration Inc. is headquartered in Calgary, Canada.

How the Company Makes Money

Headwater Exploration generates revenue primarily through the exploration and production of crude oil and natural gas. The company's revenue model is largely driven by the sale of hydrocarbons extracted from its properties. Key revenue streams include the direct sale of oil and gas to various markets, as well as potential revenue from joint ventures and partnerships that may enhance its operational capabilities and market reach. Additionally, fluctuations in commodity prices significantly impact earnings, as higher prices for oil and gas can lead to increased revenues. The company may also benefit from strategic partnerships that allow for shared development costs and expanded access to resources.

Headwater Exploration Financial Statement Overview

Summary

Headwater Exploration demonstrates strong profitability and financial stability with low leverage and efficient operations. However, the company faces challenges with declining revenue growth and negative free cash flow growth in the TTM period. Despite these challenges, the company maintains strong margins and cash flow ratios, indicating resilience in its financial performance.

Income Statement

Headwater Exploration shows strong profitability with a consistent net profit margin around 30% and a solid EBIT margin of 40% in TTM. However, the company faces challenges with a negative revenue growth rate of -56.7% in TTM, indicating a significant decline in sales. Despite this, the company maintains a healthy EBITDA margin of over 60%, suggesting efficient operations.

Balance Sheet

The company maintains a very low debt-to-equity ratio of 0.0033 in TTM, indicating minimal leverage and financial stability. Return on equity is robust at 25.97%, reflecting effective use of equity to generate profits. The equity ratio is strong, suggesting a solid financial foundation with a high proportion of assets financed by equity.

Cash Flow

Operating cash flow is strong, with a high operating cash flow to net income ratio of 2.57, indicating good cash generation relative to net income. However, free cash flow growth is negative at -4.37% in TTM, which could be a concern for future investments and liquidity. The free cash flow to net income ratio is healthy at 0.29, showing that a significant portion of net income is converted into free cash flow.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	603.71M	619.80M	425.55M	458.38M	190.94M	9.50M
Gross Profit	314.47M	332.06M	193.33M	266.00M	108.10M	49.00K
EBITDA	359.01M	372.81M	324.89M	291.97M	95.66M	5.49M
Net Income	172.80M	188.03M	156.07M	162.11M	45.83M	6.71M
Balance Sheet
Total Assets	1.01B	952.64M	836.34M	734.74M	488.81M	300.69M
Cash, Cash Equivalents and Short-Term Investments	124.35M	142.69M	146.05M	175.45M	114.70M	76.77M
Total Debt	13.78M	15.64M	842.00K	861.00K	1.55M	436.00K
Total Liabilities	254.46M	253.18M	225.84M	191.41M	91.02M	31.66M
Stockholders Equity	752.38M	699.46M	610.50M	543.34M	397.79M	269.03M
Cash Flow
Free Cash Flow	85.55M	93.87M	63.25M	35.00M	-28.73M	-34.83M
Operating Cash Flow	300.49M	316.74M	303.32M	283.93M	111.66M	230.00K
Investing Cash Flow	-212.70M	-226.85M	-243.71M	-232.06M	-109.13M	-34.40M
Financing Cash Flow	-102.38M	-93.24M	-89.00M	8.88M	35.40M	49.99M

Headwater Exploration Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 11.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:HWX, the sentiment is Positive. The current price of 11 is above the 20-day moving average (MA) of 10.22, above the 50-day MA of 9.56, and above the 200-day MA of 7.49, indicating a bullish trend. The MACD of 0.54 indicates Negative momentum. The RSI at 67.36 is Neutral, neither overbought nor oversold. The STOCH value of 72.14 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:HWX.

Headwater Exploration Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
HWX	79 Outperform	C$2.63B	15.13	23.55%	4.58%	6.44%	-6.74%
PXT	76 Outperform	C$1.95B	12.48	5.77%	8.48%	-20.07%	-53.33%
FRU	75 Outperform	C$2.69B	20.29	13.00%	7.05%	2.52%	-8.32%
BIR	70 Neutral	C$2.01B	27.15	3.16%	1.59%	-9.76%	374.65%
Sector *	65 Neutral	$15.17B	7.61	4.09%	5.20%	3.87%	-62.32%
VET	64 Neutral	C$2.02B	-8.67	2.34%	4.60%	-2.32%	70.14%
AAV	58 Neutral	C$1.84B	30.41	3.69%	―	27.84%	28.87%

Headwater Exploration Corporate Events

Headwater Exploration Posts Strong 2025 Growth on Robust Reserves and High-Impact Drilling

Headwater Exploration reported strong 2025 operating and financial performance, with fourth-quarter average production of about 24,250 boe/d and full-year average volumes of roughly 22,750 boe/d, translating into 12% year-over-year production per share growth. The company generated an estimated $326 million in adjusted funds flow from operations and invested approximately $228 million in capital expenditures, including significant allocations to waterflood projects, land and exploration, and development drilling. Reserve additions were robust across all categories, with proved developed producing reserves rising 53%, total proved reserves up 59%, and total proved plus probable reserves up 54%, supporting extended reserve life indices and attractive finding and development costs that underpin strong recycle ratios. Operationally, Headwater’s Grand Rapids program in Marten Hills West exceeded expectations, with new production and waterflood support expanding the main pool to an estimated 20 sections, while in the Greater Pelican area the company successfully drilled follow-up development wells and polymer-supported producers delivering encouraging initial production rates, reinforcing the growth potential and capital efficiency of its core asset base.

The most recent analyst rating on (TSE:HWX) stock is a Hold with a C$10.00 price target. To see the full list of analyst forecasts on Headwater Exploration stock, see the TSE:HWX Stock Forecast page.

Headwater Exploration Unveils 2026 Budget and Operations Update

Headwater Exploration Inc. has announced its preliminary 2026 budget, highlighting a capital expenditure of $185 million aimed at maintenance, growth, secondary recovery, and exploration. The company plans to achieve an 8% production growth per share, supported by a 37% reinvestment rate from adjusted funds flow, while maintaining a quarterly dividend. Recent operations updates reveal successful exploration and secondary recovery efforts in the Greater Pelican area, which have significantly reduced corporate decline rates and maintenance capital. The company aims to continue enhancing asset duration and shareholder value through strategic investments in secondary recovery and exploration.

The most recent analyst rating on (TSE:HWX) stock is a Hold with a C$9.00 price target. To see the full list of analyst forecasts on Headwater Exploration stock, see the TSE:HWX Stock Forecast page.