The recent weakness in oil prices has derailed TORC Oil and Gas’ [stock_market_widget type="inline" template="generic" color="default" assets="TOG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] momentum on the stock market. After a bright start to the year, shares of the company have nosedived over the past month — something investors were warned against earlier.
As it turns out, investors didn’t like TORC’s latest first-quarter earnings report either, even though it beat the market’s bottom-line estimate. And with oil prices on a downtrend now, let’s see if the company is able to make a comeback going forward.
What’s Ailing TORC?
For the first quarter of 2019, TORC’s overall production came in at 28,267 barrels of oil equivalent per day, up from the year-ago period’s production of 22,894 BOE/day. Crude oil production came in at 23,700 BOE/day as compared to 18,827 BOE/day a year ago.
More importantly, the company was helped by stable prices during the quarter. TORC’s average realized price fell only slightly to $56.86 per BOE as compared to $58.13 per BOE a year ago. As a result of the slight decline in the average realized price, TORC’s operating netback came in at $32.64 per barrel of oil equivalent as compared to $33.69 per BOE a year ago.
Adjusted funds flow also fell slightly to $29.90 per BOE as compared to $31.07 per BOE last year. So, the company’s performance wasn’t all that bad during the quarter as it witnessed only a slight weakness thanks to a dip in oil prices.
In fact, the company was able to generate a cash flow of $0.35 per share as compared to $0.33 per share a year ago. Moreover, the increase in the company’s output allowed TORC to maintain its bottom line at $0.03 per share, which was in line with the year-ago period.
But despite this resilient performance, investors have shunned TORC stock over the past month, attributed to a decline in falling oil prices in Canada.
Oil Prices are Proving to Be a Headwind for TORC
Global oil prices have retreated remarkably of late. WTI crude is now trading at around $58 per barrel as compared to nearly $64 per barrel at the end of April. But the decline in Canadian oil prices has been far severe.
For instance, the WTI oil price saw a weekly drop of 8% last week, which was the highest since December. But Western Canadian Select oil prices dropped at a far greater pace of 16.7% during the same period. What’s more, the WCS oil price is down 26% from its peak levels that it hit on April 8 this year.
As such, it is not surprising to see why TORC Oil and Gas stock has retreated of late.
This rapid decline in the WCS oil price is a result of an inventory build in Alberta. As reported by Financial Post:
So don’t be surprised if TORC stock heads lower because of weak oil prices, as a negative oil price trend can weaken the company’s financial performance considerably going forward.
