Obsidian Energy (OBE) AI Stock Analysis

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Obsidian Energy

(TSX:OBE)

50Neutral

Obsidian Energy's overall stock score is weighed down by its financial challenges, particularly in terms of profitability and cash flow management, despite positive revenue growth and a strong balance sheet. Technical analysis further supports a cautious outlook with bearish indicators, while valuation metrics are unattractive due to negative earnings. The absence of earnings call insights and corporate events leaves these aspects out of consideration, focusing attention on the existing financial and market data.

Positive Factors

Asset Sale

A good premium was received for the Cardium asset, described as top dollar when considering abandonment liabilities.

Financial Performance

The company continued its buyback program, buying back 1.6 million shares and returning $13.2 million to shareholders.

Operational Success

Obsidian's new development drilling at Harmon Valley South achieved IP30 rates ahead of expectation at 450-500 boe/d per well, signifying potential to extend the field and add future development locations.

Negative Factors

Market Visibility

Obsidian's discounted valuation is partially explained by how far off the radar-screen it is with other energy operators.

Shareholder Returns

With a much improved balance sheet and recent strength in crude oil prices, Obsidian is expected to prioritize outsized heavy oil production growth over enhanced shareholder returns in the medium term.

Obsidian Energy (OBE) vs. S&P 500 (SPY)

Market Cap

$469.37M

Dividend YieldN/A

Average Volume (3M)542.30K

Price to Earnings (P/E)5.6

Beta (1Y)1.40

Revenue Growth11.92%

EPS Growth-304.98%

CountryCA

Employees203

SectorEnergy

Sector Strength51

IndustryOil & Gas Exploration & Production

Share Statistics

EPS (TTM)0.20

Shares Outstanding73,684,800

10 Day Avg. Volume558,367

30 Day Avg. Volume542,300

Financial Highlights & Ratios

PEG Ratio0.01

Price to Book (P/B)0.45

Price to Sales (P/S)0.00

P/FCF Ratio-9.38

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$9.34

Price Target Upside46.66% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering3

Obsidian Energy Business Overview & Revenue Model

Company DescriptionObsidian Energy Ltd. primarily focuses on the exploration, production, and development of oil and natural gas properties in the Western Canada Sedimentary Basin. The company was formerly known as Penn West Petroleum Ltd. and changed its name to Obsidian Energy Ltd. in June 2017. Obsidian Energy Ltd. is headquartered in Calgary, Canada.

How the Company Makes MoneyObsidian Energy generates revenue primarily through the sale of crude oil, natural gas, and natural gas liquids extracted from its owned and operated assets in the Western Canadian Sedimentary Basin. The company's revenue model is centered around exploration and production activities, where it identifies and develops oil and gas reserves and subsequently sells the produced hydrocarbons at market prices. Key revenue streams include the sale of these commodities directly to refineries, marketing companies, and other purchasers under various pricing arrangements. The company's earnings are influenced by factors such as global oil and gas prices, production volumes, and operational efficiencies. Obsidian Energy may also engage in strategic partnerships or joint ventures to enhance its resource development capabilities and market reach, although specific partnerships are not detailed here. The company's focus on cost management and operational optimization further contributes to its financial performance.

Obsidian Energy Financial Statement Overview

Summary

Obsidian Energy faces a challenging financial environment. While revenue growth and a solid equity base are positive aspects, profitability issues, particularly in terms of net income and free cash flow, pose significant risks. The company's ability to manage leverage remains a strength, but attention to cash flow management is critical for future stability.

Income Statement

Neutral

Obsidian Energy's income statement shows mixed performance. Gross profit margin improved in 2024 to 7.43% from 62.65% in 2023, but net income declined significantly resulting in a negative net profit margin of -24.17% in 2024. Revenue growth is positive with a 28.24% increase from 2023 to 2024. However, the company experienced a decline in EBIT and net income, impacting profitability.

Balance Sheet

Positive

The balance sheet indicates a stable equity position with a debt-to-equity ratio of 0.24 in 2024, which is relatively low, suggesting prudent leverage. However, stockholders' equity decreased from 2023 to 2024. The equity ratio remains strong at 66.47%, signaling a robust capital structure, despite fluctuations in total assets.

Cash Flow

Neutral

Cash flow analysis reveals challenges in free cash flow, which turned negative in 2024 due to increased capital expenditures. Operating cash flow remained stable but the free cash flow to net income ratio is unfavorable due to the negative net income. The operating cash flow to net income ratio is not meaningful due to negative net income.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
837.70M	653.30M	920.00M	497.50M	286.50M
	Gross Profit
62.30M	409.40M	695.70M	497.40M	-750.10M
	EBIT
0.00	374.20M	732.00M	649.90M	-766.40M
	EBITDA
430.60M	401.20M	794.30M	577.10M	-600.30M
	Net Income Common Stockholders
-202.60M	108.00M	810.10M	181.80M	-802.80M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
0.00	500.00K	800.00K	7.30M	8.10M
	Total Assets
2.11B	2.25B	2.20B	1.43B	964.10M
	Total Debt
342.50M	228.00M	231.30M	399.70M	462.20M
	Net Debt
342.50M	227.50M	230.50M	392.40M	454.10M
	Total Liabilities
708.80M	606.60M	624.60M	665.70M	641.00M
	Stockholders Equity
1.41B	1.64B	1.58B	763.50M	323.10M
Cash Flow		Free Cash Flow
-64.60M	59.60M	137.40M	57.70M	22.20M
	Operating Cash Flow
361.90M	352.70M	456.80M	198.70M	79.40M
	Investing Cash Flow
-430.50M	-293.60M	-290.80M	-156.60M	-66.20M
	Financing Cash Flow
67.60M	-59.40M	-172.50M	-42.90M	-8.10M

