Riding the Low Price Environment – Companies with lowest debt to cash flow ratio

Imperial's Cold Lake operations.

Latest debt level data from CanOils shows that some E&P players in the Canadian oil and gas space are much better positioned to survive the lower price environment for longer duration. A handful of companies have very low level of debt in relation to their cash flow compared to their peers.

In order to identify the companies in the best position, we have used Net Debt to Cash Flow. This ratio is a measure of how many times greater a company’s debt is compared to its current level of cash flow, i.e. how long it will take to pay it all off based on the most recent data. The measure is a good indicator of financial health of a company and is more complete than most cash flow coverage ratios in that it includes all forms of debt and takes the cash on the balance sheet into account.

This analysis was conducted using data available in annual reports of 46 Canadian-listed companies that have majority of their oil production in Canada.

  • Of the group, we looked at those that produced at an average of over 10,000 bbls/d of oil in 2019.
  • The base components of net debt including cash balances, long term debt, short term debt, net debt, available credit facility, credit facility utilization, capital leases etc., are available in the CanOils F&O module .

Comparing the net debt metrics (that take credit facility utilization into account) at the end of Q4 2019, we ranked the companies with lowest net debt to cash flow ratios and found that companies outlined below in the table were in the best position.

Top 5 Companies with lowest Net Debt to Cash Flow ratio, Q4 2019

Company

Net Debt/
Cash Flow

International Petroleum Corporation

0.7

Enerplus Corporation

0.9

Tamarack Valley Energy Ltd.

0.9

Imperial Oil

1.0

TORC Oil and Gas

1.2

Source: CanOils

Note that the above metrics are based on data as of Dec. 31, 2019. The recent price crash may have altered the picture entirely and left many companies worse off when it comes to this metric as cash flow from operations may have taken a significant dip in Q1 2020. The companies most protected from such a dip were covered in our previous article “ Riding the low price environment – Largest hedgers of Q2 2020 .”

Using CanOils data, it is also possible to study the other extreme of the spectrum. By analyzing CanOils debt levels, credit facility utilization data in combination with hedging strategies and each company’s operating and overhead costs per flowing barrel, it is possible to identify the companies that may be in a more challenging position through these uncertain times.

For more information and a CanOils demo, please contact Amit Patel, CanOils Account Executive at 403-209-3581 or apatel@glacierrig.com

Alternatively, you can find out more about the CanOils Financial and Operating data by completing the form at this link.

Example dataset pulled from CanOils – ARC Resources Ltd.’s full liability profile along with some key ratios, based on data available in Q4 2019 financial statements.

All Financial Data in $C

ARC Resources Ltd.

Balance Sheet ('000)

Q4 2019

Bank Indebtedness/Overdraft

-

Revolving Credit Facility (364-Day Loans)

-

Short-Term Convertible Debentures

-

Current Portion of Long-Term Debt

148,900

Current Portion of Capital Lease

-

Advances From Parent/Subsidiary/Affiliate

-

Current Operating Leases/Right-of-Use Liabilities

16,300

Other Short-Term Debt

-

Total Current Short-Term Debt

165,200

Total Trade Payables & Accrued Liabilities

150,500

Distributions/Dividends Payable

17,700

Income Taxes & Other Taxes Payable

-

Current Deferred Tax Liability

-

Current Derivative Instruments (Liabilities)

6,100

Other Current Liabilities

25,500

Liabilities Held For Resale/Discontinued Operations

-

Total Current Liabilities

365,000

Bank Debt & Notes Payable

728,700

Convertible Debentures

-

Capital Lease

-

Advances From Parent/Subsidiary/Affiliate

-

Long-Term Operating Lease Liabilities

29,900

Other Long-Term Debt

-

Total Long Term Debt

758,600

Deferred Taxes

772,400

Asset Retirement Provisions

384,100

Pension Related Provisions

-

Other Provisions

-

Total Provisions

384,100

Long-Term Derivative Instruments (Liabilities)

28,700

Deferred Revenue/Credit/Obligation

-

Other Long-Term Liabilities

29,600

Preferred Stock (Classified as Debt)

-

Non-Controlling Interest

-

Total Liabilities

2,338,400

Capital Structure

Net Debt (Net of Cash & Equivalents, '000)

869,100

Cash Flow Statement ('000)

Total Cash From (To) Operating Activities

166,700

Total Cash From (To) Financing Activities

-4,500

Credit Facilities ('000)

Total Credit Available

1,030,000

Amount Drawn

36,900

Total Amount Undrawn

993,100

Letters of Credit

12,800

Remaining Credit Available

980,300


Advocacy & Opinion


U.S. & International


Renewables


Special Report