Crew Energy [stock_market_widget type="inline" template="generic" color="default" assets="CR.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has lost the momentum it witnessed in the earlier part of the year once oil prices started dipping, but the oil producer has made a small comeback of late. Crew Energy stock has started picking up in recent weeks, but that momentum will be put to the test when the company releases its fiscal second-quarter results on August 1.
Will Crew Energy deliver results that are strong enough to help it make a comeback? Let’s find out.
The Headline Numbers
According to Wall Street’s estimates, Crew Energy will enjoy terrific year over year growth on both its top and bottom lines. The company’s revenue is expected to jump 54% annually to C$55.5 million, helping it post break-even earnings per share as compared to a loss of C$0.06 in the year-ago period.
That growth in the company’s top and bottom lines seems surprising as the company’s production growth has not been that great of late. In fact, its output was down on a year-over-year basis during the first quarter of the year.
For the second quarter, Crew estimates that it will produce an average of 22,000 to 23,000 barrels of oil equivalent per day, though the company explicitly clarifies that it has a higher production capacity. In the year-ago period, Crew had delivered average production of 23,583 barrels of oil equivalent per day.
The lower production will be a result of a “planned deferral of dry gas production” thanks to weak spot gas prices in Western Canada. So it is difficult to see how exactly Crew will be able to deliver such massive top-line growth.
The only way the company can achieve that is if energy prices in Canada rise. Now, this could be a surprise catalyst for Crew as Western Canadian Crude oil prices stayed strong in the second quarter of 2019 as compared to the prior-year period. Similarly, AECO natural gas prices are up substantially year over year.
So Crew has a chance of delivering solid top-line growth if oil and gas prices stay at strong levels year over year.
Cost Efficiency Will Boost the Bottom Line
Crew Energy has been focused on boosting its production efficiency and keep costs under control. The company has been drilling longer laterals at lower costs to boost the bottom line performance and also preserve its balance sheet.
This is necessary for the company as its balance sheet is not in the best shape with total debt of more than C$380 million. So it needs to spend within its means so that it doesn’t have to take on more debt.
But don’t be surprised to see Crew increase production because if oil and gas prices stay strong, it might be enticed into producing more than what it forecasts. As a result, there’s a chance that Crew Energy could blow past estimates, and that will be enough for the stock to sustain its recent momentum.
