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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

Number Cruncher

Drilling beneath the surface of triple-digit oil Add to ...

What are we looking for

Oil prices are sizzling, Alberta’s energy industry is bustling – and the high price of gasoline is fuelling thoughts of another “staycation” summer to come. Yet energy investors have had little to celebrate.

Oil and gas has been among the country’s worst-performing sectors of the stock market. You can blame depressed natural gas prices and inflating costs in the industry, among other reasons.

But with the sector underperforming at a time of triple-digit oil, it’s worth looking for stocks that are successfully adding reserves while keeping costs down, and overall may be good bait for value hunters. This screen is designed to do just that.

More about our screen

With the help of Bloomberg, we’ll take a look at Canadian-listed energy firms that score the most favourably using six key industry drivers:

[BULLET]/note>– Finding costs: The average cost of adding one barrel of oil equivalent (BOE) to a company’s proven reserves through exploration. BOE is a way of combining oil and natural gas into a single measure.

[BULLET]/note>– Lifting costs: Average cost to produce one BOE.

[BULLET]/note>– Success rate: Percentage of wells drilled during the past year that found oil or gas deposits insufficient quantities to merit development.

[BULLET]/note>– Reserves replacement ratio: Percentage of reserves consumed by production during the past year that were replaced through new discoveries, acquisitions and better recoveries.

The remaining two are reserves as expressed per share, and production.

Bloomberg then assigns a ranking by equal weighting all these metrics. Only companies that had all the necessary data were ranked.

What we found

These 20 stocks, made up of both small and large caps, scored the highest. Topping our list is Vermilion Energy Inc., which has the added attraction of a 5-per-cent annual dividend yield. Vermilion grew production 10 per cent last year to 35,202 barrels of oil equivalent as output expanded at its Cardium light oil play in Western Canada and also recently acquired stakes in six producing fields in France.

Tomorrow, we’ll take a look at U.S. stocks that scored the highest. And, as always, please use this only as the starting point for more thorough research.

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