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Strathcona Resources (TSE:SCR)
TSX:SCR
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Strathcona Resources
(TSX:SCR)
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Rating:69Neutral
Price Target:
C$28.00
▲(7.69% Upside)
The score is driven primarily by solid financial performance (healthy profitability, robust operating cash flow, and improving leverage) and very attractive valuation (low P/E plus dividend yield). These positives are tempered by weaker technicals, with the stock trading below key short-term moving averages and showing soft momentum indicators.
Positive Factors
Operating Cash Flow Strength
Operating cash flow of roughly $2.0B in 2024 and strong profitability create durable internal funding to service debt, sustain required capex and support distributions. Reliable OCF improves resilience to commodity swings and underpins medium-term financial flexibility.
Improving Leverage
A declining debt-to-equity ratio reflects a strengthening capital structure, reducing interest risk and increasing headroom for strategic investment or shareholder returns. Improved leverage materially enhances the company’s ability to withstand prolonged commodity downturns over the medium term.
Margins and Scale
Sustained mid-to-high gross and EBITDA margins indicate efficient upstream operations and advantaged cost structure. Combined with scale and modest revenue growth, this supports durable cash generation, the capacity to reinvest in core assets, and potential to maintain distributions across cycles.
Negative Factors
Free Cash Flow Volatility
A ~31% decline in free cash flow and low FCF-to-net-income (~0.33) signal constrained post-investment cash available for debt reduction or shareholder returns. Persistent FCF volatility limits financial optionality and raises execution risk for growth or payout strategies in weaker commodity periods.
Inconsistent Revenue Trend
Reported revenue growth of about -11% across the measured period points to inconsistent top-line performance despite a 2024 uptick. Variable revenues tied to production or realized prices reduce forecasting visibility and can pressure margins and investment planning over the medium term.
Moderating Returns on Equity
ROE falling from peak levels (~32% to ~10%) indicates reduced capital efficiency as sector conditions normalize. Lower long-run ROE constrains the company’s ability to generate high incremental shareholder returns without either sustained margin improvement or material growth in high-return projects.
Strathcona Resources (SCR) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$5.57B
Dividend Yield2.99%
Average Volume (3M)98.08K
Price to Earnings (P/E)5.1
Beta (1Y)1.02
Revenue Growth-11.41%
EPS Growth40.81%
CountryCA
Employees797
SectorEnergy
Sector Strength52
IndustryOil & Gas Exploration & Production
Share Statistics
EPS (TTM)2.68
Shares Outstanding214,235,610
10 Day Avg. Volume90,167
30 Day Avg. Volume98,082
Financial Highlights & Ratios
PEG Ratio-2.74
Price to Book (P/B)1.16
Price to Sales (P/S)1.42
P/FCF Ratio10.29
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$33.50Price Target Upside28.85% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Strathcona Resources Business Overview & Revenue Model
Company DescriptionStrathcona Resources Ltd. operates as an exploration company. The Company engaged in the acquisition, exploration, development, and production of petroleum and natural gas reserves.
How the Company Makes MoneyStrathcona Resources generates revenue primarily through the exploration, development, and production of oil and gas resources. The company sells crude oil, natural gas, and natural gas liquids to various markets, including domestic and international buyers. Revenue streams are significantly influenced by commodity prices, production volumes, and operational efficiencies. Additionally, the company may engage in strategic partnerships or joint ventures to enhance its operational capabilities and access to new resources, further contributing to its financial performance.
Strathcona Resources Earnings Call Summary
Earnings Call Date:Aug 13, 2024
(Q2-2024)
| % Change Since: |
Next Earnings Date:Mar 31, 2026
Earnings Call Sentiment Neutral
The earnings call reflected a mix of positive achievements such as consistent oil production, improved efficiency, and strategic partnerships for decarbonization, alongside challenges like reduced natural gas production and potential rail strike impacts.Q2-2024 Updates
Positive Updates
Consistent Oil Production and Increased Sales Volume
Oil production for Q2 remained consistent with Q1 at approximately 131,000 barrels per day, while oil sales volumes increased to approximately 135,000 barrels per day due to inventory drawdown.
Debottlenecking Projects Improve Efficiency
Cold Lake projects resulted in an 8% reduction in steam oil ratio compared to the same period in 2023, enhancing operational efficiency.
Commitment to Decarbonization
Announced a $2 billion carbon capture infrastructure partnership with Canada Growth Fund, aiming for a mid-2025 FID for the first project.
Achievement of Debt Target and Dividend Announcement
Achieved debt target of $2.5 billion and announced a quarterly base dividend of $0.25 per share.
Negative Updates
Natural Gas Production Decline
Natural gas production was down 6% from Q1 due to planned and unplanned third-party outages, leading to a reduction in guidance by 15 million cubic feet per day.
Potential Impact of Looming Rail Strike
Concerns about the impact of a potential rail strike on the 30,000 barrel per day crude by rail business and supply chain inputs like diesel.
Deferred Natural Gas Production
Deferral of dry gas production from Groundbirch wells due to third-party outages and low natural gas prices.
