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Cardinal Energy: Hitting Pause On This One

Apr. 01, 2022 9:32 AM ETCardinal Energy Ltd. (CRLFF), CJ:CA7 Comments


  • The company has seen a sharp ramp higher recently in share price.
  • Its multiples are a bit stretched for our liking.
  • We rate Cardinal a hold at current prices.
  • Looking for more investing ideas like this one? Get them exclusively at The Daily Drilling Report. Learn More »
Smiling boy shooting water with squirt gun

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Cardinal Energy, (OTCPK:CRLFF) has a few levers to pull in terms of oil quality, but gets most of its daily production from heavy oil water flooding projects in the North, South, Midale, and Central areas. In mid-2021 it completed a bolt-on acquisition of

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Fluidsdoc is an international oil industry veteran with 40 years of experience having worked on six continents and in over twenty countries around the world. He is an expert in the upstream oilpatch and an energy sector specialist.

He is the leader of the investing group The Daily Drilling Report where he provides investment analysis for the oil and gas industry. Features of the group include: a model portfolio that covers all segments of upstream oilfield activity with weekly updates, ideas for both U.S and international energy companies, coverage from shale to deepwater drillers, technical analysis to identify catalysts, and more. Learn More.

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Comments (7)

River18 profile picture
Great article.
I'm long CRLFF, and after doubling my position a few days ago, Cardinal is now my 5th largest position.
sliman21 profile picture
I love the unhedged oil companies. Nothing worse than seeing the price of oil go up and having your company take a hedging loss. Ride on.
Wildstar profile picture
I'll have to go back and do some math, but I believe your numbers about their debt are off. CJ is way ahead of schedule to pay down their debt due to the large amount of cash flow from high oil prices. They should hit the level 1 debt reduction any time now, which means they should reinstate dividend soon. The math shows that dividend will be safe and approach 10% at today's prices. They will also continue to pay down debt so they don't have another BK scare. This is one to own for folks.
@Wildstar I believe the $140M number is taken from Cardinal's March 14th press release. You're correct that they've been generating a lot more cash flow than they anticipated, but the net debt number at the end of Q1 will also depend on the percentage of the 2022 CAPEX budget that was spent in that quarter.
Everything else you note is correct. According to their latest presentation, if Oil stays at or near current levels, they will easily hit the level 1 debt target by the end of Q2 and be in a position to reinstate a healthy dividend at that point.
@Wildstar The average WTI was $77 in Q4. The Average for WTI in Q1 is $94.59. So this article has some issues in that they have produced about the same amount and the debt retirement rate is the same as in Q4 despite the fact that they have an extra $17.59 per barrel more. This does not add up. My projected numbers for debt level is closer to $113 million or so. The extra 27 million is from selling the same product at a higher price. This puts them within a couple of weeks of passing that $100 million mark. They gave themselves some leeway with May 12 as announcement on the dividend front. At the current price of oil they could potentially pay 7 cents a month. That number by the way came from the presentation from Cardinal. Assuming a 50/50 split between debt retirement and share dividend. If management sticks to what was guided a couple of months ago then 84 cents/$7 is a pretty high yield. Given the debt retirement will still be at a healthy pace they could go ahead and execute this. My price target on this company is much higher than anything mentioned here. This is an easy double from here.
Nothing warrant this recommendation. Numbers are great and products unhedged. This is a hold and wait - no downwards pressure. Let it play out.
SA-NJ52 profile picture
I sold half my position when oil was at 108. I will sell the remainder when the time is right.

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