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Strathcona Resources (TSE:SCR)
TSX:SCR
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Strathcona Resources
(TSX:SCR)
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Rating:76Outperform
Price Target:
C$44.00
▲(13.78% Upside)
Action:ReiteratedDate:03/12/26
Overall score is driven primarily by strong financial performance (profitability and a strengthened, lower-leverage balance sheet) and very attractive valuation (low P/E with a dividend). The score is tempered by weaker and more volatile free cash flow in 2025 and technically stretched conditions (RSI/Stochastics elevated), which raise near-term pullback risk.
Positive Factors
Improved balance sheet with low leverage
Sustained de-leveraging and a stronger equity base reduce refinancing and solvency risk, increasing financial flexibility for capex, dividends, or acquisitions. A contained balance-sheet profile is a durable defensive advantage in the cyclical E&P sector and supports long-term operations.
Strong 2025 profitability and healthy margins
Robust margins indicate underlying earnings power and operational discipline, enabling the company to generate profit through commodity cycles. Margin strength supports reinvestment and returns to shareholders and underpins sustainable cash generation over the medium term.
Consistently positive operating cash generation
Regular positive operating cash flow provides a persistent source of internal funding for maintenance capex, dividends, and debt reduction. Even with FCF variability, steady operating cash underpins liquidity and resilience across several months and supports strategic flexibility.
Negative Factors
Weakened free cash flow and cash conversion
A notable drop in free cash flow reduces internal funding for growth, dividends, and further deleveraging. Persistent or repeated weak cash conversion creates reliance on external capital in downturns and constrains long-term capital allocation choices.
Earnings cyclicality and commodity sensitivity
High exposure to commodity price and cost volatility means earnings and margins can swing materially across cycles. This structural sensitivity complicates multi-quarter planning, makes cash flow less predictable, and increases execution risk for capital programs.
Recent negative revenue growth
A recent decline in reported revenue signals pressure on volumes or realized pricing. If persistent, negative top-line trends can erode scale economics, constrain margin recovery, and limit the company's ability to expand investment or sustain distributions over months.
Strathcona Resources (SCR) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$8.28B
Dividend Yield2.99%
Average Volume (3M)98.08K
Price to Earnings (P/E)3.4
Beta (1Y)0.75
Revenue Growth-11.41%
EPS Growth40.81%
CountryCA
Employees797
SectorEnergy
Sector Strength52
IndustryOil & Gas Exploration & Production
Share Statistics
EPS (TTM)-0.46
Shares Outstanding214,235,610
10 Day Avg. Volume90,167
30 Day Avg. Volume98,082
Financial Highlights & Ratios
PEG Ratio0.09
Price to Book (P/B)1.16
Price to Sales (P/S)1.81
P/FCF Ratio33.88
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$35.67Price Target Upside-7.76% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering3
EPS Forecast (FY)1.82
Revenue Forecast (FY)C$3.45B
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 MoneySCR primarily makes money by producing hydrocarbons from its operated and non-operated upstream assets and selling those volumes into commodity markets. Revenue is driven mainly by (1) crude oil sales and (2) natural gas and natural gas liquids (NGLs) sales, with realized pricing tied to market benchmarks (net of quality differentials), transportation and marketing costs, and applicable royalties. Cash flow is influenced by production volumes, operating costs, capital spending to sustain or grow production, and commodity-price risk management activities (e.g., hedging) to stabilize realized prices and cash flows. Specific details on the company’s largest customers, long-term offtake/processing agreements, or material partnerships that may affect earnings are null.
