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Research: Energy & Resources
Kolibri Global Energy (KEI) has reported Q124 results that saw flat EBITDA quarter-on-quarter as double-digit growth in average production to a record 3,305boepd was offset by lower commodity prices and a one-off increase in operating costs. We have updated our estimates to reflect the results and the recent well reworks, lowering our FY24 EBITDA estimate by 9%. As a result, our valuation of KEI falls from US$7.1 to US$6.9/share. The stock continues to trade at undemanding valuation multiples and, despite the increased volatility, the oil price remains generally supportive of the share price.
Kolibri Global Energy |
Record quarterly production |
Results update |
Oil and gas |
20 May 2024 |
Share price performance
Business description
Next event
Analysts
Kolibri Global Energy is a research client of Edison Investment Research Limited |
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Kolibri Global Energy (KEI) has reported Q124 results that saw flat EBITDA quarter-on-quarter as double-digit growth in average production to a record 3,305boepd was offset by lower commodity prices and a one-off increase in operating costs. We have updated our estimates to reflect the results and the recent well reworks, lowering our FY24 EBITDA estimate by 9%. As a result, our valuation of KEI falls from US$7.1 to US$6.9/share. The stock continues to trade at undemanding valuation multiples and, despite the increased volatility, the oil price remains generally supportive of the share price.
Year end |
Net revenue (US$m) |
EBITDA |
EPS* |
DPS |
P/E |
Yield |
12/22 |
37.6 |
28.9 |
0.47 |
0.0 |
6.6 |
N/A |
12/23 |
50.6 |
39.7 |
0.54 |
0.0 |
5.7 |
N/A |
12/24e |
66.8 |
53.3 |
0.76 |
0.0 |
4.1 |
N/A |
12/25e |
71.6 |
57.1 |
0.82 |
0.0 |
3.8 |
N/A |
Note: *EPS is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q124: An encouraging set of results
KEI reported a 6% q-o-q increase in revenues to US$14.3m in Q1 as a 16% increase in average production to 3,305boepd was partly offset by a 8% drop in the realised basket price. Production costs were negatively affected by the one-off reassessment of legacy processing and gathering fees, which lowered the sequentially flat EBITDA of US$10.6m by a net US$0.2m. Adjusted for these fees, unit cash production costs of US$6.4/boe were down 8% q-o-q. As a result of the lower basket price and higher absolute costs, Q124 netback came in 14% lower at US$38/boe. KEI ended the quarter with net debt of US$32.8m (FY23: US$30.2m).
Lowering estimates on results, well reworks
We have updated our estimates to reflect the results and the provisional impact on production from the recent well reworks, lowering our FY24 revenue and EBITDA by 8% and 9% to US$67m and US$53m, respectively. We maintain our FY24 WTI benchmark price assumption at US$80bbl, but lower our Henry Hub price slightly to US$2.7mmbtu. The company has earlier guided to FY24 revenues of US$60–65m and EBITDA of US$46–51m based on average production of 3,500-4,000boepd, US$72bbl WTI and US$2.6mmbtu Henry Hub prices. At these commodity price assumptions, our FY24 estimates would be at the lower end of guidance ranges.
Valuation: Oil price remains supportive
We have updated our valuation of KEI from US$7.1/share to US$7.0 (C$9.5) on lower production and earnings estimates largely offset by higher longer term NGL prices. The stock continues to trade at undemanding multiples, with an FY24e EV/EBITDA of just 2.7x. Despite the increased volatility, the oil price remains generally favourable for KEI, which has a relatively high share of oil in its production mix. With the record quarterly production achieved in Q124 and unchanged FY24 guidance, we believe KEI’s growth story remains intact as the company boasts a large undeveloped reserve base in the Caney formation alone.
Results review and earnings update
Q124 results: Record quarterly production, flat EBITDA
KEI reported Q124 revenues of US$14.3m, up 6% q-o-q, on the back of a 16% increase in average production to a record 3,305boepd, albeit with some impact from well reworks, and an 8% reduction in the realised basket price. Cash production and operating costs increased 43% q-o-q in absolute terms, while G&A expenses grew 13%. The increase in production costs was mainly due to a one-off reassessment of gathering and processing costs related to prior years. Adjusted for these historical fees of US$1.9/boe, unit cash production costs were US$6.4/boe, down 8% q-o-q. As a result of the lower basket price and higher absolute costs, Q124 netback came in 14% lower at US$38/boe. However, as weaker commodity prices were offset by higher production, Q124 EBITDA of US$10.6m remained flat compared to Q423. At the top-line level, significant support came from the recovery in realised natural gas liquids (NGL) prices and higher NGL production, with NGL contributing 7% to revenues (4% in Q423 and 5% in FY23), while the share of oil fell to c 90%.
The company ended the quarter with slightly higher net debt of US$32.8m (FY23: US$30.2m) due to a US$2m net increase in borrowings and working capital outflows. Separately, the company announced a 25% increase in its credit facility from BOK Finance to US$50m, with US$18m remaining undrawn.
