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Obsidian Energy Ltd (TSE:OBE)
:OBE
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Obsidian Energy
(NYSE MKT:OBE)
Rating:50Neutral
Price Target:―
Positive Factors
Operational Success
New development drilling at Harmon Valley South achieved IP30 rates ahead of expectation at 450-500 boe/d per well, signifying potential to extend the field and add future development locations.
Production Growth
Obsidian highlighted 16% production growth, lower costs, and active heavy oil development, showcasing strong operational performance.
Strategic Portfolio Management
Obsidian has strategically refined its portfolio, focusing on high-performing Bluesky and Clearwater formations, which positions it for future recognition.
Negative Factors
Market Visibility
Obsidian's discounted valuation is partially explained by how far off the radar-screen it is with other energy operators.
Shareholder Returns
With improved balance sheet and recent strength in crude oil prices, Obsidian is expected to prioritize outsized heavy oil production growth over enhanced shareholder returns in the medium term.
Obsidian Energy (OBE) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$557.85M
Dividend YieldN/A
Average Volume (3M)437.70K
Price to Earnings (P/E)5.6
Beta (1Y)1.44
Revenue Growth11.92%
EPS Growth-304.98%
CountryCA
Employees203
SectorEnergy
Sector Strength73
IndustryOil & Gas Exploration & Production
Share Statistics
EPS (TTM)0.20
Shares Outstanding69,211,914
10 Day Avg. Volume516,211
30 Day Avg. Volume437,699
Financial Highlights & Ratios
PEG Ratio<0.01
Price to Book (P/B)0.47
Price to Sales (P/S)0.00
P/FCF Ratio5.36
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$9.33Price Target Upside15.75% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
Obsidian Energy Business Overview & Revenue Model
Company DescriptionObsidian Energy Ltd. primarily focuses on the exploration, production, and development of oil and natural gas properties in the Western Canada Sedimentary Basin. The company was formerly known as Penn West Petroleum Ltd. and changed its name to Obsidian Energy Ltd. in June 2017. Obsidian Energy Ltd. is headquartered in Calgary, Canada.
How the Company Makes MoneyObsidian Energy generates revenue primarily through the sale of crude oil, natural gas, and natural gas liquids extracted from its owned and operated assets in the Western Canadian Sedimentary Basin. The company's revenue model is centered around exploration and production activities, where it identifies and develops oil and gas reserves and subsequently sells the produced hydrocarbons at market prices. Key revenue streams include the sale of these commodities directly to refineries, marketing companies, and other purchasers under various pricing arrangements. The company's earnings are influenced by factors such as global oil and gas prices, production volumes, and operational efficiencies. Obsidian Energy may also engage in strategic partnerships or joint ventures to enhance its resource development capabilities and market reach, although specific partnerships are not detailed here. The company's focus on cost management and operational optimization further contributes to its financial performance.
Obsidian Energy Earnings Call Summary
Earnings Call Date:May 07, 2025
(Q1-2025)
| % Change Since: 44.44%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a strategic shift towards focusing on core assets and improving financial stability through asset sales and debt reduction. While there are notable achievements in production growth and liquidity, challenges persist with higher operating costs and some suboptimal exploration results.Q1-2025 Updates
Positive Updates
Successful Pembina Asset Sale
Obsidian Energy closed the sale of its Pembina assets for a total consideration of $320 million, consisting of $211 million in cash and 9.1 million shares of in-play, plus a 34.6% working interest in Willesden Green Unit #2.
Increased Focus on Core Assets
Post-transaction, Obsidian Energy is focusing on its Peace River heavy oil and Willesden Green light oil assets, with optionality in Viking assets.
Production Growth
Q1 production was 38,400 BOEs per day, up 12% over Q1 last year, driven by heavy oil from the Peace River program.
Debt Reduction and Liquidity
Forecasted net debt of approximately $255 million by the end of Q2, with a net debt to FFO ratio of about 1.1x. The company has significant liquidity with $200 million available on its credit facility.
Share Buyback Program
Repurchased 3.5 million shares for $24.5 million through May 6, demonstrating commitment to returning capital to shareholders.
Negative Updates
Higher Operating and Capital Expenditures
Operating costs increased to $15.72 per BOE from $13.91 last year due to higher water handling costs. Q1 capital expenditures were $128 million, higher than last year's $114 million.
Negative Free Cash Flow
Q1 resulted in negative free cash flow of $35 million due to heavy capital expenditures and share repurchases.
Exploration Results
Some exploration wells in Peace River did not perform as expected, with one Clearwater well producing at a sub-economic rate and another Bluesky well not yielding conclusive results.
