Login
Password

Forgot your password?

Key Fundamental Statistics for the Oil and Gas Industry in Canada

By Edited Oct 31, 2015 1 3

This is a summary and ranking of the key fundamental statistics for the Oil & Gas Exploration & Production Industry for many of the companies in the industry listed on the TSX. For a list of US companies, click here. The source of my information is TD Waterhouse Market Research services as of October 30, 2010.

Updated for Q3 results

I have excluded companies that are exclusively exploration as their assets will not be fairly reflected in the ranking below as well as the Canadian Income Trusts as they have a different dynamic to them altogether. The 25 companies included in this ranking will be as follows, accompanies by their symbol on the TSX or TSX Venture Exchanges:

Advantage Oil and Gas Ltd - AAV
Alange Energy Corp - ALE
Alberta OilSands - AOS
Bankers Petroleum Ltd - BNK
Canacol Energy Ltd - CNE
Canadian Natural Resources Ltd - CNQ
Compton Petroleum Corp - CMT
Connacher Oil and Gas Ltd - CLL
EnCana Corp - ECA
Gran Tierra Energy Inc - GTE
Ivanhoe Energy Inc - IE
Nexen Inc - NXY
Opti Canada Inc - OPC
Orleans Energy Ltd - OEX
Pacific Rubiales Energy Corp - PRE
PetroBakken Energy Ltd - PBN
Petrolifera Petroleum Ltd - PDP
Petrominerales Limitada - PMG
Questerre Energy Corp - QEC
Rock Energy Inc - RE
Strategic Oil & Gas Ltd - SOG
Talisman Energy Inc - TLM
Terra Energy Corporation - TT
Transglobe Energy Corp - TGL
Vero Energy Inc - VRO

Price/Earnings

The Price to Earnings metric measures a company's stock price to its earnings per share. The lower the value of this metric, the more undervalued a company is. While price to earnings metrics generally need to be around 15 or less for a company to be considered undervalued, there are several factors leading to the industry's Price to Earnings of 21.5. The metric is allowed to be high for companies that are seen as "growth" companies, meaning their earnings are expected to grow exponentially beyond their current levels. Given that many of these companies have significant untapped exploration assets and that the price of oil is expected to increase in the future, they are all expected to grow and therefore leniency is given to them with respect to their P/E. Many of these companies do not currently have positive earnings and cannot be ranked:

ECA.................9.8
PMG..............10.9
CNQ..............15.2
NXY..............14.6
Industry....21.5
CLL ..............23.2
TGL..............30.8
GTE..............32.4
TLM.............42.0
PBN..............46.9
AAV................--
ALE.................--
AOS................--
BNK................--
CNE................--
CMT...............--
IE ..................--
OPC...............--
OEX...............--
PRE...............--
PDP...............--
QEC...............--
RE.................--
SOG ..............--
TT................--
VRO.............--

Price/Sales

The Price to Sales metric measures a company's stock price in terms of total sales, with the lower number representing a more undervalued stock price. Again, some leniency is given to the industry as the industry metric of 4.3x is far above other industries which have P/S metrics of 1 to 2. Rankings are:

CMT..............0.5
CLL................0.9
OPC...............0.9
PDP...............1.3
TT.................1.6
NXY..............1.9
ECA...............2.0
RE.................2.6
TLM..............2.8
VRO..............3.0
AAV..............3.1
OEX..............3.2
PMG.............3.2
CNQ.............3.3
Industry...4.3
PBN.............4.4
GTE.............5.0
TGL.............5.1
PRE.............6.7
ALE...........11.2
AOS...........12.8
SOG...........14.7
BNK...........15.0
CNE...........22.2
IE..............30.4
QEC...........34.1

Price/Book

The Price to Book metric measures a company's price in terms of its total company equity. This metric is relatively more important in the oil and gas industry for the simple fact that the majority of a company's value is easily measured by the amount of oil and gas they own multiplied by current oil and gas prices. While a tech company, for instance, would receive little to no value in its goodwill and human capital in the event of a liquidation, an oil and gas company liquidating its assets has a clear and measurable worth to them. While important, the Price/Book metric can get tricky. Significant variances in the market value of the assets a company holds and the book value - which is the at cost value of the asset on the balance sheet - can exist. If an asset's market value is worth less than its book value, GAAP requires that the company writes the asset down on the balance sheet but if an asset is worth much more than the value on the balance sheet, nothing is changed. Combine this with the deprecation of the asset as the resources are depleted and most oil and gas companies should have a market value well over their book value. So a book value over 1 does not necessarily mean a company is overvalued, but a book value of less than 1 could potentially point out undervalued stocks as the enterprise or market value of the company could be much more than its book value. The industry metric of 3.0 reflects this as the market believes that the assets each company owns are worth way more than what is reflected on the balance sheet. Rankings are:

CMT...............0.1
OPC................0.2
PDP................0.4
AOS................0.7
OEX...............0.7
AAV...............0.8
CLL................0.8
TT.................0.9
ECA................1.2
PBN................1.3
NXY...............1.4
RE..................1.4
VRO...............1.4
QEC...............1.6
TLM..............1.6
CNQ..............1.9
ALE..............2.0
GTE..............2.2
IE.................2.5
SOG..............2.9
Industry...3.0
TGL..............3.5
PRE..............4.3
PMG.............5.1
BNK.............6.7
CNE.............8.6

Price/Cash Flow

The Price to Cash Flow metric measures a company's cash flow in terms of its stock price. I view this metric as well as the Price to Book metric as the two most important ones in finding deeply undervalued companies as the latter measures just how undervalued a company is while the former measures its ability to pay off any debt the company many have. If a company's stock price is well below its book value per share and has negative earnings, that book value per share declines over time but its already so high relative to the stock price that it doesn't matter so much unless the stock price rises to an unsustainable level. However, if a company has low or negative cash flow, it may be forced to liquidate its assets at low prices and shareholders may not have enough time to see the stock recover in price and realize the value of their company. Rankings are:


