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Obsidian Energy (TSE:OBE)
TSX:OBE
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Obsidian Energy
(TSX:OBE)
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Rating:48Neutral
Price Target:
C$9.50
▼(-3.46% Downside)
The score is mainly held back by weak financial performance (losses, declining TTM revenue, and slightly negative free cash flow) and limited valuation support (negative P/E). A manageable balance sheet with low leverage and steady operating cash flow, plus broadly neutral technical indicators, provide partial offset.
Positive Factors
Low leverage / balance-sheet resilience
A debt-to-equity of ~0.16 gives Obsidian durable financial flexibility through commodity cycles. Low leverage reduces refinancing and bankruptcy risk, supports capital allocation choices (drill programs, dividends or buybacks) and preserves access to capital during multi-month industry downturns.
Strong operating cash generation
Sustained operating cash flow near $312M indicates the business reliably converts production into cash over time. This cash base supports reinvestment, debt management and potential shareholder returns without immediate reliance on volatile equity markets, helping stability over the next several months.
High cash-style margins (EBITDA)
An EBITDA margin around 50% shows the company extracts strong cash profitability from its operations despite revenue softness. High operating margins provide a structural cushion to commodity swings, aiding resilience in funding mid-term capital programs and improving odds of restoring net profitability.
Negative Factors
Declining revenue trend
An ongoing revenue decline (TTM -8.2%, multi-period negative growth) signals weakening production volumes, realized prices or mix. Persisting top-line erosion reduces internal funding for development, pressures margins and raises the risk that assets underperform absent operational or portfolio changes over the next several months.
Negative operating profitability
Negative operating profit and reported net losses indicate core operations currently fail to cover fixed and G&A costs. If losses persist beyond a few quarters, retained earnings and returns will be eroded, forcing tougher capital-allocation tradeoffs, asset sales or cost cuts that can impair long-term growth options.
Slightly negative free cash flow
Negative free cash flow means operating cash is barely insufficient to cover capex and working-capital needs. Over a multi-month horizon this pressures the need for higher cash margins, reduced capex, or external financing; persistent negative FCF undermines balance-sheet gains from low leverage.
Obsidian Energy (OBE) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$660.42M
Dividend YieldN/A
Average Volume (3M)238.19K
Price to Earnings (P/E)―
Beta (1Y)1.32
Revenue Growth-11.85%
EPS Growth-307.86%
CountryCA
Employees203
SectorEnergy
Sector Strength52
IndustryOil & Gas Exploration & Production
Share Statistics
EPS (TTM)0.24
Shares Outstanding67,116,220
10 Day Avg. Volume270,068
30 Day Avg. Volume238,191
Financial Highlights & Ratios
PEG Ratio0.01
Price to Book (P/B)0.45
Price to Sales (P/S)0.76
P/FCF Ratio-9.84
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$9.50Price Target Upside-3.46% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
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: |
Next Earnings Date:Feb 19, 2026
Earnings Call Sentiment Neutral
The earnings call reflects a strategic shift following the sale of the Pembina assets, focusing on strengthening the balance sheet and shareholder returns through buybacks. While production growth and exploration successes were positive, increased operating costs and negative free cash flow present challenges.Q1-2025 Updates
Positive Updates
Pembina Asset Sale
The company closed the sale of its Pembina assets for $320 million, including $211 million in cash, which was used to reduce debt. This transaction strengthened the balance sheet and focused the company’s efforts on key banner assets.
Production Growth
Obsidian reported a 12% increase in production to 38,400 BOEs per day from Q1 last year, driven by heavy oil production growth from the Peace River program.
Share Repurchase Program
The company repurchased 3.5 million shares for $24.5 million through May 6, demonstrating a commitment to returning capital to shareholders.
Peace River Exploration Success
Significant land acquisitions and exploration results in the Peace River region, with promising initial production rates from Clearwater and Bluesky formations.
Negative Updates
Increased Operating Costs
Operating costs increased to $15.72 per BOE from $13.91 last year due to higher water handling costs and land survey costs related to the Pembina disposition.
Negative Free Cash Flow
The company reported a negative free cash flow of $35 million for Q1, largely due to heavy capital expenditures.
Underperforming Wells
Some wells in the Peace River region underperformed due to higher viscosity oil than expected, resulting in higher gas and water rates on certain wells.
