Q2 2020 Stockwatch
sharing not pumping. Energy Summary for August 5, 2020 by Stockwatch Business Reporter West Texas Intermediate crude for September delivery added 49 cents to $42.19 on the New York Merc, while Brent for October added 74 cents to $45.17 (all figures in this para U.S.). Western Canadian Select traded at a discount of $10.83 to WTI, down from a discount of $10.15. Natural gas for September was unchanged at $2.19. The TSX energy index added 2.55 points to close at 60.18. Quarterly reporting season rolled along. Keith MacPhail and Ronald Poelzer's Alberta Montney-focused NuVista Energy Ltd. (NVA) stayed unchanged at 66 cents on 3.5 million shares, after trumpeting "decisive action in the face of a challenging quarter." In this case, decisive action meant slashing the budget and curtailing production. NuVista noted that its productive capacity exceeded 60,000 barrels of oil equivalent a day in the second quarter, but it held its actual production flat at around 50,000 barrels a day, to limit its exposure to "excessively low pricing." It expects to keep production around this level throughout the rest of 2020. Despite the restricted production, NuVista's cash flow came to seven cents a share, exceeding analysts' predictions of five cents a share thanks to cost cuts. Although NuVista did not manage to generate free cash flow during the quarter, it predicted that it will generate $55-million to $60-million for all of 2020, which will go toward debt reduction. Net debt edged up to $656-million as of June 30 from $650-million as of March 31. (NuVista's current market cap is $148-million.) All in all, the results were a "modest positive," opined Scotia Capital analyst Cameron Bean. He applauded NuVista's higher-than-expected cash flow, though he seemed taken aback by the company's near-term production forecasts, as they are "slightly below consensus expectations and its own previous messaging." Mr. Bean further noted that NuVista's cash flow could decrease sharply next year as its hedges expire and its take-or-pay commitments increase. The relaxation of these commitments and further progress on debt reduction will be "key factors for the stock to regain momentum," he concluded. He kept his rating at "sector perform" and reiterated his price target of $1.10, well above today's close of 66 cents.