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Yangarra Resources In 2020

Nov. 01, 2019 9:29 AM ETYangarra Resources Ltd. (YGRAF), YGR:CA84 Comments
Hervé Blandin profile picture
Hervé Blandin


  • Yangarra released mixed third-quarter results.
  • Management communicated its 2020 capital program.
  • The upside potential remains significant.

With its third-quarter results, the Canadian oil and gas producer Yangarra Resources (OTCPK:YGRAF) announced its 2020 capital program. Despite mixed results during this quarter, the valuation of the company based on its next-year plan remains attractive.

Yangarra Ferrier pumpjack(Note: All the numbers in the article are in Canadian dollars unless otherwise noted.)

Mixed third-quarter results

Last quarter, Yangarra had announced the goal of drilling five to six wells and complete four to five wells during its third quarter. But the results fell short of expectations since the company drilled only three wells and completed five.

In its third-quarter press release, management provided the following short explanation that points to temporary issues:

As a result of issues with a third-party contractor, production adds in the third quarter were delayed and capital costs were higher than expected.

Thus, production decreased to 12,724 barrels or equivalent a day (boe/d), down 2% quarter over quarter. But thanks to its capital program over the last several quarters, Yangarra increased its production by 23% compared to last year.

Yangarra Q3 earnings: production

Source: Press release Q3 2019

Liquids decreased to 46.2% of the company's total production compared to 47.2% during the previous quarter. The lower-than-expected number of new wells during this quarter explains the drop in liquids production since the company's new wells bring an extra amount of liquids during their first months of production.

Yangarra average well production

Source: Investor presentation November 2019

As I mentioned in my previous article, I expect Yangarra's liquids production to match its reserves' liquids proportion of 44% to 46% over the long term.

Since management didn't update its production guidance range of 13,000 boe/d to 14,000 boe/d, the disappointing third-quarter production will require a strong increase in next-quarter production to match management's guidance. For instance, fourth-quarter production will have to exceed 14,278 boe/d, which corresponds to a quarter-over-quarter increase of 12.2%, to match the

This article was written by

Hervé Blandin profile picture
I leverage my 15-year career as an IT engineer to write mostly about tech stocks with a long-term perspective.Disclaimer: Anything I write isn't investment advice and will for sure contain errors and inaccuracies. Any investment decision you make should be based solely on your own research and judgment.

Analyst’s Disclosure: I am/we are long YGRAF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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