Oilfield ‘green transition’ draws analysts to small Canadian stock

Image: Questor Technology Inc.

A firm looking to help oil and gas companies reduce emissions is drawing praise from analysts.

Questor Technology Inc., a Calgary-based environmental technology firm that provides high efficiency waste gas combustion systems, is a “pure-play opportunity” to invest in a stock that helps with lessening oilfield pollution, said Tim Monachello, analyst at AltaCorp Capital Inc. It has leverage to “green transition” in oilfield operations, he said.

“With energy producers, regulators and investors increasingly demanding environmentally responsible practices we believe demand for combustion systems is poised for structural growth,” Monachello said in a Sept. 27 report. AltaCorp initiated coverage on the company last week with an outperform rating and a share price target of C$5.50 ($4.16). The shares closed at C$4.27 on Tuesday.

As people seek to incorporate socially responsible investment options into their portfolios, a company like Questor stands out. And that positive investor sentiment can be seen the company’s shares which have surpassed the broader Canadian energy index this year -- its stock has gained 28%, more than tripling the S&P/TSX Energy Index’s 8% climb.

Canaccord Genuity’s John Bereznicki added to the bullish tone in a report published Monday and said, “The company is enjoying strong secular growth drivers amidst increasingly stringent oilfield emissions standards and an emerging industry focus on waste methane.” He reiterating a buy recommendation and C$6 price target.

All four analysts covering the C$116 million market cap company have a buy-equivalent rating, according to data compiled by Bloomberg.

But competition is steep, as certain business lines overlap with some notable names. One of its largest and most notable private competitors is John Zink Hamworthy Combustion, a unit of Koch Industries Inc., while publicly traded competitors include National Oilwell Varco Inc. and Schlumberger Ltd, AltaCorp’s Monachello added.

The company plans to monitor data on air pollution from its emissions control center in Calgary, while generating the majority of its revenue in the U.S. Questor obtained 92% of its sales in 2018 from the U.S., and 8% in Canada, according to Bloomberg data.

“The North Dakota market and our initial entry into Texas, Wyoming and New Mexico are the drivers for our increased rental revenues,” Chief Executive Officer Audrey Mascarenhas said in the second-quarter earnings release in August. She holds about 16% of Questor’s shares outstanding.

© 2019 Bloomberg L.P.

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