This TSX oil stock saw its cash flow skyrocket 115% in Q1. Time to buy?

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This TSX oil stock saw its cash flow skyrocket 115% in Q1. Time to buy?

This TSX oil stock saw its cash flow skyrocket 115% in Q1. Time to buy?
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Highlights

  • The S&P/ TSX Capped Energy Index is up by nearly 55 per cent year-to-date (YTD).
  • A TSX energy player not only more than doubled its total revenue in its latest quarter this year, but also its net profit.
  • This particular oil company also increased its quarterly dividend to C$ 0.26 per share in March.

Canada’s oil and gas industry has been on quite the ride this year, thanks to the crippling supply constraints in the global oil market. The S&P/ TSX Capped Energy Index is up by nearly 55 per cent year-to-date (YTD), having outshone the TSX benchmark, which has slipped by over two per cent in 2022.

This ride could get more exciting if global customers, especially those turning away from Russia, look to Canada to quench their energy demands. And if that happens, those exploring Canadian oil stocks could stand to gain.

Speaking of Canadian oil stocks, today let’s talk about one TSX energy player that not only more than doubled its total revenue in its latest quarter this year, but also its net profit.

This particular oil company, which is fairly new to the game, also increased its quarterly dividend to C$ 0.26 per share in March, payable on June 30, from an earlier payment of C$ 0.24.

Can you guess the name?

Well, we’re talking about Topaz Energy Corp (TSX: TPZ), a Calgary-based enterprise which purchased its formative royalty and energy infrastructure assets from another Canadian oil player, Tourmaline Oil Corp (TSX: TOU) in November 2019.

Topaz Energy Corp (TSX: TPZ) saw its cash flow inflate by 115% YoY in Q1 FY2022

The energy infrastructure company saw its total revenue go from C$ 37.76 million a year ago to C$ 81.32 million in Q1 2022. Its cash flow catapulted by a whopping 115 per cent year-over-year (YoY) to C$ 74.17 million in the latest quarter, while its free cash flow (FCF) rose from C$ 33.99 million in Q1 2021 to C$ 73.78 million in Q1 2022.

Topaz Energy’s net profit also swelled from 5.35 million a year ago to C$ 11.4 million in Q1 2022. It recorded a royalty production revenue of C$ 65.74 million in the first three months of 2022, significantly exceeding C$ 24.17 million registered in the same quarter of 2021.

The C$ 3.2-billion market cap firm saw its processing revenue stand at C$ 13.07 million in the latest quarter, up from C$ 10.47 million in the first three months of FY2021.

Topaz Energy (TSX:TPZ)’s Q1 2022 results

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Topaz Energy’s stock surged by 31% YTD

Stocks of Topaz Energy swelled by over 31 per cent year-to-date (YTD) and nearly 60 per cent in 52 weeks. Having closed at C$ 23.47 on May 5, TPZ stock was trading at C$ 23.29 at 9:56 AM EST on Friday, May 6. 

According to Refinitiv data, the energy stock has been outpacing the TSX benchmark index since September 2021 and held a Relative Strength Index (RSI) value of 63.02 at the time of writing this.

What’s in store for Topaz Energy?

While Russia’s attack on Ukraine crisis sent energy prices through the roof, they headed straight for the moon earlier in May after reports surfaced that the European Union (EU) is planning a complete ban on Russian oil embargo. As on Friday morning, May 6, 8:30 AM EST, the West Texas Intermediate (WTI) was trading at US$ 109.2 per barrel and Brent crude oil was at US$ 112.16 per barrel.

As for Topaz Energy, the oil firm signed an acquisition agreement with Keystone Royalty Corp in March for a consideration of C$ 85 million. This transaction is expected to close in Q2 FY2022. In the light of this acquisition, the energy company has also increased its EBITDA guidance range by 17 per cent for 2022, based on internal estimations.

Topaz Energy has recorded robust results and seems to be on an upward trajectory, possibly due to soaring oil prices. But before committing to any final deal, investors should make note of all key changes in the oil market and within the company.

Also read: Shopify (TSX: SHOP) posts Q1 revenue surge of 22% YoY. Time to buy?

Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.

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