NuVista Energy [stock_market_widget type="inline" template="generic" color="default" assets="NVA.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has got off to a bright start in 2019, which is not surprising given the pace at which the company is growing. The stock’s 18% rise so far this year has been aided by an improvement in oil prices, as well as the eye-catching production growth it announced for the fourth quarter and full year 2018.
More importantly, NuVista investors can expect further upside from the company as it is on track to deliver impressive production growth once again. The recent rise in Canadian oil prices will be another catalyst. Let’s see what’s in store for the company this year and why it deserves a place in your portfolio.
Meet NuVista’s Biggest Catalyst
NuVista’s fourth-quarter production of 49,060 barrels of oil equivalent per day was 31% higher than the year-ago period. Moreover, the production level easily exceeding the higher end of its guidance range of 46,000-48,500 BOE/day. NuVista’s full-year production came in at a record 40,350 BOE/day, again beating the higher end of the company’s guidance. Annual production was up 35% from 2017 levels.
What’s impressive is that the increase in NuVista’s production was achieved with an increase of only 8% in the capital expenditure. The company’s financial growth was also aided by a strong jump in the prices of oil and natural gas liquids.
NuVista recorded a 16% increase in the average selling price of condensates and oil to $70.92 per BOE, while the price of natural gas liquids shot up 27% to $32.82 per BOE last year. As a result, the company’s top line increased 47% annually, while adjusted funds flow shot up 32%.
However, the company’s performance in the final quarter of 2018 was tempered by weak oil prices. The average realized price of condensates and oil was down 25% annually during the fourth quarter, while the price of natural gas liquids went down 14%.
As a result, NuVista will keep its spending disciplined in 2019, but it can still deliver another year of strong growth.
What’s in Store This Year?
NuVista expects to achieve output in the range of 51,000 to 54,000 BOE per day this year. The mid-point of that guidance means that its production is on track to jump 30% in 2019. This impressive increase in NuVista’s output will be achieved at a capital expenditure of $300 million to $325 million, which is lower than the 2018 capex of $340.8 million.
In this way, NuVista has prepared itself for a weak oil pricing environment. The company’s capex forecast for the year will be within its adjusted funds flow so that it doesn’t have to take on any debt. Even then, the company’s production is on track to rise at a nice pace, which indicates its production efficiency.
Another piece of good news is that oil prices in Canada have increased post the government-mandated cuts in Alberta. The Western Canadian Select (WCS) benchmark crude oil prices have risen from lows of $10 per barrel in November 2018 to almost $50 a barrel at present.
As a result, it won’t be surprising to see NuVista’s revenue and funds flow rising once again this year as it has reduced its costs anticipating the worst. This could help the stock sustain its momentum on the market.
