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1. Company Snapshot

1.a. Company Description

Obsidian Energy Ltd.primarily focuses on the exploration, production, and development of oil and natural gas properties in the Western Canada Sedimentary Basin.The company was formerly known as Penn West Petroleum Ltd.


and changed its name to Obsidian Energy Ltd.in June 2017.Obsidian Energy Ltd.


is headquartered in Calgary, Canada.

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1.b. Last Insights on OBE

Obsidian Energy's recent performance was driven by several positive factors. The company's second-quarter results showed a significant share buyback program, with approximately 5.4 million shares repurchased and cancelled for $36.6 million. Additionally, BMO Capital Markets maintained its outperform rating on the shares, with a price target of C$10.00. The company's second-half capital program update revealed initial drilling results above internal expectations and a record seven-day production average in Peace River of ~14,500 boe/d. Furthermore, the company completed a partial redemption of $30 million of its outstanding senior unsecured notes.

1.c. Company Highlights

2. Obsidian Energy Delivers Strong Q1 2025 Results with Focus on Shareholder Value

Obsidian Energy reported a solid first quarter with notable financial and operational achievements. The company highlighted a revenue growth of 12% year-over-year, driven by higher production volumes and improved commodity prices. Notably, the company reported an actual EPS of $0.2, significantly outperforming analyst estimates of -$4.11. This positive surprise underscores the company's ability to execute its strategic initiatives effectively.

Publication Date: May -12

📋 Highlights
  • Production Guidance: Q2 2025 production midpoint is 29,200 BOE/day, pro forma for the Pembina sale, with a 72% oil and liquids mix.
  • Pembina Sale Impact: The sale closed for $320 million, reducing OpEx by $1.60/BOE and ARO by 50% to $357 million.
  • Financial Position: Net debt is forecasted at $255 million, representing 1.1x net debt to FFO, with $200 million in liquidity post-Pembina.
  • Exploration Success: Peace River asset shows growth potential, with Clearwater wells achieving IP30s of 170-229 BOE/day and promising results in North Nampa and South Harmon Valley.
  • Shareholder Value: The company has repurchased 3.5 million shares for $24.5 million and maintains a strong balance sheet, prioritizing buybacks over dividends.

Operational Highlights and Strategic Focus

Stephen Loukas, President and CEO, emphasized the company's focus on per-share growth through production growth, share buybacks, and debt reduction. Operationally, Obsidian Energy achieved Q1 production of 38,400 BOE/day, up 12% year-over-year, with capital expenditures of $128 million. The company also made significant strides in its exploration and development programs, particularly in the Peace River asset, where recent drilling results showed promising hydrocarbon discoveries. The company drilled seven exploration wells, with five showing notable success, particularly in North Nampa and South Harmon Valley. These results highlight the potential of the company's extensive land base and its ability to unlock value through targeted investments.

Debt Reduction and Share Buybacks

Obsidian Energy's net debt increased to $460 million in Q1 but is expected to drop to $255 million post-Pembina sale, representing a net debt to fund flow ratio of 1.1x. The company also repurchased 3.5 million shares for $24.5 million, demonstrating its commitment to returning capital to shareholders. The Pembina sale not only reduced operational expenses by $1.60/BOE but also lowered the company's Asset Retirement Obligation (ARO) by 50%, from $747 million to $357 million. This transaction underscores the company's disciplined approach to streamlining its portfolio and enhancing financial flexibility.

Valuation and Strategic Positioning

From a valuation perspective, Obsidian Energy trades at a Price-to-Book (P/B) ratio of 0.35 and an EV/EBITDA of 1.93, indicating a discount relative to its peers. The company's focus on debt reduction, share buybacks, and high-margin growth projects positions it well to maximize shareholder value. The strong financial performance and operational execution suggest that the company is on track to deliver on its strategic objectives, despite the challenging commodity price environment.

3. NewsRoom

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Obsidian Energy Announces Closing of $175 Million, 5-Year Senior Unsecured Notes Due in 2030 and Redemption of Existing $80.8 Million Senior Unsecured Notes Due in 2027

Dec -03

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RBC Names Suncor Energy, Canadian Natural Resources as Top Picks in Integrated Oil, Exploration and Production Cos

Nov -24

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Obsidian Energy Announces Offering and Pricing of $175 Million, 5-Year Senior Unsecured Notes due in 2030 and Redemption of Existing $80.8 Million Senior Unsecured Notes due in 2027

Nov -19

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Exploring Global Undervalued Small Caps With Insider Activity In November 2025

Nov -17

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Obsidian Energy (TSX:OBE): Valuation Discount Persists as Negative Margins Challenge Turnaround Narratives

Nov -01

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Obsidian Energy Sector-Perform Rating and $9.50 Price Target Confirmed at RBC on Q3 Results

Oct -31

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Obsidian Energy's Q3 Profit Falls 49% on Weaker Production and Prices; Cuts Guidance

Oct -30

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Obsidian Energy Announces Third Quarter 2025 Results

Oct -30

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.06%)

6. Segments

Oil

Expected Growth: 3.83%

Obsidian Energy Ltd.'s 3.83% growth in oil production is driven by increased drilling activities in the Pembina Cardium area, improved well completion techniques, and enhanced oil recovery (EOR) initiatives. Additionally, the company's focus on cost optimization and operational efficiencies has contributed to higher production volumes.

