Crew Energy Stock Can Make a Comeback

Crew Energy [stock_market_widget type="inline" template="generic" color="default" assets="CR.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] shares picked up the pace in the early part of the year, but the recent weakness in oil prices has dented the stock’s returns. But a closer look at Crew’s operating performance indicates that the stock’s crash is not deserved. Instead, it will make sense for investors to look for opportunities to build a long position in Crew stock since it is pulling the right strings to improve business.

Pulling the Right Strings

Crew Energy’s production for the three months ending March 31, 2019 came in at 23,222 barrels of oil equivalent per day. By comparison, the company had produced 25,939 BOE per day in the prior year period.

The company’s performance improved quarter over quarter. Crew’s volumes increased 4% over the preceding quarter on the back of higher production from the Greater Septimus area.

Crew is also making notable progress at its Ultra Condensate Rich (UCR) wells, which should allow it to record production growth at low costs. They have been drilling the longest laterals in its history. According to the press release:

Four extended reach horizontal (“ERH”) UCR wells were drilled in Q1 with lateral lengths over 3,000 metres and per lateral metre drilling costs that were 35% lower than costs realized in 2017.

Clearly, Crew Energy is focusing on improving its production and simultaneously lowering costs, which is why the company has been able to maintain its adjusted funds flow at consistent levels over the prior-year period despite lower production.

More specifically, Crew’s adjusted funds flow per share came in at $0.17 during the quarter, a slight drop over the $0.18 in the year-ago quarter. What’s more, Crew’s net income increased to $0.04 per share as compared to $0.03 in the year-ago period, which is commendable given the weak pricing environment prevalent during the quarter.

Crew Energy reported an average price of $26.53 per barrel of oil equivalent, a slight increase over the $25.46 per BOE prevalent in the year-ago period. Meanwhile, its operating costs declined slightly, leading to an operating netback of $16.69 per barrel of oil equivalent as compared to $14.70 per BOE in the year-ago period.

In all, Crew Energy delivered a nice performance during the quarter, but investors are concerned that the downturn in the oil pricing environment in Canada will take a toll on the company.

Crew is Prepared for a Downturn

The good thing about Crew Energy is that it has already prepared itself for a weak oil pricing environment. The company kept its capital expenses under control. First quarter capital expenses came in at $39 million and this was lower than the company’s original guidance.

More importantly, Crew Energy is taking steps to ensure that its current asset base is strong enough to boost production. The company stated in its press release:

Our strategic investment in infrastructure has resulted in Crew having the capacity to produce over 40,000 boe per day through existing facilities, which can significantly reduce future on-stream costs. We remain committed to high grading our portfolio of assets to enhance shareholder value while preserving the material upside in our vast resource base.

As such, don’t be surprised to see Crew Energy stock recovering once again because of its impressive production profile.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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