CMT................2.0
PDP.................3.8
TT...................3.9
NXY................4.9
AAV................5.4
TLM................5.6
CNQ................6.5
RE..................6.6
ECA................7.2
PBN...............7.3
PMG...............8.1
VRO...............8.8
GTE...............9.7
OEX.............10.0
CLL..............11.2
Industry...12.1
PRE.............17.2
TGL.............20.1
BNK.............33.4
QEC.............93.0
ALE................--
AOS................--
CNE...............--
IE...................--
OPC...............--
SOG...............--

Gross Margin

The Gross Margin figure is important because you can estimate how much oil or gas must increase in price for a company to breakeven in its operations, assuming all other things remain equal like General and Administrative Expenses and economies of scale. Almost all of the companies near the bottom of this list at well over -100% margin are companies just starting up so these margins will likely improve significantly over the coming few quarters. However, these companies still have a long way to go before they catch up to their more mature counterparts near the top of this list. Rankings are:

PMG.............28.38%
CNQ.............19.47%
ECA.............17.45%
NXY............14.61%
GTE............14.58%
TGL............13.63%
BNK..............8.68%
CLL...............6.30%
PBN.............4.07%
Industry...2.64%
TT..............-6.20%
TLM...........-8.88%
PDP............-9.55%
CMT.........-14.57%
PRE..........-16.82%
RE............-21.98%
AAV.........-26.91%
VRO.........-42.19%
OEX.........-66.05%
QEC........-149.62%
ALE........-152.15%
OPC.......-162.77%
SOG.......-177.87%
AOS.......-189.41%
IE..........-192.84%
CNE.......-210.88%

Overall Ranking

My final stat will be a personal overall ranking based on my calculations and a 15% weighting each for P/E and P/S, 25% weighting each for P/B and P/CF, and a 20% weighting on Gross Margin. If a company does not have a P/E or P/CF, it receives a score of 0 for that category. These numbers are neither a buy nor a sell recommendation but rather a weighted average ranking of the statistics above, reflecting what I believe are undervalued companies. You must do your own research into any company listed here that you are interested in as there could be factors outside of these numbers that explain why a stock is priced the way it is. These can include legal affairs, liquidity issues, and amount, type and cost to produce of the resources that they have, among others. A company that is just starting up production will have a disadvantage compared to companies that have significant exploration assets, but have also been producing for a few years. Rankings are:

CMT...........522
PDP............184
OPC............176
CLL.............145
TT..............138
NXY...........122
ECA............112
AAV.............96
TLM.............89
CNQ.............88
RE...............80
PMG............79
PBN.............75
OEX.............71
VRO.............63
GTE.............60
Industry...54
TGL.............42
PRE.............28
BNK............ 18
AOS...............4
QEC.............-9
ALE.............-11
SOG............-22
IE...............-26
CNE...........-36

Using these rankings, Compton Petroleum came out on top by a large margin. This should not be too surprising as it finished first in 3 out of the 5 categories, and its extremely low P/B metric scored 250 of the 522 points it achieved. Its gross margin of -14.57% was not prohibitively negative. On the other end, Canacol Energy scored a -36 as it has no earnings and negative cash flow and its current margin is -210.88%. As this company is just starting up, it will be interesting to see how their statistics improve over the next few quarters as a reflection of ramped up production.

Disclaimer: I own positions in Petrolifera Petroleum and Compton Petroleum.

If you are interested in trading or investing in these or other TSX-listed companies but don't know how to, refer to my Equity Investing in Canada article for more information.

There are other great resources for oil company research available on the web.

Refer to my other investment articles if you are interested in learning about:

Junior Gold Explorers

Biotech Stocks and Beaten Down Biotech Stocks

Natural Gas

Canadian Bank Stocks

Penny Stocks

Advertisement

Comments

Nov 3, 2010 11:40am
BlogMakesMoney
wow well reasearched article thnaks
Nov 4, 2010 1:03am
Crucible401
This comment has been deleted.
Nov 4, 2010 1:45am
EV38
This comment has been deleted.
Nov 5, 2010 3:41am
Crucible401
Crikey, deleting comments on outrageously incompetent articles? Do you really want people to be horribly misled when they invest? Use some common sense..
Nov 5, 2010 9:41am
EV38
I'll say it again. Your comments are baseless and have no substance. These numbers are straight from a reliable source. There's no "guessing game" on my part. If your IE or CNE or whatever stock you own doesn't score well using my rankings, they won't score well using any ranking of those 5 categories. We'll just have to wait and see if they make good on their promises to bring some cash flows in from their wells.

Also what part of this do you not understand:

"You must do your own research into any company listed here that you are interested in as there could be factors outside of these numbers that explain why a stock is priced the way it is. These can include legal affairs, liquidity issues, and amount, type and cost to produce of the resources that they have, among others."

Did I say anywhere to buy a certain stock? No I did not. I am leading people in the CORRECT direction with regard to fundamentals and they have to make the final choice on factors outside of the ones listed here by researching expected production, land holdings, debt levels and other corporate issues.
Add a new comment - No HTML
You must be logged in and verified to post a comment. Please log in or sign up to comment.

Explore InfoBarrel

Auto Business & Money Entertainment Environment Health History Home & Garden InfoBarrel University Lifestyle Sports Technology Travel & Places
© Copyright 2008 - 2016 by Hinzie Media Inc. Terms of Service Privacy Policy XML Sitemap

Follow IB Business & Money