Royalties

Expected Growth: 3.83%

Obsidian Energy Ltd.'s 3.83% royalty growth is driven by increased oil production, higher crude oil prices, and improved operational efficiency. Additionally, the company's strategic asset optimization and cost reduction initiatives have contributed to the growth. Furthermore, Obsidian's focus on developing its high-margin light oil assets has also supported the royalty growth.

Natural Gas

Expected Growth: 4.65%

Obsidian Energy Ltd.'s 4.65% growth in Natural Gas is driven by increased production from its Cardium play, improved well performance, and optimized operations. Additionally, the company's strategic hedging program and favorable commodity pricing environment have contributed to the growth. Furthermore, Obsidian's focus on cost reduction and capital efficiency has enabled it to maintain a competitive edge in the industry.

Natural Gas Liquids

Expected Growth: 6.37%

Obsidian Energy Ltd.'s 6.37% growth in Natural Gas Liquids is driven by increased production from its Cardium play, improved well completion designs, and enhanced oil recovery techniques. Additionally, the company's strategic acreage acquisition and focus on high-liquid content wells have contributed to the growth.

Commodities Purchased from Third Parties

Expected Growth: 4.0%

Obsidian Energy Ltd.'s 4.0% growth in Commodities Purchased from Third Parties is driven by increasing demand for oil and natural gas, successful drilling and extraction operations, and strategic partnerships with suppliers. Additionally, favorable market conditions, improved operational efficiencies, and effective cost management have contributed to this growth.

Processing Fees

Expected Growth: 4.0%

Obsidian Energy Ltd's 4.0% growth in Processing Fees is driven by increased oil and gas production, improved operational efficiency, and strategic partnerships. Additionally, the company's focus on cost optimization and investments in digital technologies have contributed to the growth. Furthermore, favorable market conditions, including higher commodity prices, have also supported the increase in processing fees.

7. Detailed Products

Light Oil

Obsidian Energy Ltd. produces high-quality light oil, a type of crude oil with a low density and sulfur content, used as a feedstock for refineries to produce various petroleum products.

Natural Gas

Obsidian Energy Ltd. extracts and sells natural gas, a fossil fuel used as a clean-burning energy source for power generation, heating, and cooking.

Natural Gas Liquids (NGLs)

Obsidian Energy Ltd. produces NGLs, a group of hydrocarbons that are extracted from natural gas, used as a feedstock for petrochemical plants and as a fuel source.

Heavy Oil

Obsidian Energy Ltd. produces heavy oil, a type of crude oil with a high density and sulfur content, used as a feedstock for refineries to produce various petroleum products.

8. Obsidian Energy Ltd.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Obsidian Energy Ltd. operates in the oil and gas industry, which has limited substitutes. However, the increasing focus on renewable energy sources and energy efficiency may pose a moderate threat to the company.

Bargaining Power Of Customers

Obsidian Energy Ltd.'s customers are primarily large industrial and commercial entities, which have limited bargaining power due to their dependence on the company's energy products.

Bargaining Power Of Suppliers

Obsidian Energy Ltd. relies on a diverse range of suppliers for its operations, including equipment providers and service companies. While suppliers have some bargaining power, the company's scale and diversification mitigate this risk.

Threat Of New Entrants

The oil and gas industry has significant barriers to entry, including high capital requirements, regulatory hurdles, and technical expertise. This limits the threat of new entrants to Obsidian Energy Ltd.'s market share.

Intensity Of Rivalry

The oil and gas industry is highly competitive, with many established players competing for market share. Obsidian Energy Ltd. faces intense rivalry from other energy companies, which may impact its pricing power and market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 11.89%
Debt Cost 16.39%
Equity Weight 88.11%
Equity Cost 16.39%
WACC 16.39%
Leverage 13.50%

11. Quality Control: Obsidian Energy Ltd. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Advantage Energy

A-Score: 5.2/10

Value: 6.0

Growth: 5.8

Quality: 5.0

Yield: 0.0

Momentum: 8.0

Volatility: 6.3

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SilverBow Resources

A-Score: 4.9/10

Value: 8.8

Growth: 7.2

Quality: 6.5

Yield: 0.0

Momentum: 5.0

Volatility: 2.0

1-Year Total Return ->

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Vermilion Energy

A-Score: 4.6/10

Value: 8.6

Growth: 2.4

Quality: 3.8

Yield: 6.0

Momentum: 2.5

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Obsidian Energy

A-Score: 4.5/10

Value: 8.5

Growth: 5.6

Quality: 3.0

Yield: 0.0

Momentum: 6.0

Volatility: 4.0

1-Year Total Return ->

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Frontera Energy

A-Score: 4.4/10

Value: 9.8

Growth: 3.2

Quality: 2.8

Yield: 5.0

Momentum: 1.5

Volatility: 4.3

1-Year Total Return ->

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Pine Cliff Energy

A-Score: 4.3/10

Value: 6.3

Growth: 3.3

Quality: 3.5

Yield: 8.0

Momentum: 0.5

Volatility: 4.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

8.66$

Current Price

8.66$

Potential

-0.00%

Expected Cash-Flows