It Might Be a Good Time to Buy TORC Oil & Gas


TORC Oil & Gas stock has lost a quarter of its value in 2019 after starting the year on a bright note as the oil price scenario has weakened. But the company’s second-quarter results were a revelation as it delivered improvements in key metrics despite the macroeconomic scenario.

Let’s take a closer look at what worked for TORC during the quarter and if it can keep improving on its quarterly performance.

A Closer Look at TORC’s Results

TORC delivered production of 28,326 barrels of oil equivalent during the second quarter, up from 23,059 boepd in the year-ago period. However, the company’s average realized price fell to $59.32 per barrel of oil equivalent as compared to $64.04 per boe in the second quarter of 2018.

The improvement in TORC’s oil production was a result of an increase in the number of wells drilled during the quarter. More specifically, the company drilled a total of 9.8 net wells in the second quarter, up from 7 wells in the year-ago period. For the first six months of the year, TORC has drilled 37.7 net wells as compared to 25.6 net wells in the same period a year ago.

But what’s impressive to see is that TORC’s cash flow per share increased to $0.37 as compared to $0.35 a year ago despite lower prices. This can be attributed to the company’s strategy of keeping its expenses within the cash flow. In fact, TORC’s exploration and development expenditure increased to just $34.8 million from $30 million a year ago, and its debt was actually down to $364 million from $396 million at the end of the first quarter.

However, the weakness in oil pricing did impact TORC’s operating netback negatively. Its operating netback for the quarter came in at $34.35 per barrel of oil equivalent, down from $39.28 per barrel of oil equivalent last year.

In all, TORC’s performance was decent last quarter given the prevailing end-market scenario.

The Way Ahead

TORC is focusing on generating higher operational efficiencies this year, stating that it plans to achieve results that exceed the capital budget it has outlined for the year.

According to the company’s press release:

The capital program maintains TORC’s balanced approach as the Company continues to focus on achieving long term sustainable growth, protecting the Company’s strong financial position, and maintaining a consistent decline profile to preserve repeatability of the business model.

This is why TORC believes that it can achieve “significant free cash flow in 2019 above the current capital program and dividend.” This is a smart strategy to follow because TORC needs to keep its debt under control, and at the same time, it has to keep its production growing at a decent clip so that it doesn’t miss out when oil prices start ticking up.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
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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