E&P Co. Has 90% Potential Upside, Analyst Says

Feb 29, 2024
e&p-co.-has-90%-potential-upside,-analyst-says

Cormark Securities analyst Garett Ursu shared coverage on New Stratus Energy Inc., giving it a Buy rating.

Cormark Securities analyst Garett Ursu shared coverage on New Stratus Energy Inc. (NSE:TSX.V) in a January 16 research note with a Buy rating and CA$1.50 price target. New Stratus is a micro-cap international E&P focused on a “uniquely structured” deal to redevelop stranded oil assets in Venezuela.

Financial Results and Projections

The analyst models 2023 funds flow of negative CA$15.4 million, improving to $27.6 million by 2025. Production is estimated to be 700 boe/d in 2024, reaching 1,274 boe/d in 2025. 

For 2024, Cormark forecasts “operating netbacks” above CA$174 per BOE and “cash flow netbacks” of CA$76.75 per BOE, which would “rank at the top” of the firm’s E&P coverage universe. The outlook is for positive free cash flow generation beginning in 2025.

Venezuela’s Undercapitalized Resources

Both Mexico and Venezuela represent massive stranded oil resources from industry mismanagement and underinvestment.

Recent sanctions relief enables experienced operators to profitably redevelop assets avoided by most companies, the analyst said.

Transformational Venezuela Agreement

New Stratus holds a 50% stake in a JV with GoldPillar, itself owning 40% of fields with rights held by Venezuela’s state oil firm. The analyst noted that this structure insulates from political risk while positioning New Stratus to generate E&P, marketing, procurement, and financing income.

An initial 90-well workover program begins immediately, targeting over 5 billion barrels of oil in place, the report stated. 

Valuation & Upside

With material near-term production growth expected and over 60 million barrels of recoverable resources outlined, analyst Ursu sees the risk-reward as compelling. His CA$1.50 target represents a 90% upside potential.



Want to be the first to know about interesting Oil & Gas – Exploration & Production investment ideas? Sign up to receive the FREE Streetwise Reports’ newsletter. Subscribe

Important Disclosures:

  1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of New Stratus Energy Inc.
  2.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

For additional disclosures, please click here.

Disclosures for Cormark Securities Inc., New Stratus Energy Inc., January 16, 2024

This report has been prepared by Cormark Securities Inc., which is regulated by the Investment Industry Regulatory Organization of Canada (“IIROC”). Cormark Securities Inc. and, its wholly owned affiliate, Cormark Securities (USA) Limited (collectively “:CSI”) are in compliance with IIROC and the Financial Industry Regulatory Authority research report rules and regulations where they apply. The firm does not receive compensation for any non-securities or non-investment banking related services. Neither the analyst nor the associate (if any), or any member of his/her household, serve as an officer, director or employee or serve in any advisory capacity of the subject company(ies) under their coverage. CSI actively solicit investment banking business, including underwriting and advisory services, from its research coverage list. As a result, although uncertain, revenue from these activities may be received at any time. All relevant disclosures required by regulatory rules (including IIROC) and Cormark’s recommendation statistics and research dissemination policies can be obtained at www.cormark.com. Cormark will provide, upon request, a statement of its financial condition and a list of the names of its Directors and senior officers.

For Canadian Residents: This report has been approved by Cormark Securities Inc. (“CSI”), member IIROC and CIPF, which takes responsibility for this report and its dissemination in Canada. Canadian clients wishing to effect transactions in any security discussed should do so through a qualified salesperson of CSI. For US Residents: Cormark Securities (USA) Limited (“CUSA”), member FINRA and SIPC, accepts responsibility for this report and its dissemination in the United States. This report is intended for distribution in the United States only to certain institutional investors. US clients wishing to effect transactions in any security discussed should do so through a qualified salesperson of CUSA. Any research analyst contributing to this report is not registered as a research analyst with FINRA and is not an associated person of CUSA and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Every province in Canada, state in the US, and most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, some of the securities discussed in this report may not be available to every interested investor. This report is not, and under no circumstances, should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to all clients and does not have regard to the particular circumstances or needs of any specific person who may read it. This report is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any securities discussed herein. The information and any statistical data contained herein have been obtained from sources believed to be reliable as of the date of publication, but the accuracy or completeness of the information is not guaranteed, nor in providing it does CSI or CUSA assume any responsibility or liability. All opinions expressed and data provided herein are subject to change without notice. The inventories of CSI or CUSA, its affiliated companies and the holdings of their respective directors, officers and companies with which they are associated may have a long or short position or deal as principal in the securities discussed herein. A CSI or CUSA company may have acted as underwriter or initial purchaser or placement agent for a private placement of any of the securities of any company mentioned in this report, may from time to time solicit from or perform financial advisory, or other services for such company. The securities mentioned in this report may not be suitable for all types of investors; their prices, value and/or the income they produce may fluctuate and/ or be adversely affected by exchange rates. No part of any report may be reproduced in any manner without prior written permission of CSI. A full list of our disclosure statements as well as our research dissemination policies and procedures can be found on our website at: www.cormark.com.

Each research analyst and research associate who authored this document hereby certifies that the recommendations and opinions expressed in the research report accurately reflect their personal views about the subject company (ies) and its (their) securities and that they have not been and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.



Leave a comment