Company Guidance
During the call, Obsidian Energy provided guidance for the second quarter of 2025, with an estimated production midpoint of approximately 29,200 barrels of oil equivalent (BOEs) per day, following the sale of their Pembina assets. The production mix is expected to be around 72% oil and liquids. The company has approximately 71 million shares outstanding, translating to a market capitalization of about $385 million. They forecast net debt at the end of the second quarter to be approximately $255 million, with a net debt to funds from operations (FFO) ratio of roughly 1.1x. Obsidian Energy's strategy focuses on delivering superior shareholder returns through production growth, share buybacks, and debt reduction, with a current emphasis on maintaining a prudent leverage position and ample liquidity. The company also highlighted their strategic advantages, including a high-quality asset base, significant potential for future growth, and a strong balance sheet. The call noted that capital expenditures for Q2 are projected to be between $37 million and $42 million, with an expectation of generating positive free cash flow of $16 million.Obsidian Energy Financial Statement Overview
Summary
Financials are pressured by an 8.2% TTM revenue decline and losses/negative operating profit, indicating a down-cycle. Offsetting this, leverage is manageable (debt-to-equity ~0.16) and operating cash flow remains solid (~$312M), but slightly negative TTM free cash flow (~-$4.5M) limits the score.Income Statement
TTM (Trailing-Twelve-Months) revenue declined (-8.2%) and profitability is weak, with a net loss and negative operating profit. While cash-style profitability looks better (EBITDA margin ~50.6% in TTM), margins and earnings have deteriorated sharply versus 2022–2023, reflecting a clear down-cycle and higher volatility typical for the sector.38
Negative
Balance Sheet
Leverage looks manageable with relatively low debt versus equity in TTM (debt-to-equity ~0.16) and debt reduced meaningfully versus 2024. The key weakness is returns: equity remains sizable, but losses in TTM and 2024 translate into negative returns on equity, indicating the balance sheet is strong but currently under-earning.66
Positive
Cash Flow
Operating cash flow remains solid in TTM (~$312M) and improved in its ability to cover reported earnings versus 2024. However, free cash flow is slightly negative in TTM (about -$4.5M) and worsened versus 2023, signaling that capital spending and/or working-capital needs are absorbing most operating cash generation.54
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 704.50M | 837.70M | 653.30M | 920.00M | 497.50M | 286.50M |
| Gross Profit | -12.50M | 62.30M | 409.40M | 697.40M | 497.40M | 900.00K |
| EBITDA | 333.60M | 34.20M | 401.20M | 781.00M | 569.80M | -600.30M |
| Net Income | -237.30M | -202.60M | 108.00M | 810.10M | 414.00M | -771.70M |
Balance Sheet | ||||||
| Total Assets | 1.80B | 2.11B | 2.25B | 2.20B | 1.43B | 964.10M |
| Cash, Cash Equivalents and Short-Term Investments | 1.00M | 0.00 | 500.00K | 800.00K | 7.30M | 8.10M |
| Total Debt | 149.60M | 342.50M | 228.00M | 231.30M | 399.70M | 462.20M |
| Total Liabilities | 400.30M | 708.80M | 606.60M | 624.60M | 665.70M | 641.00M |
| Stockholders Equity | 1.40B | 1.41B | 1.64B | 1.58B | 763.50M | 323.10M |
Cash Flow | ||||||
| Free Cash Flow | -4.50M | -64.60M | 59.60M | 137.40M | 57.70M | 22.20M |
| Operating Cash Flow | 312.30M | 361.90M | 352.70M | 456.80M | 198.70M | 79.40M |
| Investing Cash Flow | -39.90M | -430.50M | -293.60M | -290.80M | -156.60M | -66.20M |
| Financing Cash Flow | -272.30M | 67.60M | -59.40M | -172.50M | -42.90M | -8.10M |
Obsidian Energy Technical Analysis
Positive
9.84
Price Trends
8.62
Positive
8.61
Positive
8.01
Positive
Market Momentum
0.37
Negative
65.00
Neutral
74.72
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 9.84 is above the 20-day moving average (MA) of 9.01, above the 50-day MA of 8.62, and above the 200-day MA of 8.01, indicating a bullish trend. The MACD of 0.37 indicates Negative momentum. The RSI at 65.00 is Neutral, neither overbought nor oversold. The STOCH value of 74.72 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
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | C$595.13M | 5.60 | 12.26% | ― | 24.36% | -55.40% | |
79 Outperform | C$1.07B | 5.23 | 98.62% | ― | 194.52% | 10204.44% | |
69 Neutral | $729.71M | 16.39 | 5.87% | 7.59% | -7.36% | ― | |
68 Neutral | C$456.56M | 18.12 | 10.64% | ― | 40.83% | 26.01% | |
65 Neutral | $15.17B | 7.61 | 4.09% | 5.20% | 3.87% | -62.32% | |
48 Neutral | C$660.42M | -3.12 | -14.96% | ― | -11.85% | -307.86% |
* Energy Sector Average
TSE:OBE
Obsidian Energy
9.84
2.57
35.35%
TSE:SGY
Surge Energy
7.38
2.49
51.01%
TSE:TNZ
Tenaz Energy Corp
37.63
24.21
180.40%
TSE:SOIL
Saturn Oil & Gas
3.16
1.06
50.48%
TSE:LGN
Logan Energy Corp
0.79
0.11
16.18%
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.