Highlights from 2018 Yearend Reserves

Now that 99% of companies have reported their yearend 2018 reserves and Company value it is time to drill down into the database and analyze the results.  These highlights will help guide our stock selections for 2019 and beyond as the market recovery takes hold.  I would invest cautiously though as the world economy appears to be on the verge of a recession and the two largest economies in the World are in a trade war.  Without further discussion though are the highlights from 2018 Yearend Reserves.

Largest Upside to NAV

On this table there are some companies that could bounce to the upside, but are constrained by too much debt.  The most likely scenario for the top 3 is that they will either sell off assets to pay off debt, or restructure the debt by diluting the shareholders of the company.  As of the writing of this article Bellatrix has announced a debt restructuring that may help slightly. Unfortunately after dilution there is still too much debt on the balance sheet.  Stay tuned.

Least Upside to NAV(Overvalued)

These companies are obvious market favorites and command a premium share price.  None of them appear to be investable at this point in time, except for Valeura, which shows up in some other summaries.  Valeura just recently raised money to drill wells in Turkey into a basin centered shale gas play that could have a lot of upside.  Think the Montney before it was proved up, but have the gas price you can sell into be above $8.00/mcf, very interesting.

Largest Percent Increase in Production per Share

Next to valuation the number that is the most important is production growth per share.  Companies that can not grow their production per share either have a reserve problem(no drillable economic projects) or a financial problem(too much debt).  These companies stand out as good operators that can increase the production in their properties and should be considered as investments.

Smallest Percent Increase in Production per Share

Companies that can not increase their production per share are generally in some trouble, such as Bellatrix, with too much debt and an inability to spend money on adding reserves.  The other scenario is companies that have issued a lot of stock, like Valeura, either to do an acquisition or drill wells.  Valeura sold shares to drill wells into their new shale play in Turkey.  In this case the company balance sheet is now flush with cash and they are ready to go, that is a good thing so something to watch.

BOE Production Growth

This bar graph shows all the companies featured on this website and their year over year BOE production growth per share.

Largest Percent Increase in per Share Reserves

These companies have found a way to add PDP(producing wells) reserves and 1P(Producing and ready to drill) reserves and grow the company.  Combined with growing production and an undervalued stock this metric points to successful companies that should increase their NAV over time.  With a growing NAV the share price should also go up increasing your NAV.

Conclusion

There you have it, the highlights of the 2018 yearend reserves.  As of the time of the writing of this article the markets have recovered from the carnage at the yearend of 2018 and bounced off a bottom.  The United States is headed into a trade war with China and volatility is rising with the uncertainty of what is next.  Check the market risk indicator occasionally to see if risk is rising and you should take some chips off of the table.  Today the indicator is pointing downward, or to higher risk and a market correction so be warned that stocks could correct again in the near future.  It is possible that we could get a buying opportunity again like Crescent Point at $3.50/share.

As always please consult a qualified financial advisor before buying or selling any security.  All or any of the stocks mentioned on this article I could own or sell at any point in time.