The comeback of vitality shares in 2023 is actual, not superficial. As of this writing, the sector is the third-best performer, beating the broader market yr so far at +10.73% versus +0.81%. Oil costs are spiking and nearing US$100 per barrel attributable to provide cuts by heavyweight crude producers, significantly Saudi Arabia.
Revenue buyers who need publicity to the vitality sector and trip on the constructing momentum ought to contemplate Headwater Exploration (TSX:HWX). This development inventory is among the steadiest vitality constituents. It has gained 17.64% within the final three months and is up 26.57% yr so far. At $7.16 per share, you possibly can partake within the profitable 5.43% dividend.
New dividend payer
Headwater Exploration isn’t a longtime dividend payer like sector heavyweights Enbridge, Canadian Pure Assets, or TC Power. Its dividend monitor document is comparatively younger, solely 4 quarters. The board of administrators introduced a dividend coverage and applied a return of capital technique final yr.
Due to the corporate’s distinctive monetary efficiency, the board accredited the inaugural quarterly money dividend on November 3, 2022. The fourth payout will probably be on October 16, 2023, to shareholders of document on the shut of enterprise on September 29, 2023.
Rising the quarterly dividend is now a part of Headwater’s multi-year enterprise technique. The board expects to take care of the common quarterly dividend, given the projected long-term West Texas Intermediate (WTI) oil worth of US$55 per barrel.
Multi-year enterprise technique
The $1.68 billion useful resource firm explores, develops, and produces petroleum and pure fuel in Canada. Headwater boasts high-quality oil manufacturing, reserves, and lands in its core working areas. It operates within the Clearwater play in Alberta’s Marten Hills space. The McCully Subject, near Sussex, New Brunswick, has low-decline pure fuel manufacturing and reserves.
On the event aspect (US$75 per barrel WTI), the recognized stock helps 10 years or extra of secure manufacturing using 60-70 places per yr. Administration’s major purpose is to supply superior corporate-level returns by specializing in sustainability, asset high quality, and steadiness sheet power.
Moreover rising the quarterly dividend, Headwater hopes to take care of optimistic working capital. It is going to additionally proceed so as to add incremental prospects by way of strategic land acquisitions and accretive mergers and acquisitions.
Monetary highlights
Within the first half of 2023, complete revenues (gross sales and royalties) and web revenue declined 9.2% and 39.2% yr over yr to $188.13 million and $60.92 million. The money flows from working actions dipped 13% to $127 million in comparison with a yr in the past.
Since introducing its dividend coverage, Headwater has returned $70.5 million to shareholders. As of June 30, 2023, the working capital is $54.8 million, whereas excellent financial institution debt is zero.
Regardless of the drop within the prime and backside strains, the board of administrators elevated the 2023 capital expenditure steerage to $225.0 million with out reservations. The plan is to pursue further strategic land and exploration prospects.
TSX30 winner
Headwater Exploration’s primary attraction is its very good manufacturing development. The corporate’s manufacturing soared 123.1% from 7,688 barrels of oil equal per day (boe/d) within the third quarter of 2021 to 17,152 boe/d within the second quarter of 2023. Due to the inventory’s +442% acquire in three years, it has joined the elite membership of high-growth shares. HWX ranks sixteenth within the 2023 TSX30 Listing.
