Total Energy Services Inc T.TOT

Ink Research

[retiredcf]

Morning Report: Look who is buying the dip in the Energy sector 

October 6, 2023

On Wednesday, we highlighted insider net selling at Canadian Natural Resources (Mixed; CNQ) which sported a P/E ratio

above the sector average. Today, we look at two stocks that are not enjoying premium valuations where insiders have been buying during the recent sell-off. We last featured Cardinal Energy (CJ) here on May 16th. In Q2, it produced 21,047 barrels of oil equivalent per day (84% crude), down 6% from Q2 2022. Most of the shortfall was due to wildfire-related shutdowns. On October 3rd, it announced an asset acquisition that is expected to contribute about 900 boe/d this quarter. It believes that will allow it to exit 2023 with production of 22,500 boe/d. CJ has a $0.06 monthly dividend implying a 10.2% prospective yield versus a 5.5% sector average. CJ reported a dividend payout ratio of 105% in Q2, but in a July 27th filing it said, "At current commodity prices, present sources of capital are anticipated to be sufficient to satisfy the Company's capital expenditure program and decommissioning obligations and dividend payments for the 2023 fiscal year and beyond." Given their outlook, it was encouraging to see director John Brussa buying again when the stock traded below $7.00 this week.

Total Energy (TOT) is another name that regularly appears in this report due to insider buying. We last featured it here on June 28th. Insiders were buying again as the stock slid this month to test its 200-day moving average ($8.89). In Q2, it reported net income of $0.17 per share, up 7% from a year earlier. Revenue was $208.8 million, up 17% from Q2 2022. The stock is up 22.5% over the past twelve months. Despite the rally, valuations remain relatively depressed with a trailing 12-months P/E ratio of 6.3 and a price-to-book ratio of 0.7. It currently pays a quarterly dividend of $0.08 per share, and it has been buying back stock as well. TOT plans to release Q3 results on or before November 10th.