Strathcona Resources (SCR) AI Stock Analysis

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Strathcona Resources

(TSX:SCR)

77Outperform

Strathcona Resources scores well due to its strong financial performance and attractive valuation. The company's solid profitability metrics and cash flow generation contribute significantly to its financial strength. However, the technical analysis indicates some caution with downward momentum, which may present short-term challenges. Overall, the stock is well-positioned with strong financials and valuation, despite some technical headwinds.

Positive Factors

Dividend Policy

A dividend hike of 4% highlights the company's intent to increase shareholder returns.

Production Guidance

Robust year-to-date production with potential increase in 2025 annual guidance being considered.

Resource Base

Strathcona has established an impressive track record of accretive growth and has built a multi-decade resource base.

Negative Factors

Cash Flow

Strathcona reported lower-than-expected cash flow while production was in line with consensus.

Trading Liquidity

The small float will limit trading liquidity, which would likely act as a drag on share price.

Strathcona Resources (SCR) vs. S&P 500 (SPY)

Market Cap

C$5.26B

Dividend Yield3.1%

Average Volume (3M)53.68K

Price to Earnings (P/E)8.7

Beta (1Y)1.41

Revenue Growth796.07%

EPS Growth-35.52%

CountryCA

Employees797

SectorEnergy

Sector Strength44

IndustryOil & Gas Exploration & Production

Share Statistics

EPS (TTM)2.82

Shares Outstanding214,235,610

10 Day Avg. Volume58,813

30 Day Avg. Volume53,679

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.15

Price to Cash Flow (P/CF)2.90

P/FCF Ratio5.80

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$33.17

Price Target Upside37.35% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering6

Strathcona Resources Business Overview & Revenue Model

Company DescriptionStrathcona Resources Ltd. is a Canadian-based oil and gas exploration and production company. It focuses on the development and extraction of hydrocarbon resources, primarily operating in the Western Canadian Sedimentary Basin. The company is committed to sustainable and efficient energy production, leveraging advanced technologies and methodologies to optimize resource recovery while minimizing environmental impact.

How the Company Makes MoneyStrathcona Resources generates revenue primarily through the exploration, development, and production of oil and gas resources. The company sells crude oil, natural gas, and natural gas liquids to various markets, including domestic and international buyers. Revenue streams are significantly influenced by commodity prices, production volumes, and operational efficiencies. Additionally, the company may engage in strategic partnerships or joint ventures to enhance its operational capabilities and access to new resources, further contributing to its financial performance.

Strathcona Resources Financial Statement Overview

Summary

Strathcona Resources shows strong financial performance with impressive revenue growth and profitability. The income statement is robust, and cash flow generation is solid, providing financial flexibility. Despite increased leverage, the overall financial health remains strong.

Income Statement

Very Positive

Strathcona Resources demonstrates strong revenue growth with a substantial increase from 2022 to 2023. The gross profit margin is healthy at 25.8%, and the net profit margin stands at 13.9%, indicating solid profitability. EBIT and EBITDA margins are robust at 23.6% and 41.6%, respectively, reflecting efficient operational management. The company has shown significant improvement in revenue and profitability over the years.

Balance Sheet

Positive

The balance sheet shows a moderate debt-to-equity ratio of 0.58, suggesting manageable leverage. Return on equity is impressive at 11.0%, indicating effective use of equity capital. The equity ratio is 50.7%, showing a balanced capital structure. While the company has increased its assets and equity significantly, the rise in debt requires careful monitoring.

Cash Flow

Very Positive

Free cash flow has grown substantially, supported by strong operating cash flow, with a high operating cash flow to net income ratio of 2.60. Free cash flow to net income ratio is 0.85, reflecting solid cash generation ability. The company’s cash flow management appears strong, providing flexibility for future investments or debt reduction.

TTM	Dec 2023	Dec 2022	Dec 2021	Sep 2020	Sep 2019
Breakdown
Income Statement		Total Revenue
2.58B	4.24B	649.65M	376.93M	131.76M	59.61M
	Gross Profit
649.05M	1.09B	368.37M	180.82M	-5.33M	6.92M
	EBIT
569.22M	1.00B	349.11M	169.41M	-13.65M	-2.71M
	EBITDA
1.11B	1.76B	443.12M	235.60M	39.59M	15.37M
	Net Income Common Stockholders
386.08M	587.20M	220.12M	67.92M	-17.28M	-13.98M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
8.30M	17.80M	0.00	0.00	40.12M	28.65M
	Total Assets
28.41M	10.50B	1.10B	886.17M	694.47M	663.82M
	Total Debt
0.00	3.07B	211.57M	333.48M	259.82M	216.97M
	Net Debt
-8.30M	3.09B	211.57M	333.48M	219.71M	188.32M
	Total Liabilities
4.12M	5.17B	414.56M	462.53M	339.41M	293.74M
	Stockholders Equity
24.29M	5.33B	683.47M	423.64M	355.06M	370.07M
Cash Flow		Free Cash Flow
638.70M	497.90M	132.98M	-33.50M	-62.95M	-151.85M
	Operating Cash Flow
1.84B	1.52B	378.81M	157.86M	41.64M	10.56M
	Investing Cash Flow
-1.24B	-999.40M	-266.26M	-187.63M	-103.21M	-154.50M
	Financing Cash Flow
-641.64M	-559.60M	-112.55M	29.77M	32.93M	152.14M