Company Guidance
During the Q2 2024 earnings call for Strathcona Resources Limited, significant guidance was provided on various operational and financial metrics. The company reported an average production of approximately 182,000 barrels of oil equivalent (BOE) per day, generating funds from operations of $548 million, or $2.56 per share. Capital expenditures totaled $297 million, resulting in free cash flow of $247 million, or $1.15 per share. Oil production remained consistent with the previous quarter at around 131,000 barrels per day, while oil sales volumes increased to approximately 135,000 barrels per day due to the commissioning of a new crude by rail offloading facility. Natural gas production stood at 237 million cubic feet per day, down 6% from the first quarter, and natural gas liquids production was steady at 11,500 barrels per day. Strathcona announced a reduction in its annual natural gas guidance by 15 million cubic feet per day, adjusting the corporate guidance range to 185,000 to 190,000 BOE per day, with an oil weighting increase to 72%. The company maintained its capital budget guidance at $1.3 billion and achieved its debt target of $2.5 billion by June 30, leading to the approval of a quarterly base dividend of $0.25 per share. Additionally, Strathcona announced a partnership with Canada Growth Fund to develop up to $2 billion in carbon capture infrastructure, targeting a final investment decision by mid-2025. An Investor Day is scheduled for November 14, 2024, to elaborate on near- and long-term asset plans.Strathcona Resources Financial Statement Overview
Summary
Strong profitability and operating cash flow in 2024 with improving leverage (debt-to-equity down to ~0.48). Offsetting this, margins/returns have normalized from 2022 peaks and free cash flow fell ~31% in 2024, highlighting cyclicality and reduced flexibility.Income Statement
The company shows solid scale and profitability in the most recent annual period (2024), with revenue up ~6% and healthy margins (gross ~27%, EBITDA ~42%, net ~13%). Profitability is lower than 2022 (when net margin was ~34%), indicating normalization/volatility typical of the sector. Still, net income held relatively stable from 2023 to 2024 despite margin compression, supporting a strong but cyclical earnings profile.78
Positive
Balance Sheet
Leverage looks manageable and improving: debt-to-equity declined from ~0.58 (2023) to ~0.48 (2024) while equity increased. Returns on equity are positive but moderating (about ~10% in 2024 vs ~32% in 2022), suggesting weaker profitability versus peak conditions. Overall balance sheet strength is good, though the business remains exposed to commodity-driven swings that can pressure equity returns.72
Positive
Cash Flow
Cash generation is strong on an operating basis (operating cash flow of ~$2.0B in 2024 and comfortably above net income), but free cash flow weakened in 2024 (down ~31% vs 2023). Free cash flow relative to net income is modest (~0.33 in 2024), implying heavier reinvestment/capex or working-capital effects. Cash flow quality is solid, but free cash flow volatility reduces the score.67
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 4.26B | 4.75B | 4.24B | 3.75B | 376.93M | 131.76M |
| Gross Profit | 1.17B | 1.30B | 1.09B | 1.29B | 180.82M | -5.33M |
| EBITDA | 1.76B | 2.01B | 1.85B | 1.51B | 179.27M | 47.24M |
| Net Income | 1.10B | 603.70M | 587.20M | 1.36B | 67.92M | -17.28M |
Balance Sheet | ||||||
| Total Assets | 11.05B | 10.98B | 10.50B | 9.16B | 886.17M | 694.47M |
| Cash, Cash Equivalents and Short-Term Investments | 1.29B | 0.00 | 0.00 | 34.30M | 0.00 | 0.00 |
| Total Debt | 1.29B | 2.81B | 3.07B | 3.30B | 333.48M | 259.82M |
| Total Liabilities | 4.41B | 5.15B | 5.17B | 4.96B | 462.53M | 339.41M |
| Stockholders Equity | 6.64B | 5.82B | 5.33B | 4.20B | 423.64M | 355.06M |
Cash Flow | ||||||
| Free Cash Flow | 227.80M | 656.20M | 497.90M | 834.40M | -33.11M | -62.35M |
| Operating Cash Flow | 1.72B | 1.99B | 1.52B | 1.46B | 157.86M | 41.64M |
| Investing Cash Flow | -678.90M | -1.30B | -999.40M | -3.04B | -187.63M | -103.21M |
| Financing Cash Flow | -1.04B | -694.50M | -559.60M | 1.62B | 29.77M | 32.93M |
Strathcona Resources Technical Analysis
Negative
26.00
Price Trends
29.33
Negative
28.52
Negative
25.77
Positive
Market Momentum
-0.80
Negative
40.47
Neutral
27.47
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SCR, the sentiment is Negative. The current price of 26 is below the 20-day moving average (MA) of 26.60, below the 50-day MA of 29.33, and above the 200-day MA of 25.77, indicating a neutral trend. The MACD of -0.80 indicates Negative momentum. The RSI at 40.47 is Neutral, neither overbought nor oversold. The STOCH value of 27.47 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:SCR.
Strathcona Resources Peers Comparison
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | C$4.99B | 13.19 | 13.48% | 5.77% | 11.52% | 24.76% | |
74 Outperform | C$3.60B | 11.47 | 13.57% | ― | -6.14% | 14.09% | |
70 Neutral | C$2.01B | 27.15 | 3.16% | 1.59% | -9.76% | 374.65% | |
69 Neutral | C$5.57B | 5.08 | 9.60% | 2.99% | -11.41% | 40.81% | |
67 Neutral | C$4.47B | -47.74 | -4.70% | 1.91% | -1.36% | -149.45% | |
65 Neutral | $15.17B | 7.61 | 4.09% | 5.20% | 3.87% | -62.32% | |
58 Neutral | C$1.84B | 30.41 | 3.69% | ― | 27.84% | 28.87% |
* Energy Sector Average
TSE:SCR
Strathcona Resources
26.00
6.41
32.71%
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11.01
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7.32
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29.24%
TSE:TVE
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9.21
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114.74%
TSE:NVA
NuVista Energy
18.64
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44.61%
TSE:PEY
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24.54
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70.44%
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.