RBCJuly 23, 2023 Obsidian Energy Ltd. Company description Obsidian Energy is an intermediate Canadian oil & gas producer with a balanced portfolio featuring legacy assets held across the Cardium, Peace River, and Viking plays. The company has undergone significant changes over the last decade, right-sizing the portfolio to roughly 33,000 boe/d of production, and is now headed by President and CEO Stephen Loukas. Investment summary We rate Obsidian shares Outperform with a $12/share price target. • Seasoned management team focused on optimizing the business. Led by CEO Stephen Loukas, Obsidian has showcased a commitment to cost optimization, debt reduction, and broad asset delineation, which we expect to lead to improved operating performance. • Diversified portfolio with potential Clearwater upside. Obsidian is focused on free cash harvesting on its legacy Cardium portfolio to finance growth in key heavy oil plays at Peace River. The company currently holds ~500 net sections in Peace River with Bluesky/ Clearwater rights, which represent material upside with delineation success. • Rebuilt with resilience in mind. Obsidian has restructured the business with a focus on long-term sustainability and refinanced its balance sheet to provide financial flexibility; we estimate that it will exit 2023E/24E with $259/$170 million in net debt, mapping to a 0.6x/0.4x D/CF multiple.
Outperform TSX: OBE; CAD 8.53; NYSE: OBE Price Target CAD 12.00