2023 was a bumpy year for Canadian oil and gas investors. The flagship Canadian Energy ETF (XEG.to) was up ~3.5%, but underlying that solid performance was large divergence in performance between companies. The XEG tends to be weighted heavily towards large cap E&P companies, with ~2/3 of the holdings weighted towards 4 companies (CNQ.to, CVE.to, SU.to and TOU.to). While many larger and more index relevant companies performed quite well, some stocks particularly on the smaller side did not fare quite as well in 2023.
Below is the stock performance for 2023 for a group of oil and gas E&P stocks tracked by BOE Intel. There is a wide cross section of companies and sizes represented here. While dividends play an important part in the return calculation for the oil and gas asset class, they are not included in these returns, so those dividend names will not reflect as well as they should in the chart below.
2023 Stock Performance – not including dividends
The company with the top performance was Athabasca, while MEG Energy, Canadian Natural Resources, Imperial Oil, Kelt Exploration, Rubellite Energy, ARC Resources, Headwater and Obsidian Energy all saw positive returns (including dividends would put Suncor and Crescent Point into this group as well).
#1 Performer for 2023 – Athabasca Oil (ATH.to)
The number one performer on the year was Athabasca with a stock price increase of ~73%. The company continued its impressive run off of its 2020 lows and was by far the top performer in 2023. While overall corporate volumes on a BOE/d basis haven’t shown much growth (although the company has sold some volumes), Athabasca recently hit 6+ year highs in terms of oil production as Leismer pad L8M ramps up. The company has also managed to eliminate its net debt position (Figure 2) over the last few years with commodity price improvement and asset sales, and recently formed a new Duvernay company with Cenovus to accelerate development of its Kaybob Duvernay assets.
Figure 1 – Corporate production – Athabasca Oil
Figure 2 – Net debt – Athabasca Oil
These factors, along with an operating netback which surged to new highs in Q3 2023 (Figure 3), were behind the strong performance last year. The resulting impact on the company’s valuation can be seen in the BOE Intel valuation charts below:
- In terms of EV/BOE/d, the company traded at ~$65,700/BOE/d at the end of Q3, a premium valuation compared to the median company in our dataset. (Figure 4)
- Based on trailing 12 months operating cash flow, the company traded at ~8.7x EV/OCF, again a premium multiple compared to the median. (Figure 5)
Figure 3 – Operating netback (after hedging) – Athabasca Oil
Figure 4 – Flowing barrel metric (EV/BOE/d) – Athabasca vs. the median company
Figure 5 – EV/OCF multiple – Based on 12 months trailing operating cash flow – Athabasca vs. the median company