Exhibit 1: Q124 results summary
US$m |
Q124 |
Q423 |
q-o-q (%) |
Q123 |
y-o-y (%) |
Average production, boepd |
3,305 |
2,842 |
16.3 |
3,194 |
3.5 |
Realised basket price, US$/boe |
60.7 |
65.8 |
-7.7 |
62.9 |
-3.5 |
Net revenues |
14.3 |
13.4 |
6.3 |
14.3 |
-0.1 |
Opex |
2.2 |
1.6 |
43.3 |
1.6 |
44.6 |
G&A |
1.3 |
1.1 |
12.7 |
0.9 |
36.0 |
EBITDA - Edison |
10.6 |
10.5 |
1.4 |
11.8 |
-9.7 |
Adjusted EBITDA - company |
10.4 |
10.5 |
-1.2 |
11.4 |
-9.0 |
Netback, US$/boe |
37.8 |
43.4 |
-13.0 |
42.2 |
-10.5 |
Net debt |
32.8 |
30.2 |
8.5 |
15.3 |
114.8 |
Source: Kolibri, Edison Investment Research
During the first quarter, KEI reworked three wells that were affected by offset fracture stimulation, which reduced quarterly production by about 275boepd, or c 8%. According to the company, the wells had not fully recovered by the end of the quarter. Another well was reworked in Q224.
FY23 results in line with expectations
On 2 May, KEI reported FY23 results that were largely in line with our updated and company expectations. The main highlights of the results were a 71% increase in average production and a significant reduction in unit cash production which, despite a visible drop in the realised basket price, led to a 35% increase in revenues and a 37% boost to EBITDA. On the flip side, the company had to borrow more to fund production growth, with FY23 net debt reaching US$30m vs US$17m at end FY22. At the same time, KEI achieved a significant reduction in well costs during the year.
Exhibit 2: FY23 results summary
US$m |
2023 actual |
2023 Edison |
Guidance |
2022 |
y-o-y (%) |
Average production, boepd |
2,796 |
2,881 |
2,800-3,000 |
1,640 |
70.5 |
Realised basket price (US$/boe) |
63.1 |
64.4 |
|
80.8 |
-21.9 |
Net revenues |
50.6 |
53.2 |
51-53 |
37.6 |
34.5 |
Opex |
5.9 |
6.6 |
|
4.9 |
20.2 |
G&A |
4.2 |
4.5 |
|
7.6 |
-44.0 |
EBITDA |
39.7 |
41.3 |
39-41 |
28.9 |
37.1 |
Netback (US$/boe) |
41.6 |
42.4 |
|
47.8 |
-12.9 |
Net debt |
30.2 |
29.1 |
29-31 |
16.8 |
79.9 |
Source: Kolibri, Edison Investment Research
Earnings and valuation update
KEI’s earlier FY24 guidance was for revenues of US$60–65m and adjusted EBITDA of US$46–51m based on average production of 3,500-4,000boepd. The company expected to complete six to seven wells in FY24. Having drilled one well in late 2023, KEI is currently fracture stimulating Nickel Hill 35-1H and Nickel Hill 35-2H wells, both with a 62.9% working interest. The latter two wells are expected to start production in June. For now, we maintain our assumption of seven well completions in FY24. Having provisionally adjusted our estimates for the impact of well reworks, we lower our FY24 average production from 3,921boepd to 3,623boepd. We maintain our benchmark WTI price at US$80bbl for the year, slightly lower our Henry Hub price to US$2.7mmbtu, but lift our NGL price assumptions following the increase in realised prices in Q1. As a result, our revenue and EBITDA forecasts for FY24 reduce to US$67m and US$53m. We note that the company’s guidance is based on the WTI price of US$72bbl and Henry Hub price of US$2.6mmbtu. At the company’s commodity price expectations, our revenue and EBITDA estimates for FY24 would be at the lower end of the guidance. Our FY25 financial estimates are marginally down on slightly lower production forecasts.
Exhibit 3: Estimates revisions
|
FY24e |
FY25e |
||
US$m |
New |
Old |
New |
Old |
Average production, boepd |
3,623 |
3,921 |
4,131 |
4,260 |
Realised basket price, US$/boe |
64.8 |
65.2 |
60.9 |
60.9 |
Net revenues |
66.9 |
72.7 |
71.6 |
73.9 |
EBITDA |
53.3 |
58.7 |
57.1 |
58.6 |
EPS |
0.76 |
1.07 |
0.82 |
1.06 |
Net debt/(cash) |
30.1 |
17.3 |
17.3 |
(1.8) |
Source: Edison Investment Research
Given the above changes to production and earnings estimates, which are largely offset by upward adjustments to our long-term NGL price assumptions, our valuation of KEI falls from US$7.1 to US$7.0/share (C$9.5/share) at an unchanged WACC of 10%. The stock continues to trade at undemanding valuation multiples, with an FY24e EV/EBITDA of just 2.7x. Despite the increased volatility of the oil price, it generally remains supportive of KEI’s share price.