Strathcona Resources Technical Analysis

Technical Analysis Sentiment

Negative

Last Price24.15

Price Trends

50DMA

26.91

Negative

100DMA

28.33

Negative

200DMA

28.68

Negative

Market Momentum

MACD

0.65

Negative

RSI

57.02

Neutral

STOCH

38.28

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SCR, the sentiment is Negative. The current price of 24.15 is below the 20-day moving average (MA) of 27.49, below the 50-day MA of 26.91, and below the 200-day MA of 28.68, indicating a bearish trend. The MACD of 0.65 indicates Negative momentum. The RSI at 57.02 is Neutral, neither overbought nor oversold. The STOCH value of 38.28 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:SCR.

Strathcona Resources Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SCR	77 Outperform	C$5.26B	8.71	10.83%	3.10%	796.07%	-35.52%
IMO	77 Outperform	$44.17B	9.61	21.08%	2.89%	1.08%	6.38%
SU	77 Outperform	$57.49B	9.84	13.82%	4.79%	3.25%	-25.69%
ARX	71 Outperform	$14.68B	13.26	14.67%	2.85%	-9.83%	-27.76%
TOU	71 Outperform	C$22.26B	16.80	8.55%	2.56%	-8.29%	-30.52%
CVE	67 Neutral	$28.83B	9.42	10.88%	4.54%	3.97%	-22.22%
Sector *	57 Neutral	$7.56B	4.34	-4.83%	6.50%	-0.19%	-64.60%

* Energy Sector Average

Performance Comparison

TSE:SCR

Strathcona Resources

24.54

-7.04

-22.29%

TSE:CVE

Cenovus Energy

15.81

-11.47

-42.04%

TSE:ARX

ARC Resources

25.06

0.58

2.38%

TSE:IMO

Imperial Oil

86.78

-5.39

-5.85%

TSE:SU

Suncor Energy

46.47

-2.68

-5.45%

TSE:TOU

Tourmaline Oil

59.47

-1.88

-3.06%

Strathcona Resources Earnings Call Summary

Earnings Call Date: Mar 4, 2025 | % Change Since: 1.09% | Next Earnings Date: May 20, 2025

Earnings Call Sentiment Neutral

The earnings call reflected a mix of positive achievements such as consistent oil production, improved efficiency, and strategic partnerships for decarbonization, alongside challenges like reduced natural gas production and potential rail strike impacts.

Highlights

Consistent Oil Production and Increased Sales Volume

Oil production for Q2 remained consistent with Q1 at approximately 131,000 barrels per day, while oil sales volumes increased to approximately 135,000 barrels per day due to inventory drawdown.

Debottlenecking Projects Improve Efficiency

Cold Lake projects resulted in an 8% reduction in steam oil ratio compared to the same period in 2023, enhancing operational efficiency.

Commitment to Decarbonization

Announced a $2 billion carbon capture infrastructure partnership with Canada Growth Fund, aiming for a mid-2025 FID for the first project.

Achievement of Debt Target and Dividend Announcement

Achieved debt target of $2.5 billion and announced a quarterly base dividend of $0.25 per share.

Lowlights

Natural Gas Production Decline

Natural gas production was down 6% from Q1 due to planned and unplanned third-party outages, leading to a reduction in guidance by 15 million cubic feet per day.

Potential Impact of Looming Rail Strike

Concerns about the impact of a potential rail strike on the 30,000 barrel per day crude by rail business and supply chain inputs like diesel.

Deferred Natural Gas Production

Deferral of dry gas production from Groundbirch wells due to third-party outages and low natural gas prices.

Company Guidance

During the Q2 2024 earnings call for Strathcona Resources Limited, significant guidance was provided on various operational and financial metrics. The company reported an average production of approximately 182,000 barrels of oil equivalent (BOE) per day, generating funds from operations of $548 million, or $2.56 per share. Capital expenditures totaled $297 million, resulting in free cash flow of $247 million, or $1.15 per share. Oil production remained consistent with the previous quarter at around 131,000 barrels per day, while oil sales volumes increased to approximately 135,000 barrels per day due to the commissioning of a new crude by rail offloading facility. Natural gas production stood at 237 million cubic feet per day, down 6% from the first quarter, and natural gas liquids production was steady at 11,500 barrels per day. Strathcona announced a reduction in its annual natural gas guidance by 15 million cubic feet per day, adjusting the corporate guidance range to 185,000 to 190,000 BOE per day, with an oil weighting increase to 72%. The company maintained its capital budget guidance at $1.3 billion and achieved its debt target of $2.5 billion by June 30, leading to the approval of a quarterly base dividend of $0.25 per share. Additionally, Strathcona announced a partnership with Canada Growth Fund to develop up to $2 billion in carbon capture infrastructure, targeting a final investment decision by mid-2025. An Investor Day is scheduled for November 14, 2024, to elaborate on near- and long-term asset plans.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.