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NuVista Energy: The Oil Price Is More Important Than The Natural Gas Price

Sep. 03, 2022 11:35 AM ETNuVista Energy Ltd. (NUVSF), NVA:CA7 Comments


  • NuVista Energy is a Canadian oil and gas producer, taking advantage of the current tailwinds despite historical hedges.
  • The cash flows will remain strong, even if oil drops to US $65 and if natural gas drops to US $3.
  • While the majority of the oil-equivalent production comes from natural gas sales, the majority of the revenue comes from the sale of condensate.
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British Columbia Natural Gas Liquids Plant North Montney shale formation Alaska Highway



As explained in my previous articles on NuVista (OTCPK:NUVSF) (TSX:NVA:CA), this Canadian natural gas producer is an interesting story to keep an eye on. Unfortunately the AECO natural gas price is pretty weak these days but

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Comments (7)

Strong week for NuVista. Anyone hear any news?
River18 profile picture
@DrT it had a major upgrade today in the Globe&Mail.
G&M: Monday’s analyst upgrades and downgrades
Desjardins Securities analyst Chris MacCulloch reaffirmed his view of NuVista Energy Ltd. (NVA-T +3.53%) as “one of the best-positioned growth and capital return stories in the Canadian energy sector” after hosting investor meetings in Montreal with chief operating officer Mike Lawford and incoming chief financial officer Ivan Condic last week.
“From growing pains to capital gains, NVA is delivering shareholder value through the drill bit,” he said. “One of the key differentiating factors for NVA in recent years has been top-decline organic production growth rates. Recall that the company was one of the fastest-growing Montney producers prior to the pandemic when it was actively drilling to fill minimum volume commitments (MVCs) with third-party infrastructure providers, some of which were executed in the wake of its transformative acquisition of the Pipestone North asset from Cenovus Energy in 2018. Following the commodity price crash, NVA effectively ceased drilling and completion activity through the remainder of 2020, stockpiling DUC locations while also successfully renegotiating the terms of its MVCs. These decisions ultimately helped the company ride out the storm before the commodity price recovery started taking hold in 2021, upon which it resumed its three-rig program at Pipestone and Wapiti

“Since then, the company has quickly regained operational momentum and is now on pace to deliver 32-per-cent annualized production growth in 2022 and 22 per cent in 2023 based on our forecast for average output of 69,000 boe/d and 84,000 boe/d, respectively. When also considering the impact of share buybacks given that we are currently modelling 50 per cent of FCF toward the NCIB (and a future SIB), NVA’s 2023 PPS growth metric improves to 30 per cent based on strip prices, conservatively assuming our $18 per share target price as the cost basis for buybacks.”

Barring a significant drop in commodity prices, he thinks NuVista will likely “exhaust” its normal course issuer bid by the end of the year and and “accelerate” shareholder returns through significant issuer bid in 2023.

“Our working assumption is that the company will pursue a SIB next year, and it could be material given we are now forecasting a $130-million working capital surplus exiting 2023 at strip prices, even after allocating 50 per cent of FCF to share buybacks,” said Mr. MacCulloch.

He maintained a “buy” rating and $18 target for the company’s shares. The average on the Street is $16.40.

YTD NVA is up +64.37%
Thanks for pointing out that POU Paramount Resources is a major shareholder owning 16%.
POU also has stakes in other gassy companies.
Do you have a position in this company?
The Investment Doctor profile picture
@anthbutler No. The disclosure can always be found at the bottom of every article.
Thanks for the analysis. Noteworthy was Nuvista's growth in Condenste production, as Condensate in Alberta often trades at a premium to WTI as it is a critical diluent in blending with oil sands bitumen to meet pipeline viscosity specs without exceeding pipeline RVP specs.

I note most Canadian natural gas weighted stocks trade up and down with the price of WTI, even those where Condensate is not as predominant as it is in Nuvista's case,
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