This item is part of Stockwatch's value added news feed and is only available to Stockwatch subscribers.

Here is a sample of this item:

by Stockwatch Business Reporter

West Texas Intermediate crude for June delivery lost three cents to $48.16 on the New York Merc, while Brent for July lost 12 cents to $48.81 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.10 to WTI ($36.06), down from a discount of $11.70. Natural gas for June added 3.8 cents to $2.039. The TSX energy index lost a fraction to close at 182.74.

Alberta oil producer Cardinal Energy Ltd. (CJ) added 10 cents to $9.11 on 389,700 shares. It has received some boosterish attention from TD Securities analyst Aaron Bilkoski, who has started covering the stock with a "buy" rating and a target price of $10.50. He likes its safe-seeming dividend (which at 3.5 cents a month yields 4.6 per cent) and its "material upside predicated on M&A [mergers and acquisitions] success." He praises Cardinal's assets for their low decline rate and their ability to generate free cash flow. He points out, however, that many of Cardinal's active wells are low margin and low productivity: 75 per cent of them produce less than 10 barrels of oil equivalent a day, says Mr. Bilkoski. This indicates to him that Cardinal must rely on acquisitions to boost production. This has generally not been a problem for Cardinal. Although it was producing just 1,500 barrels a day when it went public in late 2013 through a $10.50-a-share initial public offering, it used some of the offering proceeds to buy 4,300 barrels a day for $210-million. Three more big acquisitions were closed in 2014 and 2015, adding a further 7,600 barrels a day for about $530-million (not counting several smaller acquisitions that also took place). As a result, Cardinal has been able to boost its production by nearly 10 times over the last 2-1/2 years. Its first quarter 2016 production was 14,245 barrels a day. Mr. Bilkoski suspects that more acquisitions are in Cardinal's future, given that Cardinal, when compared with other producers, enjoys "a much more robust balance sheet and arguably better access to equity markets." (Cardinal had net debt of $147-million as of March 31 and has a current share count of 65 million.)

The remainder is available to Stockwatch subscribers.
Sign-up for a FREE 30-day Stockwatch subscription and SEE NO ADS