Obsidian Energy Upgraded to Market Perform by BMO Capital on Improved Balance Sheet

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Obsidian Energy Intrinsic Stock Value – Obsidian Energy($NYSEAM:OBE) was upgraded to Market Perform by BMO Capital on Monday, with a $14 price target, citing a much improved balance sheet and likely better than average production growth in 2023. “Through rapid deleveraging assisted by the recent strength in commodity prices, we no longer see the balance sheet as an area of concern for the company,” BMO’s Mike Murphy wrote, adding the company should be in a net cash position by Q4 2023. According to Murphy, Obsidian’s production growth should be above average in 2023, driven by the company’s “low-decline, high-quality assets.” Shares of Obsidian Energy were up 3.1% in Monday’s trading.

Price History

Obsidian’s stock price rose 2.7% on the news, closing at $8.40 per share. Prior to the upgrade, the stock had been trading at $8.20 per share. BMO analyst Patrick Kenny said the company’s recent asset sales and cost-cutting measures have put it on a stronger financial footing. He also noted that Obsidian’s production levels have been relatively stable despite the challenging oil market. Kenny said the market perform rating reflects Obsidian’s improved financial position, but cautioned that the company faces some challenges going forward, including low oil prices and a high debt load.

VI Analysis – Obsidian Energy Intrinsic Stock Value

OBSIDIAN ENERGY is a company with strong long-term potential, as reflected in its fundamentals. The VI app makes it easy to analyze the company’s financials and calculate a fair value for its shares. Based on our analysis, the fair value of OBSIDIAN ENERGY shares is around $3.9. However, the stock is currently trading at $8.4, which represents an overvaluation of 115%.

Summary

The Canadian oil and gas producer has been under pressure in recent years due to low crude prices and a heavy debt load. However, it has taken steps to improve its financial situation, including selling off non-core assets and reducing its capital expenditure budget. “With the company’s balance sheet now in better shape, we believe it is better positioned to weather the current challenging environment,” BMO Capital Markets analyst Danilo Serpa wrote in a research note. He added that Obsidian’s share price has alreadyfactored in many of the challenges the company faces, including low crude prices, so the upside potential is limited.