Baytex Energy Corp       

Baytex Energy Corp. (TSX: BTE) is an oil and gas company that acquires, develops, and produces oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford, the United States.

Why Should Investors Book Profit

• At the last closing price (on July 5, 2021), shares of BTE crosses the upper Bollinger Band©, which is 2x deviation from the 20-day SMA. This indicates that a price consolidation could take place towards the 20-day SMA.

Source: REFINITIV, Analysis by Kalkine Group

• Further, on the daily and weekly price chart 14-day RSI is hovering in an overbought zone at 72.45, which indicates a potential consolidation in the stock in near-term.
• Baytex Energy shares have rallied handsomely over the past 1-year, on the back of a strong rally in the crude oil. Any adverse movement in the oil prices could also have a sharp impact in the Baytex stock prices as well.
• Valuation Metrics suggest that the stock is trading at higher multiples compared to its peers.

Valuation Methodology (Illustrative): EV to EBITDA

Stock Recommendation: Despite a splendid rally in the oil prices, demand uncertainties are still hovering on the back of resurgence in the COVID-19 Delta variant cases in some parts of the world and a new wave of travel restriction and lockdown announcement could have a weigh on the oil prices in near term.  We have valued the stock using EV to EBITDA based valuation method and arrived at a price offering a lower double digit downside potential (in percentage terms). We have considered ARC resources, NuVista Energy etc., as a peer group for comparison. Therefore, based on the above rationale and valuation; we recommend a “Sell” rating on the stock at the closing price of CAD 2.58 on July 05, 2021.

1-Year Price Chart (as on July 05, 2021). Source: REFINITIV, Analysis by the Kalkine Group

NuVista Energy Ltd.,      

NuVista Energy Ltd. (TSX: NVA) is a condensate and natural gas company, engages in the development, delineation, and production of condensate, oil, and natural gas reserves in the Western Canadian Sedimentary Basin.

Why Investors should book profit:

• On the daily and weekly price chart, the leading momentum indicator, 14-day RSI, is hovering in a steep overbought territory, with daily 14-day RSI stood at 82.5 and weekly 14-day RSI hovering at 81.6. This implies that consolidation or correction could take place in the stock.
• Despite a splendid rally in the oil prices, demand uncertainties are still hovering on the back of a resurgence in the COVID-19 Delta variant cases in some parts of the world, and a new wave of travel restriction and lockdown announcements could have a weigh on the oil prices in the near term.
• Moreover, a lot of rallies in the oil prices was because of the supply squeeze; once OPEC+ countries would ease out their production output, oil prices could adjust accordingly.
• NuVista Energy shares have rallied handsomely over the past 1-year; given the micro-cap market categorization of the company, price consolidation could also be very sharp if things go adverse.

Valuation Methodology Illustration (EV to EBITDA)

Stock Recommendation: Oil has a strong history of large swings and mostly operated by a cartel of oil major countries. The company’s revenue is closely linked with the prices of crude oil, and volatility in the oil price would affect the group’s financial performance. We have valued the stock using EV to EBITDA based valuation metrics and arrived at a potential downside in lower double-digit (in percentage terms). We have considered Crescent Point Energy Corp, Baytex Energy etc., as a peer group for the comparison. Therefore, based on the above rationale and valuation, we recommend a “Sell” rating on the stock at the closing price of CAD 4.10 on July 05, 2021.

1-Year Price Chart (as on July 05, 2021). Source: REFINITIV, Analysis by the Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.