This TSX under $40 energy stock jumped by 370% in a year. Buy alert?

The Canadian energy space remains the top sector, with the TSX energy index posting a year-to-date (YTD) gain of nearly 45 per cent, marking the highest increase compared to other sectors, despite recent market pullbacks.

Oil prices are currently under US$ 100 per barrel. They have been fluctuating for a while now, resulting from the weak market sentiments emerging from macro-economic factors (including sanctions and embargoes on Russia) and recession worries associated with the expected interest rate to control inflation.

To be precise, Brent Oil was somewhat around US$ 97.49 per barrel, up by 1.05 per cent, at 4:30 AM EST on Tuesday, August 23. The Crude Oil WTI Futures also raced higher to US$ 91.53 a barrel, up by 1.29 per cent at the time of writing.

To some extent, recent interest rate hikes seem to have affected gasoline prices in July as Statistics Canada reported a price surge of 35.6 per cent year-over-year (YoY), lower than a 54.6 per cent rise in June this year. This deceleration is said to have eased the Consumer Price Index (CPI) growth to 7.6 per cent in July compared to the previous month this year.

However, despite this price slowdown, energy players could still be an option to consider because of their robust cash flows. Furthermore, sales at gasoline stations rose by 3.9 per cent in June 2022, leading to a 1.1 per cent surge in Canada’s retail sales to reach C$ 63.1 billion, according to Statistics Canada’s retail trade data released on August 19.

Considering all these key points, some Canadian oil stocks could provide investors significant returns when oil prices recover and if the global oil market stays tight. Speaking of returns, a Toronto Stocks Exchange (TSX)-listed mid-cap stock catapulted by more than 370 per cent in 12 months, thereby outperforming the S&P/TSX Capped Energy Index, which 109.48 per cent during this time.

Why explore this TSX oil stock?

According to the TMX site, this oil stock is ranked fourth in the top energy stock list, including 40 TSX and TSXV energy stocks with the biggest price gain in the last 30 days. This mid-cap stock is also among the top volume stocks with the largest trade volumes in the last ten days.

We are talking about Vermilion Energy (TSX: VET), which currently holds a market capitalization of C$ 5.7 billion. This Canadian oil and gas company also announced a 33 per cent increase in the quarterly dividend to C$ 0.08, set to be distributed on October 17 (ex-dividend on September 28). Now, let us learn more about this oil company and closely look at its overall performance.

Vermilion Energy: Key Financials

Vermilion saw a double-digit surge of 28 per cent year-over-year (YoY) in its net profit to C$ 362.62 million in the second quarter of fiscal 2022, aided by high commodity prices and net hedging profit. The Calgary, Alberta-headquartered oil producer reported C$ 452.9 million in funds flow from operations in the latest quarter, reflecting YoY growth of 16 per cent. Vermilion Energy also posted a free cash flow (FCF) of C$ 339.74 million in Q2 2022, up by 12 per cent from Q2 2021.

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Completing the Leucrotta Exploration acquisition in May, its assets, including Mica property, were successfully integrated into Vermilion. The oil and gas producer stated that the Mica asset substantially enhances the depth and quality of its North American inventory and is projected to improve its free cash flow. The energy company narrowed its net debt to C$ 1.58 billion in Q2 2022, lower than the C$ 1.85 billion posted a year ago. Further, Vermilion Energy reduced its long-term debt to C$ 1.52 billion in Q2 2022, less than C$ 1.76 billion in Q2 2021.

Petroleum and natural gas sales reached C$ 858.84 million in the second quarter this year compared to C$ 407.17 million in the second quarter last year. On the production front, Vermilion posted an average production of 84,868 barrels of oil equivalent per day (boe/d), reflecting a two per cent decrease mainly due to planned and unplanned downtown.

Vermilion stock zoomed by nearly 119 per cent YTD

Vermilion stock zoomed by nearly 119 per cent so far this year. On August 11, the VET stock clocked a 52-week high of C$ 34.09. On the other hand, this oil stock climbed almost 352 per cent from a 52-week low of C$ 7.7 (August 23, 2021).

The VET stock seems to be on an upward trajectory with a Relative Strength Index (RSI) value of 64.76 (indicating a medium-to-high momentum), supported by 1.91 million shares switching hands on August 22. The VET stock was the top gainer on the TSX, with the highest increase of 5.07 per cent on August 22.

Bottom line

Though market liquidity may continue to affect weak investment sentiments, those aiming to advantage from oil price fluctuation and have a moderate risk appetite could explore this under C$ 40 energy stock. This oil producer has benefitted from high commodity prices in Q2 2022, but investors should do their research before investing.

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.