Obsidian Energy Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price6.37

Price Trends

50DMA

7.03

Negative

100DMA

7.47

Negative

200DMA

7.93

Negative

Market Momentum

MACD

-0.34

Negative

RSI

49.79

Neutral

STOCH

66.75

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:OBE, the sentiment is Neutral. The current price of 6.37 is above the 20-day moving average (MA) of 6.17, below the 50-day MA of 7.03, and below the 200-day MA of 7.93, indicating a neutral trend. The MACD of -0.34 indicates Negative momentum. The RSI at 49.79 is Neutral, neither overbought nor oversold. The STOCH value of 66.75 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:OBE.

Obsidian Energy Peers Comparison

Overall Rating

UnderperformOutperform

Sector (56)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TNZ	67 Neutral	C$406.72M	187.11	-13.52%	―	-3.50%	-153.25%
LGN	60 Neutral	C$400.68M	63.27	2.03%	―	―	―
Sector *	56 Neutral	$7.06B	3.68	-4.87%	5.83%	0.28%	-51.94%
CEI	53 Neutral	C$457.69M	―	-5.23%	―	113.34%	-11.26%
OBE	50 Neutral	$469.37M	5.64	-12.88%	―	11.92%	-304.98%

* Energy Sector Average

Performance Comparison

TSE:OBE

Obsidian Energy

6.37

-4.66

-42.25%

ZPTAF

Surge Energy

3.57

-1.11

-23.72%

FECCF

Frontera Energy

3.66

-2.81

-43.43%

TSE:TNZ

Tenaz Energy Corp

14.47

10.50

264.48%

TSE:CEI

Coelacanth Energy, Inc.

0.86

0.10

13.16%

TSE:LGN

Logan Energy Corp

0.62

-0.24

-27.91%

Obsidian Energy Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q1-2025)

% Change Since: 14.16%|

Next Earnings Date:Jul 31, 2025

Earnings Call Sentiment Neutral

The earnings call reflects a strategic shift towards focusing on core assets and improving financial stability through asset sales and debt reduction. While there are notable achievements in production growth and liquidity, challenges persist with higher operating costs and some suboptimal exploration results.

Q1-2025 Updates

Positive Updates

Successful Pembina Asset Sale

Obsidian Energy closed the sale of its Pembina assets for a total consideration of $320 million, consisting of $211 million in cash and 9.1 million shares of in-play, plus a 34.6% working interest in Willesden Green Unit #2.

Increased Focus on Core Assets

Post-transaction, Obsidian Energy is focusing on its Peace River heavy oil and Willesden Green light oil assets, with optionality in Viking assets.

Production Growth

Q1 production was 38,400 BOEs per day, up 12% over Q1 last year, driven by heavy oil from the Peace River program.

Debt Reduction and Liquidity

Forecasted net debt of approximately $255 million by the end of Q2, with a net debt to FFO ratio of about 1.1x. The company has significant liquidity with $200 million available on its credit facility.

Share Buyback Program

Repurchased 3.5 million shares for $24.5 million through May 6, demonstrating commitment to returning capital to shareholders.

Negative Updates

Higher Operating and Capital Expenditures

Operating costs increased to $15.72 per BOE from $13.91 last year due to higher water handling costs. Q1 capital expenditures were $128 million, higher than last year's $114 million.

Negative Free Cash Flow

Q1 resulted in negative free cash flow of $35 million due to heavy capital expenditures and share repurchases.

Exploration Results

Some exploration wells in Peace River did not perform as expected, with one Clearwater well producing at a sub-economic rate and another Bluesky well not yielding conclusive results.

Company Guidance

In the first quarter of 2025, Obsidian Energy provided guidance on several key metrics. The company estimated its second quarter production midpoint at approximately 29,200 BOEs per day, following the sale of its Pembina assets. Obsidian Energy's production mix consists of about 72% oil and liquids, with a forecasted net debt of approximately $255 million, translating to a net debt to FFO ratio of 1.1x by the end of the second quarter. The company has approximately 71 million shares outstanding, equating to a market capitalization of around $385 million. Obsidian Energy continues to focus on delivering shareholder returns through production growth, share buybacks, and debt reduction, utilizing free cash flow from light oil assets to invest in the Peace River asset. The strategic advantages include a high-quality asset base with stable production and significant growth potential, particularly in the Peace River area, where an initial waterflood project has commenced. The company also highlighted its strong balance sheet, ample liquidity, and commitment to maintaining high health and safety standards.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.