Exhibit 4: Financial summary
US$'000s |
2021 |
2022 |
2023 |
2024e |
2025e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Gross revenue |
|
|
19,128 |
48,376 |
64,390 |
85,673 |
91,827 |
Royalties |
(4,156) |
(10,816) |
(13,793) |
(18,848) |
(20,202) |
||
Net revenue, including other income |
14,972 |
37,560 |
50,597 |
66,825 |
71,625 |
||
Production costs |
(2,962) |
(4,904) |
(5,895) |
(8,330) |
(9,048) |
||
SG&A |
(2,697) |
(3,494) |
(4,243) |
(4,628) |
(4,976) |
||
Share based payments |
0 |
(277) |
(790) |
(600) |
(500) |
||
EBITDA |
|
|
9,315 |
28,931 |
39,671 |
53,326 |
57,101 |
D&A |
(3,594) |
(7,581) |
(15,009) |
(15,695) |
(16,864) |
||
EBIT |
|
|
5,721 |
21,350 |
24,662 |
37,632 |
40,237 |
Exceptionals |
71,403 |
0 |
0 |
0 |
0 |
||
Net interest |
(906) |
(1,067) |
(2,366) |
(2,956) |
(2,956) |
||
Other |
(5,216) |
(3,640) |
343 |
(735) |
(100) |
||
Normalised PBT |
|
|
(401) |
16,643 |
22,639 |
33,941 |
37,181 |
Reported PBT |
71,002 |
16,643 |
22,639 |
33,941 |
37,181 |
||
Tax |
0 |
0 |
3,359 |
6,788 |
7,808 |
||
Reported profit after tax |
71,002 |
16,643 |
19,280 |
27,153 |
29,373 |
||
Npormalised profit after tax |
|
|
(401) |
16,643 |
19,280 |
27,153 |
29,373 |
Average Number of Shares Outstanding (m) |
23.3 |
35.6 |
35.6 |
35.6 |
35.6 |
||
EPS - normalised (US$) |
|
|
(0.02) |
0.47 |
0.54 |
0.76 |
0.82 |
EPS - reported (US$) |
3.05 |
0.47 |
0.54 |
0.76 |
0.82 |
||
Dividend (US$) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
147,114 |
176,602 |
217,351 |
242,646 |
260,639 |
PP&E |
147,076 |
176,554 |
216,161 |
241,456 |
259,449 |
||
Rights of use assets |
38 |
48 |
1,190 |
1,190 |
1,190 |
||
Current Assets |
|
|
9,902 |
7,480 |
6,928 |
8,360 |
22,013 |
Cash |
7,316 |
1,037 |
598 |
925 |
14,110 |
||
Receivables |
1,999 |
5,773 |
5,492 |
6,597 |
7,064 |
||
Deposits and prepaid expenses |
587 |
670 |
838 |
838 |
838 |
||
Current Liabilities |
|
|
(6,079) |
(14,049) |
(18,844) |
(17,818) |
(19,591) |
Payables |
(3,145) |
(12,596) |
(17,648) |
(16,432) |
(17,848) |
||
Loans |
(1,000) |
0 |
0 |
0 |
0 |
||
Leases |
(43) |
(32) |
(1,068) |
(1,258) |
(1,615) |
||
FV of commodity contracts |
(1,891) |
(1,421) |
(128) |
(128) |
(128) |
||
Long Term Liabilities |
|
|
(17,849) |
(19,835) |
(31,740) |
(31,740) |
(31,740) |
Debt |
(15,866) |
(17,799) |
(29,612) |
(29,612) |
(29,612) |
||
Leases |
0 |
(17) |
(162) |
(162) |
(162) |
||
Other |
(1,983) |
(2,019) |
(1,966) |
(1,966) |
(1,966) |
||
Net Assets |
|
|
133,088 |
150,198 |
173,695 |
201,448 |
231,321 |
Shareholders' equity |
|
|
133,088 |
150,198 |
173,695 |
201,448 |
231,321 |
CASH FLOW |
|||||||
Profit after tax |
71,002 |
16,643 |
19,280 |
27,153 |
29,373 |
||
D&A |
3,594 |
7,581 |
15,009 |
15,695 |
16,864 |
||
Working capital |
551 |
(2,140) |
1,714 |
(2,321) |
948 |
||
Other |
(68,844) |
(42) |
2,644 |
700 |
600 |
||
Net operating cash flow |
|
|
6,303 |
22,042 |
38,647 |
41,227 |
47,785 |
Capex |
(696) |
(37,097) |
(53,173) |
(39,900) |
(33,600) |
||
Lease payments |
(74) |
(54) |
(903) |
(1,000) |
(1,000) |
||
Other |
4,252 |
8,016 |
3,305 |
0 |
0 |
||
Net Cash Flow |
9,785 |
(7,093) |
(12,124) |
327 |
13,185 |
||
Opening net debt/(cash) |
|
|
19,939 |
9,593 |
16,811 |
30,244 |
30,107 |
FX and other |
561 |
(125) |
(1,309) |
(190) |
(357) |
||
Closing net debt/(cash) |
|
|
9,593 |
16,811 |
30,244 |
30,107 |
17,279 |
Source: Kolibri Global Energy accounts, Edison Investment Research
|
|
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