CASE STUDY: Cardinal Energy (CRLFF)

May 1, 2022

Cardinal Energy (CRLFF) is a Canadian oil producer.

Here is the company’s most recent investor presentation:

For 2022, revenue will be about $673 million, EBITDA $365 million, cash flow $337 million, and earnings $240 million.  The current market cap is $804.7 million, while enterprise value (EV) is $924.8 million.

Book value at the end of 2022 will be about $742.7 million.

Using these figures, we get the following multiples:

    • EV/EBITDA = 2.53
    • P/E = 3.35
    • P/B = 1.08
    • P/CF = 2.39
    • P/S = 1.20

Insider ownership is 18%, which is very good.  TL/TA (total liabilities/total assets) is 33.1%, which is good.  ROE is 52.1%, which is excellent.

The Piotroski F_score is 8, which is very good.

Due to years of underinvestment from oil producers, oil supply is constrained.  (Government policy has also discouraged oil investment.)  Moreover, due to money printing by central banks plus strong fiscal stimulus, oil demand is strong and increasing.

The net result of constrained supply and strong demand is a structural bull market for oil that is likely to last years.  The oil price is likely to remain high at $90-110 per barrel (WTI) and later perhaps even higher.

Intrinsic value scenarios:

    • Low case: Book value per share at the end of 2022 will be about $4.94.  This is 7% lower than today’s stock price of $5.29.
    • Mid case: Free cash flow in 2022 will be about $233 million.  Because this is probably the beginning of a structural bull market for oil, $233 million in free cash flow is a mid-cycle figure and the stock is worth a free cash flow multiple of at least 8.  That works out to $12.39, which is 135% higher than today’s $5.29.
    • High case: Free cash flow is likely to reach $470 million in the next few years.  With a free cash flow multiple of 6, the stock would be worth $18.75, over 250% higher than today’s $5.29.


There will probably be a bear market and/or recession during which oil prices fall temporarily but then quickly rebound.  In this case, CRLFF stock would fall temporarily but then quickly rebound.



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