Over the last few quarters, I've been repeating Yangarra Resources (OTCPK:YGRAF) was my favorite investment opportunity in the Canadian oil and gas industry. Yet, the stock price has decreased by more than 66% since last year.
With strong Q2 results and the 2019 guidance confirmed, I still consider Yangarra as my favorite idea. Due to its low costs, the company generated higher netbacks than its peers.
In this article, I have a close look at the Q2 results to check if my investment thesis remains valid.
Image source: Yangarra Resources
Note: All the numbers in the article are in Canadian dollars unless otherwise noted.
Q2 Results: low costs become lower
During Q2, production increased 9% quarter over quarter and 72% year over year to reach 13,032 boe/d.
Source: Q2 2019 MD&A
The portion of gas production increased again this quarter, and liquids now represent 47.2% of the total production compared to 59.6% the year before.
According to the 2018 reserves report, liquids represented 43.7%, 46.6%, and 46.7% PDP, proved, and 2P reserves, respectively. Thus, I expect the portion of liquids production to stabilize in the range of 44% to 46% over the medium term.
Thanks to the increased production, per-unit costs declined. Due to the lower liquids and gas prices, the total netback decreased to C$9.98. But, as usual, Yangarra generated a higher total netback compared to its peers.