Strathcona Resources Earnings Call Summary
Earnings Call Date:Aug 13, 2024
(Q2-2024)
| % Change Since: |
Next Earnings Date:May 20, 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
Financial statements are solid overall: strong profitability in 2025 and a notably improved balance sheet with low leverage. The main offset is cash flow quality—free cash flow fell sharply in 2025 versus 2024 and cash conversion was weaker, indicating volatility and sensitivity to reinvestment/working-capital swings.Income Statement
Profitability is strong in the latest annual period (2025) with healthy gross and operating margins and a solid net margin, following a marked recovery from earlier volatility. Revenue expanded sharply in 2025 versus 2024, but 2024 revenue was higher than 2025 and net margin compressed materially in 2023–2024 versus 2022, highlighting sensitivity to commodity pricing and cost swings. Overall, earnings power looks attractive, but the profit profile has been uneven year-to-year.78
Positive
Balance Sheet
Leverage has improved significantly over time, with debt-to-equity declining from higher levels in 2021–2023 to a low level in 2025, supported by a rising equity base. Returns on equity remain solid in 2025 and were exceptionally high in 2022, though they have fluctuated alongside earnings. Overall balance sheet risk appears well-contained for the sector, with the main drawback being profitability cyclicality rather than current leverage.84
Very Positive
Cash Flow
Operating cash generation is consistently positive, but cash conversion weakened in 2025: free cash flow fell sharply versus 2024 and represents a relatively small share of net income, suggesting heavier reinvestment or working-capital drag. Prior years (2022–2024) showed much stronger free cash flow and better alignment between profits and cash generation, while 2021 and 2020 included negative free cash flow. Cash flow quality is acceptable but less consistent than earnings and balance sheet improvement.62
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 4.26B | 4.75B | 4.24B | 3.75B | 376.93M |
| Gross Profit | 1.17B | 1.30B | 1.09B | 1.29B | 180.82M |
| EBITDA | 1.76B | 2.01B | 1.85B | 1.51B | 179.27M |
| Net Income | 1.10B | 603.70M | 587.20M | 1.36B | 67.92M |
Balance Sheet | |||||
| Total Assets | 11.05B | 10.98B | 10.50B | 9.16B | 886.17M |
| Cash, Cash Equivalents and Short-Term Investments | 1.29B | 0.00 | 0.00 | 34.30M | 0.00 |
| Total Debt | 1.29B | 2.81B | 3.07B | 3.30B | 333.48M |
| Total Liabilities | 4.41B | 5.15B | 5.17B | 4.96B | 462.53M |
| Stockholders Equity | 6.64B | 5.82B | 5.33B | 4.20B | 423.64M |
Cash Flow | |||||
| Free Cash Flow | 227.80M | 656.20M | 497.90M | 834.40M | -33.11M |
| Operating Cash Flow | 1.72B | 1.99B | 1.52B | 1.46B | 157.86M |
| Investing Cash Flow | -678.90M | -1.30B | -999.40M | -3.04B | -187.63M |
| Financing Cash Flow | -1.04B | -694.50M | -559.60M | 1.62B | 29.77M |
Strathcona Resources Technical Analysis
Positive
38.67
Price Trends
28.55
Positive
29.24
Positive
27.21
Positive
Market Momentum
2.17
Negative
85.59
Negative
95.30
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SCR, the sentiment is Positive. The current price of 38.67 is above the 20-day moving average (MA) of 30.91, above the 50-day MA of 28.55, and above the 200-day MA of 27.21, indicating a bullish trend. The MACD of 2.17 indicates Negative momentum. The RSI at 85.59 is Negative, neither overbought nor oversold. The STOCH value of 95.30 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 |
|---|---|---|---|---|---|---|---|
78 Outperform | C$5.74B | 10.89 | 13.75% | 5.77% | 11.52% | 24.76% | |
76 Outperform | C$8.28B | 3.37 | 17.87% | 2.99% | -11.41% | 40.81% | |
70 Neutral | C$1.96B | -27.70 | 3.28% | 1.59% | -9.76% | 374.65% | |
68 Neutral | C$5.22B | -110.02 | -4.70% | 1.91% | -1.36% | -149.45% | |
65 Neutral | $15.17B | 7.61 | 4.09% | 5.20% | 3.87% | -62.32% | |
54 Neutral | C$1.83B | 36.95 | 3.69% | ― | 27.84% | 28.87% |
* Energy Sector Average
TSE:SCR
Strathcona Resources
38.67
18.78
94.44%
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Advantage Energy
10.95
1.44
15.14%
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7.13
1.93
37.04%
TSE:TVE
Tamarack Valley Energy
10.76
6.65
162.06%
TSE:PEY
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28.03
12.80
84.01%
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.