Paramount Resources increases dividend 20%.Another Kay Bob Duvernay winner

Paramount (POU) had a good first quarter producing on average 101,000 barrels a day which was only slightly lower than Q4.At the same time it showed an increase of 22,000 barrels/day from it's multi-pad wells in the Kay Bob region.Kay Bob is the new shale oil discovery that is showing superior oil and natural gas production.This area was explored before with below average results because of the low porosity of shale.But with the advent of new technology in horizontal drilling, production has become much more successful.In fact,the Kay Bob area is condidered the most productive in the Duvernay.In 2023,4 out of the top 5 producing wells, in Alberta were from the Kay Bob region.But these wells deliver oil,liquids and natural gas.It is not a pure oil play.

   POU has increased it's capital expenditures to$214 million in Q1.And it is drilling 15 new wells.9 of these wells are in the Grande Prairie Duvernay region and 4 in the Kay Bob area.This leaves Paramount with about 200,000 acres of unexplored land in the Duvernay region.                                         

   Financially Speaking

   Paramount is unlike most oil companies in the oil patch as it has almost no debt and $570 million in investments including 31.5 million shares of Nuvista Energy (NVA).Recently it sold 6 million shares of NVA for $75 million.This will largely be used to finance it's capital construction program.In addition, it's Q1 operating results were good enough for POU to increase it's dividend by 20% to $.15 per share.It had operating income of $201 million and adjusted funds flow of $226 million but negative free cash flow of $10 million.The latter fas been caused by accounting adjustments.

   Paramount sold some non-core assets for $47 million in 2023 and this reduced total production to 97,000 boe/day.But additional production from newly drilled Kay Bob wells brought Q1 production to 101,000 boe/day.Guidance for the rest of 2024 remains about the same as for Q1.This blog sees increases in the average price of oil and natural gas for the rest of 2024 (above the Q1 average price).This could easily create a positive free cash flow and operating income of $225-$240 million by Q3.If so then POU should be trading around $35-$37 per share by Q3.                          https://www.zacks.com/            

Dale Mcintyre is a freelance writer writing for Marketbeat.com And Zacks.

Innergex Renewable is the smallest,but yet a quality utility in the Index

Innergex Renewable Energy (INE) is considered the smallest utility on the TSX index.It and Boralex are both fairly new entrants to the TSX Index and both are headquartered in QuebecAlso both have a portfolio of all noin-renewable assets..INE only generates non-renewable energy, that is, energy from hydro,solar and wind power.It has a market capitalization of about $1.5 billion.This compares to utilities such as  Fortis or Emera which have market caps of $27 billion and $13 billion respectively.And both INE and BLX are adding new facilities to increase their total energy outage.INE has installed capacity of 4266 MW.It has 85 operating facilities with 13 projects under development.It has in a few years more than tripled it's power generating capacity.Most of it's projects are in Quebec with a few in Chile.And a significant percentage comes from hydro power.

     Performance in 2023

   2023 was not a great year for North American utilities.Even those with substantial inreases in performance did not get substantial increases in share price.As interest rates were high and investors did not want to bid up share prices of utilities with relatively high yields.Instead investors ploughed money into high grade bonds.While in 2023 INE added to it's stable of non renewable assets.For example, it completed an acquisition of a 60 MW facility in Ontario and built it's first storage facility in Chile.It also adbvanced on the construction of it's 330 MW facility in Boswell Springs in Wyoming.And it started delivering power on it's 7.5 MW Innavik hydro project in nortern Quebec.As hydro is a significant part of the INE portfolio of non renewable assets.
                                                               

             Growth versus Earnings

   Innergex  has grown rapidly in the past 5 years.Still it's market capitalization is about half of the next biggest utility on the TSX index which is Boralex, another Quebec based utility.And INE has made a concerted growth effort in 2023.In addition, it has made a partnership with a French financier called Credit Agricole Assurances.But it has not done as well with improving it's  earnings.It has showed negative earnings since 2019.Each year it has large and growing interest expense.Also it has a large debt/equity ratio.It is not likely to show substantial share price increases until it's debt has been pared down and there are decreases in interest expense.As increases in revenues have ben matched by increases in interst expense.This blog sees INE moving in a tight range around it's present share price in 2024.
                                             https://www.zacks.com/             

 Dale Mcintyre M.S.Sc.(econ) is a freelance writer that writes primarily  for Zacks Researchy.

New kid on the Block -Duvernay Energy

 As of January1,2024 Duvernay Energy will become a newly formed Canadian oil company.It will be formed by the combination of  Cenovus (CVE) and Athabasca Oil(ATH).CVE will own 70% and ATH will own 30%.It will own 200,000 gross acres,most of it in the Montney and Duvernay region.It will inherit Kaybob acreage from Athabasca Oil and Cenovus Energy.Athabasca has 3 Duvernay pads in the Kabob region.Duvernay will own a pipeline network  connected to Pembina Pipeline and Keyera Ppipeline.On January1,2024 Duvernay Energy will start off with production of 2000 boe/day.And the board will give guidance at the end of Q1 2024.

           Cenovus Contribution

   The new Duvernay Energy board will have a 4 man board with one member from CVE.And Duvernay will get $18 million of it's $40 million seed capital from CVE.Also Cenovus will contribute some of it's profitable  Kaybob acreage to Duvernay Energy.In total, Cenovus will earn 30% of  Duvernay's net income and own 30% of it's assets.

   The opening production in Q1 2024 will be 2000 boe/day.A further 2 well pad will be producing in Q2 2024.Athabasca plans to have production of 6000 boe/day in 2025.This blog finds this to be a low forecast.However this could produce from $100 million to $125 million of revenue for Duvernay Energy in 2024.And Athabasca plans to have no debt on it's books for 2024.The average netback for thermal oil is $35-$39 a barrel.And Duvernay (especially Kaybob Duvernay ) assets have relatively high netbacks and low decline rates.

 

 A Low Risk Investment

  At this point in time it seems like the main way that investors can participate in Duvernay Energy is through Athabasca Oil and Cenovus Energy.However more leverage can be obtained by investing in Athabasca Oil (ATH) as no IPO ( an initial public offering of shares) has been mentionned yet for Duvernay.Although Duvernay is intended to be a separate entity from Athabasca, net income earned by Duvernay will be added to ATH.Capital and financing costs are minimal as there will be no debt and seed capital is added by ATH and CVE.Still this blog sees only moderate profits for Duvernay as it goes through startup costs.On the other hand if the price of oil gradually moves towards $80 a barrel and Duvernay netbacks increase, Athabasca Oil will likely hit $5.00 a share.

                  MarketBeat: Stock Market News and Research Tools     Dale Mcintyre is a freelance writer that submits articles chiefly to Marketbeat.com and Zacks Research.