Both Peters and NBC highlighted Clearwater & Waterflood potential this week.
I'm sure unrelated to Spur trading up to a new high of $28.50/sh this week
(reminding you public market disconnect from reality is real). NBC's weekend note is below on HWX & TVE.
Special Situations (Clearwater Waterflood; HWX & TVE) – In the face of macro and commodity price volatility, some of the recent strength of share price correlation (notably, CF/FCF & De-leveraging) will be challenging to maintain, and with that, outside of the large caps any outperformance in energy is likely to come from a “special situation”. Uniquely, waterflood in the Clearwater should offer a catalyst towards supporting free cash momentum in the face of a muted commodity, and we expect continued updates on this front through the quarter, as waterflood is a) working better than expected) and b) is accelerating in emphasis for producers. HWX & TVE offer the best analogies to this, where; HWX has proved leadership in stabilizing approximately 1/3rd of corporate volumes, which based on the significance of FCF support (a small-scale SAGD asset), can support about 2/3rd of its enterprise value (a reflection of the strength of that value relative to its already premium multiple). Expect more of the same here, as waterflood progresses across its growing asset base (positive success being noted in expanding the scope of its assets, for which waterflood should generally be deployed) in support of incremental value creation. TVE is earlier-stage in waterflood, but arguably underappreciated (less is priced in here, given its value dislocation; trading around 3.5x. vs. HWX 5.5x), where injection is expected to 2x through YE24 to see about ~10% of its assets in the play stabilized, and with continued deployment could see up to ½ of Clearwater assets stabilized over the long-term in support of a disproportionate value wedge relative to its discounted multiple (could that potentially support the entirety of its market cap, or close to, given its relative valuation???). Bottom line, waterflood in the Clearwater is one of the most significant catalysts to support continued CF/FCF & De-leveraging momentum in support of outperformance in the face of a challenged commodity, and the special situations of HWX & TVE should continue to be the benefactors. Notably, TVE has outperformed HWX on every interval YTD, albeit on a static relative multiple, which reflects the significance of its organic value creation YTD (cost initiatives executed, outperforming on capital efficiencies + waterflood building) and which is pushing it up the relative depth chart in the group.
thanks to: Tom MacInnis