Raging River Exploration has increased production more than eightfold since the beginning of 2012 and has beat analysts’ earnings estimates in seven of the past 10 quarters.TODD KOROL/Reuters
Raging River Exploration Inc. is skirting the oil-price slump and rewarding investors with the best performance among companies in the heart of Canada's energy patch.
About 20 months into the rout last week, the oil producer pulled off a rare secondary equity offering for $95-million, in which banks buy the shares confident in being able to resell them to investors. The stock, buoyed by the company's low debt, production growth and cost-cutting, has outperformed 62 Calgary-based stocks over the past year, data compiled by Bloomberg show.
"That was an aggressive move for the banks to do in this environment, which tells you a lot about the quality of the company," Rafi Tahmazian, a portfolio manager at Canoe Financial in Calgary, said by phone. Raging River is one of Canoe's largest energy holdings because of executives' track record of overdelivering on their targets and their careful spending, he said. "These guys were very good stewards of their capital through the correction."
Output rising
Raging River has increased production more than eightfold since the beginning of 2012 and has beat analysts' earnings estimates in seven of the past 10 quarters, according to data compiled by Bloomberg. While investors shy away from the debt load of many producers, Raging River has been bringing down costs and has a pristine balance sheet that will let it make more acquisitions to grow, according to Canaccord Genuity Corp.
The 19-per-cent gain for Raging River shares in the past 12 months tops the producer's energy peers as well as companies focused on transportation and fertilizer products, even in a crude market decline that has the U.S. benchmark trading about 70 per cent below its high in mid-2014. Calgary-based companies lost an average of 37 per cent in the past year, according to the Bloomberg screening.
Raging River's market capitalization is about $2-billion; its total debt was about $58-million at the end of the third quarter of 2015.
Low debt
"The company has one of the leanest balance sheets in the entire junior and intermediate oil and gas universe," Dennis Fong, an analyst at Canaccord in Calgary who rates Raging River the equivalent of a buy, said in an interview. The shares have 11 buy and no hold or sell recommendations from analysts. "That's something investors cherish, especially in this low oil price environment."
Neil Roszell, chief executive officer of Raging River, declined by e-mail to comment. He cited securities restrictions that prevent him from speaking about the company until the share offering closes on March 9. Mr. Roszell, an engineer, formed Raging River after selling a previous company, Wild Stream Exploration Inc., to Crescent Point Energy Corp. in 2012.
Raging River, which is focused on extracting light oil primarily from Saskatchewan's Viking formation, has brought down costs from about $1-million a well prior to the price slump to less than $700,000 recently, Mr. Fong said. The company's debt is poised to be about 0.2 times its cash flow in 2016, compared with a multiple of more than four times for its peers, he said. The producer's output amounted to about 13,400 barrels of oil a day in the third quarter.
Last week's stock offering gives Raging River the "dry powder" to be able to make more acquisitions in the Viking, Mr. Fong said, following its purchase in December of closely held Anegada Energy Corp. for about $130-million. Underwriters have an option to buy additional shares, bringing the maximum raised under the offering to about $108-million if the overallotment option is exercised in full, the company said in a Feb. 17 release.
"Having the quality balance sheet that they have should allow them to act opportunistically going forward," Mr. Fong said. "There are several assets for sale across Saskatchewan and Alberta and I think they would prefer to look at Viking first."