Athabasca Oil – Preview of Q3 results
Posted: Fri Oct 11, 2024 8:57 am
Athabasca will report on 30th of October after market its Q3 results. Athabasca (4th) is after Hemisphere (3rd), the highest-ranking Canadian oil and gas company in my ranking system of 83 oil and gas companies.
The high ranking of Athabasca is based on strong reserves, a growing production in 2027/2028 (both bitumen and Duvernay shale), a very sound balance sheet and a good profitability. The 2024 PE is a bit high, but with the increasing production, the PE will fall over time. Returns to shareholder are generous.
Production
• Q2 production was 36.7 K BoE/d.
• Athabasca did not provide a Q3 outlook.
• I expect a Q3 production of 38.1 K BoE/d. The 1.5 K BoE/d increase over Q2 will come mainly from extra production from the Duvernay shale.
• Athabasca 2024 outlook is 36-37 K BoE/d, based on 33-34 K BoE/d from bitumen, plus 3.0 K BoE/d from the Duvernay shale.
• I expect Athabasca to be at the top end of the 2024 outlook, at 36.9 K BoE/d.
• Production in 2025/2026 should be near 2024 levels or slightly above.
• After 2026, production can jump to 55-60 K BoE/d in 2028, with expansions at Leismer and Duvernay.
Balance sheet
• Q2 long term debt was C$ 191 M.
• I expect debt at the end of Q3 to be slightly up versus Q2, at C$ 200-205 M.
• Debt is heading for $ 210-220 M at the end of 2024.
• The debt/EBITDA ratio at the end of 2024 will be near an excellent 0.36.
• Q2 equity ratio (=equity/balance total) was an excellent 75.7%.
• I expect the Q3 equity ratio to be slightly down compared at 74.5%.
Profitability
• Q2 results were as per expectation. Royalties up due to the Duvernay production, depreciation was slightly above expectation and operating costs were below expectation.
• Q2 eps was C$ 0.17.
• I expect for Q3 an eps of C$ 0.12. The Q3 eps will be below Q2, due to lower oil and gas prices and higher stock-based expenses.
• The 2024 eps is heading for C$ 0.48 (PE=10.8)
• In 2025/2026 the eps will be close to the 2024 eps at C$ 0.49-0.51 (PE=10.6-10.8).
• The jump in eps to C$ 0.70-0.75 (PE 6.7-6.9) will come in 2027/2028, with the increases in Leismer/Duvernay production.
Shareholder returns
• Athabasca want to returns 100% of the FCF to shareholders.
• Athabasca does not pay dividends.
• Athabasca bought back 14 M shares in Q1 and 20.7 M shares in Q2 for a total C$ 173 M.
• With lower oil prices, I expect in H2 share buybacks to fall back to 15-20 M shares, a bit below H1.
• 2024 total yield should be a high 9.0-9.2%
• Shareholder yield in 2025/2026 (6.0-6.5%) should drop off a bit due lower oil prices, but can pick up again in 2027/2028 to 9-10% due to production increases.
With the ample reserves, growing production, a strong balance sheet, good profitability, a medium PE and decent shareholder returns Athabasca justifiable sits in the top five of my ranking system.
The high ranking of Athabasca is based on strong reserves, a growing production in 2027/2028 (both bitumen and Duvernay shale), a very sound balance sheet and a good profitability. The 2024 PE is a bit high, but with the increasing production, the PE will fall over time. Returns to shareholder are generous.
Production
• Q2 production was 36.7 K BoE/d.
• Athabasca did not provide a Q3 outlook.
• I expect a Q3 production of 38.1 K BoE/d. The 1.5 K BoE/d increase over Q2 will come mainly from extra production from the Duvernay shale.
• Athabasca 2024 outlook is 36-37 K BoE/d, based on 33-34 K BoE/d from bitumen, plus 3.0 K BoE/d from the Duvernay shale.
• I expect Athabasca to be at the top end of the 2024 outlook, at 36.9 K BoE/d.
• Production in 2025/2026 should be near 2024 levels or slightly above.
• After 2026, production can jump to 55-60 K BoE/d in 2028, with expansions at Leismer and Duvernay.
Balance sheet
• Q2 long term debt was C$ 191 M.
• I expect debt at the end of Q3 to be slightly up versus Q2, at C$ 200-205 M.
• Debt is heading for $ 210-220 M at the end of 2024.
• The debt/EBITDA ratio at the end of 2024 will be near an excellent 0.36.
• Q2 equity ratio (=equity/balance total) was an excellent 75.7%.
• I expect the Q3 equity ratio to be slightly down compared at 74.5%.
Profitability
• Q2 results were as per expectation. Royalties up due to the Duvernay production, depreciation was slightly above expectation and operating costs were below expectation.
• Q2 eps was C$ 0.17.
• I expect for Q3 an eps of C$ 0.12. The Q3 eps will be below Q2, due to lower oil and gas prices and higher stock-based expenses.
• The 2024 eps is heading for C$ 0.48 (PE=10.8)
• In 2025/2026 the eps will be close to the 2024 eps at C$ 0.49-0.51 (PE=10.6-10.8).
• The jump in eps to C$ 0.70-0.75 (PE 6.7-6.9) will come in 2027/2028, with the increases in Leismer/Duvernay production.
Shareholder returns
• Athabasca want to returns 100% of the FCF to shareholders.
• Athabasca does not pay dividends.
• Athabasca bought back 14 M shares in Q1 and 20.7 M shares in Q2 for a total C$ 173 M.
• With lower oil prices, I expect in H2 share buybacks to fall back to 15-20 M shares, a bit below H1.
• 2024 total yield should be a high 9.0-9.2%
• Shareholder yield in 2025/2026 (6.0-6.5%) should drop off a bit due lower oil prices, but can pick up again in 2027/2028 to 9-10% due to production increases.
With the ample reserves, growing production, a strong balance sheet, good profitability, a medium PE and decent shareholder returns Athabasca justifiable sits in the top five of my ranking system.