Company Guidance
In the first quarter of 2025, Obsidian Energy provided guidance on several key metrics. The company estimated its second quarter production midpoint at approximately 29,200 BOEs per day, following the sale of its Pembina assets. Obsidian Energy's production mix consists of about 72% oil and liquids, with a forecasted net debt of approximately $255 million, translating to a net debt to FFO ratio of 1.1x by the end of the second quarter. The company has approximately 71 million shares outstanding, equating to a market capitalization of around $385 million. Obsidian Energy continues to focus on delivering shareholder returns through production growth, share buybacks, and debt reduction, utilizing free cash flow from light oil assets to invest in the Peace River asset. The strategic advantages include a high-quality asset base with stable production and significant growth potential, particularly in the Peace River area, where an initial waterflood project has commenced. The company also highlighted its strong balance sheet, ample liquidity, and commitment to maintaining high health and safety standards.Obsidian Energy Financial Statement Overview
Summary
Obsidian Energy's financial statements present a mixed picture. Although revenue grew by 28.24% from 2023 to 2024 and the balance sheet shows a strong equity position with low leverage, profitability is a concern with a negative net profit margin and negative free cash flow. The stable operating cash flow is a positive, but the negative net income and challenges in cash flow management weigh heavily on the financial performance score.Income Statement
Obsidian Energy's income statement shows mixed performance. Gross profit margin improved in 2024 to 7.43% from 62.65% in 2023, but net income declined significantly resulting in a negative net profit margin of -24.17% in 2024. Revenue growth is positive with a 28.24% increase from 2023 to 2024. However, the company experienced a decline in EBIT and net income, impacting profitability.55
Neutral
Balance Sheet
The balance sheet indicates a stable equity position with a debt-to-equity ratio of 0.24 in 2024, which is relatively low, suggesting prudent leverage. However, stockholders' equity decreased from 2023 to 2024. The equity ratio remains strong at 66.47%, signaling a robust capital structure, despite fluctuations in total assets.65
Positive
Cash Flow
Cash flow analysis reveals challenges in free cash flow, which turned negative in 2024 due to increased capital expenditures. Operating cash flow remained stable but the free cash flow to net income ratio is unfavorable due to the negative net income. The operating cash flow to net income ratio is not meaningful due to negative net income.50
Neutral
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 813.00M | 837.70M | 653.30M | 920.00M | 497.50M | 286.50M | Gross Profit |
| -51.50M | 62.30M | 409.40M | 697.40M | 497.40M | 900.00K | EBIT |
| -231.50M | -249.50M | 145.30M | 618.50M | 453.30M | -766.40M | EBITDA |
| 439.50M | 430.60M | 401.20M | 794.30M | 577.10M | -600.30M | Net Income Common Stockholders |
| -199.10M | -202.60M | 108.00M | 810.10M | 414.00M | -771.70M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 300.00K | 0.00 | 500.00K | 800.00K | 7.30M | 8.10M | Total Assets |
| 2.17B | 2.11B | 2.25B | 2.20B | 1.43B | 964.10M | Total Debt |
| 357.00M | 342.50M | 228.00M | 231.30M | 399.70M | 462.20M | Net Debt |
| 356.70M | 342.50M | 227.50M | 230.50M | 392.40M | 454.10M | Total Liabilities |
| 761.70M | 708.80M | 606.60M | 624.60M | 665.70M | 641.00M | Stockholders Equity |
| 1.41B | 1.41B | 1.64B | 1.58B | 763.50M | 323.10M |
| Cash Flow | Free Cash Flow | ||||
| -42.10M | -64.60M | 59.60M | 137.40M | 57.70M | 22.20M | Operating Cash Flow |
| 399.90M | 361.90M | 352.70M | 456.80M | 198.70M | 79.40M | Investing Cash Flow |
| -425.10M | -430.50M | -293.60M | -290.80M | -156.60M | -66.20M | Financing Cash Flow |
| 25.20M | 67.60M | -59.40M | -172.50M | -42.90M | -8.10M |
Obsidian Energy Technical Analysis
Positive
8.06
Price Trends
6.69
Positive
7.22
Positive
7.61
Positive
Market Momentum
0.38
Negative
64.13
Neutral
76.55
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:OBE, the sentiment is Positive. The current price of 8.06 is above the 20-day moving average (MA) of 7.26, above the 50-day MA of 6.69, and above the 200-day MA of 7.61, indicating a bullish trend. The MACD of 0.38 indicates Negative momentum. The RSI at 64.13 is Neutral, neither overbought nor oversold. The STOCH value of 76.55 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:OBE.
Obsidian Energy Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
58 Neutral | $7.56B | 3.29 | -4.46% | 10.00% | 0.84% | -49.61% | |
50 Neutral | C$557.85M | 5.64 | -12.88% | ― | 11.92% | -304.98% | |
| $467.88M | ― | -5.48% | 7.98% | ― | ― | ||
| $394.39M | 32.66 | 0.67% | 3.47% | ― | ― | ||
69 Neutral | C$529.43M | 187.11 | -13.52% | ― | -3.50% | -153.25% | |
64 Neutral | C$387.20M | 48.51 | 2.74% | ― | 42.32% | ― | |
56 Neutral | C$451.68M | ― | -6.69% | ― | 41.39% | -61.36% |
* Energy Sector Average
Performance Comparison
TSE:OBE
Obsidian Energy
8.17
-1.69
-17.14%
ZPTAF
Surge Energy
4.83
0.28
6.15%
FECCF
Frontera Energy
5.05
-0.65
-11.40%
TSE:TNZ
Tenaz Energy Corp
18.98
15.49
443.84%
TSE:CEI
Coelacanth Energy, Inc.
0.85
0.08
10.39%
TSE:LGN
Logan Energy Corp
0.65
-0.17
-20.73%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.