Strathcona Resources (SCR) AI Stock Analysis

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Strathcona Resources

(TSX:SCR)

Rating:77Outperform

Price Target:―

Strathcona Resources scores well due to its strong financial performance and attractive valuation. The company's solid profitability metrics and cash flow generation contribute significantly to its financial strength. However, the technical analysis indicates some caution with downward momentum, which may present short-term challenges. Overall, the stock is well-positioned with strong financials and valuation, despite some technical headwinds.

Positive Factors

Resource Base

Strathcona has established an impressive track record of accretive growth and has built a multi-decade resource base.

Shareholder Returns

A dividend hike of 4% highlights the company's intent to increase shareholder returns.

Negative Factors

Cash Flow

Strathcona reported lower-than-expected cash flow while production was in line with consensus.

Trading Liquidity

The small float will limit trading liquidity, which would likely act as a drag on share price.

Strathcona Resources (SCR) vs. iShares MSCI Canada ETF (EWC)

Market Cap

C$7.04B

Dividend Yield3.65%

Average Volume (3M)70.85K

Price to Earnings (P/E)9.9

Beta (1Y)1.42

Revenue Growth796.07%

EPS Growth-35.52%

CountryCA

Employees797

SectorEnergy

Sector Strength54

IndustryOil & Gas Exploration & Production

Share Statistics

EPS (TTM)0.96

Shares Outstanding214,235,610

10 Day Avg. Volume81,042

30 Day Avg. Volume70,848

Financial Highlights & Ratios

PEG Ratio<0.01

Price to Book (P/B)0.94

Price to Sales (P/S)0.00

P/FCF Ratio4.83

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$35.00

Price Target Upside6.58% Upside

Rating ConsensusHold

Number of Analyst Covering4

Strathcona Resources Business Overview & Revenue Model

Company DescriptionStrathcona Resources Ltd. is a Canadian-based oil and gas exploration and production company. It focuses on the development and extraction of hydrocarbon resources, primarily operating in the Western Canadian Sedimentary Basin. The company is committed to sustainable and efficient energy production, leveraging advanced technologies and methodologies to optimize resource recovery while minimizing environmental impact.

How the Company Makes MoneyStrathcona Resources generates revenue primarily through the exploration, development, and production of oil and gas resources. The company sells crude oil, natural gas, and natural gas liquids to various markets, including domestic and international buyers. Revenue streams are significantly influenced by commodity prices, production volumes, and operational efficiencies. Additionally, the company may engage in strategic partnerships or joint ventures to enhance its operational capabilities and access to new resources, further contributing to its financial performance.

Strathcona Resources Earnings Call Summary

Earnings Call Date:May 15, 2025

(Q2-2024)

% Change Since: 22.17%|

Next Earnings Date:Aug 19, 2025

Earnings Call Sentiment Neutral

The earnings call reflected a mix of positive achievements such as consistent oil production, improved efficiency, and strategic partnerships for decarbonization, alongside challenges like reduced natural gas production and potential rail strike impacts.

Q2-2024 Updates

Positive Updates

Consistent Oil Production and Increased Sales Volume

Oil production for Q2 remained consistent with Q1 at approximately 131,000 barrels per day, while oil sales volumes increased to approximately 135,000 barrels per day due to inventory drawdown.

Debottlenecking Projects Improve Efficiency

Cold Lake projects resulted in an 8% reduction in steam oil ratio compared to the same period in 2023, enhancing operational efficiency.

Commitment to Decarbonization

Announced a $2 billion carbon capture infrastructure partnership with Canada Growth Fund, aiming for a mid-2025 FID for the first project.

Achievement of Debt Target and Dividend Announcement

Achieved debt target of $2.5 billion and announced a quarterly base dividend of $0.25 per share.

Negative Updates

Natural Gas Production Decline

Natural gas production was down 6% from Q1 due to planned and unplanned third-party outages, leading to a reduction in guidance by 15 million cubic feet per day.

Potential Impact of Looming Rail Strike

Concerns about the impact of a potential rail strike on the 30,000 barrel per day crude by rail business and supply chain inputs like diesel.

Deferred Natural Gas Production

Deferral of dry gas production from Groundbirch wells due to third-party outages and low natural gas prices.

Company Guidance

During the Q2 2024 earnings call for Strathcona Resources Limited, significant guidance was provided on various operational and financial metrics. The company reported an average production of approximately 182,000 barrels of oil equivalent (BOE) per day, generating funds from operations of $548 million, or $2.56 per share. Capital expenditures totaled $297 million, resulting in free cash flow of $247 million, or $1.15 per share. Oil production remained consistent with the previous quarter at around 131,000 barrels per day, while oil sales volumes increased to approximately 135,000 barrels per day due to the commissioning of a new crude by rail offloading facility. Natural gas production stood at 237 million cubic feet per day, down 6% from the first quarter, and natural gas liquids production was steady at 11,500 barrels per day. Strathcona announced a reduction in its annual natural gas guidance by 15 million cubic feet per day, adjusting the corporate guidance range to 185,000 to 190,000 BOE per day, with an oil weighting increase to 72%. The company maintained its capital budget guidance at $1.3 billion and achieved its debt target of $2.5 billion by June 30, leading to the approval of a quarterly base dividend of $0.25 per share. Additionally, Strathcona announced a partnership with Canada Growth Fund to develop up to $2 billion in carbon capture infrastructure, targeting a final investment decision by mid-2025. An Investor Day is scheduled for November 14, 2024, to elaborate on near- and long-term asset plans.

