Yangarra Resources – A story of Ghosts Past, Present and Future.

[Petroleum economist]

Yangarra has been spooked by investor ghosts in the past, but the investor ghosts of the future may bring it a fairy tale ending.

Yangarra investor ghosts of the past
From an investor point of view, an investment in Yangarra has been a disaster.

If I had bought Yangarra shares in early 2022 I would have paid C$ 1.73, while at the end of last week the share price was $ 1.04 – a drop of 40%. If I had bought at the peak of C$ 4.00 in June 2022, I would be looking at a paper loss of -74%.

In 2024 the share price reduction continued relentless, dropping -16.9% from C$ 1.30 to C$ 1.08.

Dividends as compensation? Sadly no! No dividends. I cannot find an indication that Yangarra has ever paid a dividend.

Growing production? No sir! The production in 2019 (12.6 K BoE/d) was 16% above the 2024 production (10.9 K BoE/d). 2024 production was -8.8% below 2023 (11.9 K BoE/d).

The 2024 balance sheet is in an average condition. Management preserved the balance sheet by reducing in H2 the 2024 capex from C$ 70 M to C$ 55-60 M. The equity/balance sheet ratio at the end of 2024 will be a good 66.6%, but the 2024 debt/EBITDA ratio will be a too high 1.36.
Although the balance sheet is not a disaster, nobody is cheering.

An investment in Yangarra has been an investors nightmare. Money trapped and lost.

Yangarra investor ghosts of the present
In 2025 the Yangarra stock price fall has continued where it left off in 2024 - a further 3.7% decline in the share price from $ 1.08 to C$ 1.04.

A dividend in 2025? Unlikely. Yangarra management has indicated that shareholder returns will not start until the long-term debt (currently C$ 110 M) is reduced to below C$ 80 M. This will not happen until late 2025. No 2025 dividends.

Growing production? The 2025 outlook (11.25-11.75 K BoE/d) may give a glimmer of hope as the midpoint is a 5.6% increase over 2024 (10.6 K BoE/d).

Despite the limited production growth, 2025 profits can increase substantially. Canadian gas prices should start to increase in H2 2025 with the start of Canada LNG and increasing US and local Canadian demand. The 2025 eps can be $ 0.33-0.36 (PE= low 2.9-3.2), resulting in a good 2025 FCF of C$ 28-33 M.

The balance sheet? With higher gas prices the 2025 EBITDA will increase. The 2025 FCF will be heading 100% towards the balance sheet, thus reducing the long-term debt. Late 2025 the equity/balance sheet ratio can be a very good 69.8% and the debt/EBITDA ratio a healthy 0.86. A healthy balance sheet in late 2025 is on the horizon.

To note is that the equity per share is C$ 5.72, This is 5.5 times the current share price!

Yangarra investor ghosts of the future
Like a real fairy tale, the story of Yangarra may come to a beautiful ending. During 2025 Yangarra may start to transform from an ugly duckling into a beautiful white swan.

Yangarra has enormous reserves relatively to its production. The 2023 proven reserves (96.8 M BoE) are equivalent to 22.3 years of production. With a continued high RRR (=2.03 over the last five years) reserves can grow further in the future. The reserves and an increasing gas demand will enable an extensive growth of production over the next 5-10 years

After 2025 the FCF will no longer be required solely for the balance sheet reinforcement. Part of the FCF will be available for shareholder returns. Shareholder returns may start with a careful 5% in 2026, but thereafter quickly can increase to 10-15%.

With such high returns an increase in share price is unavoidable. Question is when this will happen, 2025 or later?

Possibly a prince on a white horse will come along and fall for Yangarra’s attractive reserves and its enormous glimmering equity. The prince may kiss Yangarra awake, thus chasing all ghosts away. A kiss of C$ 2.00-3.00 per share will be a good kiss. Yangarra ranks a high 8th in my oil and gas ranking out of 84.

[Petroleum economist]

As per the 2023 annual information form, the Yangarra NPV10 value of the 2023 proven reserves is C$ 903 M. The NPV10 of the proven plus probable reserves is C$ 1.248 M. Yangarra at the end of Q3 had 98.7 M basic shares.

The NPV10 of the 2023 proven reserves thus equals 903/98.7 = C$ 9.15 per share. That of the proven plus probable reserves is 1.248/98.7 =C$ 12.64 per share. The latest Yangarra share price is C$ 1.04.