WesCan Energy Corp (WCE) a low-cost oil company that is finally starting its development drilling program. Great Netbacks and Low P/E Forecast
Stock Price: 0.10
Shares Outstanding: 35 Mln
Market Cap: 3.5 Mln
Expected Shares Diluted: 43 Mln (Including 2.8 Mln Stock Options – Expiry Date 29-9-2026 - and 5 Mln shares expected after the private placement of the 15-2-2021 press release)
This oil company can exponentially increase its production. The company has finally started drilling new wells, beginning with a $1 mln financing arrangement for a new well in the core area at Provost, Alberta, with its development drilling program. They didn’t do this before as after the company got acquired in 2015 the oil prices didn’t look well.
https://www.stockwatch.com/News/Item/Z-C!WCE-3208223/C/WCE Low Costs Costs have been low due to a facility WesCan owns and operates itself. It doesn’t show on the Balance Sheet.
Because the production levels and workover expenses have fluctuated a lot the past years, I looked at the financials over multiple years to come to an average. When calculated from financial year 2017 Q1 - 2021 Q2 the Operating Expenses were 31 CAD per BOE (28% Workover Expenses) and 4.5 CAD Royalty Expenses. This means that without a major new well it is an Operating Netback Cost of 35/36 but with inflation and higher oil prices you can make it
a conservative 40 CAD per BOE (Operating Expenses and Royalty Expenses).
With an oil price of 90 WTI USD – which is 90 CAD the company receives for its oil (WTI price directly in CAD) – we have an Operating Netback of 90 – 40 = $50 CAD per BOE with the smaller wells. A big well can lower the costs drastically per BOE.
Profit Calculation Quick profit calculation: 100 BOE/D expected after all the workovers are finished * 50 Netback * 360 days = 1.8 Mln
1.8 Mln – 800K G&A and Depletion (Q1+Q2 of FY21 * 2) = 1 Mln Profit before Tax.
1 Mln / 43 Mln Shares = 2,3 cents per share
Rough P/E Valuation IWC (Microcap ETF) P/E: 15 (Source:
https://stockanalysis.com/etf/iwc/ )
Profit Valuation excluding Production Growth, Facility & Oil Reserves
2,3 cents per share profit * 15 P/E = 34.5 cents
Potential of New Wells after only Workovers Over the past years the production has been small with low oil prices. However, the potential is clearly there, already stated from the 2015 acquisition of present management. Quote from the 28 April 2015 acquisition press release: ‘’Management has identified approximately 8 re-activations of existing shut-in wells and approximately 10-15 low-risk development drilling locations that are supported within a defined area of 3D seismic.’’ No drilling has been done over the years due to oil prices, only workovers, so a lot of potential development drilling still left. Production has been from FY2017 till present below 100 BOE on average, with only some workovers. Yet, the oil reserves are clear that oil is present so new wells have potential!
Oil Reserves & NPV For information, WesCan has great oil reserves as can be found on Sedar looking for the 'Oil and gas annual disclosure filing' report on Jul 28 2021. This report was made in March 2021 before the workovers and new drilling development. Moreover, WCE has besides strong oil reserves a $5,5 mln NPV with 10% discount on page 2. This should become higher after the workovers and higher oil prices than the $60 used in the report. The difference between the oil price in the report and the oil prices today are almost directly profits.
Oil Industry I’m positive towards oil as the world still needs oil. From 2011-2019 the world energy consumption increased by 10% and oil consumption source increased at the same rate according to this source.
https://ourworldindata.org/grapher/global-energy-substitution?country=~OWID_WRL *Disclaimer: This is my personal opinion, please do your own homework