Strathcona Resources Financial Statement Overview

Summary

Strathcona Resources shows strong financial performance with impressive revenue growth and profitability. The income statement is robust, and cash flow generation is solid, providing financial flexibility. Despite increased leverage, the overall financial health remains strong.

Income Statement

Very Positive

Strathcona Resources demonstrates strong revenue growth with a substantial increase from 2022 to 2023. The gross profit margin is healthy at 25.8%, and the net profit margin stands at 13.9%, indicating solid profitability. EBIT and EBITDA margins are robust at 23.6% and 41.6%, respectively, reflecting efficient operational management. The company has shown significant improvement in revenue and profitability over the years.

Balance Sheet

Positive

The balance sheet shows a moderate debt-to-equity ratio of 0.58, suggesting manageable leverage. Return on equity is impressive at 11.0%, indicating effective use of equity capital. The equity ratio is 50.7%, showing a balanced capital structure. While the company has increased its assets and equity significantly, the rise in debt requires careful monitoring.

Cash Flow

Very Positive

Free cash flow has grown substantially, supported by strong operating cash flow, with a high operating cash flow to net income ratio of 2.60. Free cash flow to net income ratio is 0.85, reflecting solid cash generation ability. The company’s cash flow management appears strong, providing flexibility for future investments or debt reduction.

Breakdown	TTM	Dec 2023	Dec 2022	Dec 2021	Sep 2020	Sep 2019
Income Statement
Total Revenue	2.58B	4.24B	649.65M	376.93M	131.76M	59.61M
Gross Profit	649.05M	1.09B	368.37M	180.82M	-5.33M	6.92M
EBITDA	1.11B	1.76B	443.12M	235.60M	39.59M	15.37M
Net Income	386.08M	587.20M	220.12M	67.92M	-17.28M	-13.98M
Balance Sheet
Total Assets	10.60B	10.50B	1.10B	886.17M	694.47M	663.82M
Cash, Cash Equivalents and Short-Term Investments	21.70M	17.80M	0.00	0.00	40.12M	28.65M
Total Debt	3.04B	3.07B	211.57M	333.48M	259.82M	216.97M
Total Liabilities	5.17B	5.17B	414.56M	462.53M	339.41M	293.74M
Stockholders Equity	5.43B	5.33B	683.47M	423.64M	355.06M	370.07M
Cash Flow
Free Cash Flow	638.70M	497.90M	132.98M	-33.50M	-62.95M	-151.85M
Operating Cash Flow	1.84B	1.52B	378.81M	157.86M	41.64M	10.56M
Investing Cash Flow	-1.24B	-999.40M	-266.26M	-187.63M	-103.21M	-154.50M
Financing Cash Flow	-641.64M	-559.60M	-112.55M	29.77M	32.93M	152.14M

Strathcona Resources Technical Analysis

Technical Analysis Sentiment

Positive

Last Price32.84

Price Trends

50DMA

29.18

Positive

100DMA

27.74

Positive

200DMA

28.05

Positive

Market Momentum

MACD

0.41

Negative

RSI

71.10

Negative

STOCH

70.83

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SCR, the sentiment is Positive. The current price of 32.84 is above the 20-day moving average (MA) of 30.68, above the 50-day MA of 29.18, and above the 200-day MA of 28.05, indicating a bullish trend. The MACD of 0.41 indicates Negative momentum. The RSI at 71.10 is Negative, neither overbought nor oversold. The STOCH value of 70.83 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:SCR.

Strathcona Resources Peers Comparison

Overall Rating

UnderperformOutperform

Sector (68)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
IMO	81 Outperform	$57.47B	12.10	20.61%	2.55%	1.26%	8.70%
SCR	77 Outperform	C$7.04B	9.93	12.43%	3.65%	796.07%	-35.52%
CVE	77 Outperform	$36.38B	13.24	9.50%	3.99%	1.57%	-38.04%
SU	76 Outperform	$67.36B	11.36	13.74%	4.16%	2.16%	-20.22%
ARX	75 Outperform	C$16.14B	12.16	17.25%	2.75%	2.20%	13.50%
TOU	73 Outperform	C$24.09B	18.34	8.35%	9.63%	-8.29%	-30.52%
Sector *	68 Neutral	$15.42B	10.07	6.34%	5.16%	4.06%	-67.04%

* Energy Sector Average

Performance Comparison

TSE:SCR

Strathcona Resources

32.84

1.84

5.94%

TSE:CVE

Cenovus Energy

20.06

-7.17

-26.33%

TSE:ARX

ARC Resources

27.61

4.33

18.61%

TSE:IMO

Imperial Oil

112.89

17.60

18.47%

TSE:SU

Suncor Energy

54.87

3.97

7.79%

TSE:TOU

Tourmaline Oil

62.27

3.84

6.57%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jan 19, 2025