Obsidian Energy Ltd. :OBE-US: Earnings Analysis: Q2, 2017 By the Numbers : August 16, 2017

Obsidian Energy Ltd. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Obsidian Energy Ltd. – Vermilion Energy Inc., Encana Corporation, Canadian Natural Resources Limited, Advantage Oil & Gas Ltd. and Baytex Energy Corp. (VET-US, ECA-US, CNQ-US, AAV-CA and BTE-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 72.14 million, Net Earnings of USD -6.69 million.
  • Gross margins narrowed from -11.11% to -32.99% compared to the same period last year, operating (EBITDA) margins now 37.11% from 38.33%.
  • Year-on-year change in operating cash flow of 133.75% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 72.14 85.38 84.68 83.56 139.63
Revenue Growth (%YOY) -48.34 -36.25 -45.37 -56.78 -47.17
Earnings (mil) -6.69 20.4 -173.87 -177.86 -102.4
Earnings Growth (%YOY) 93.46 128.03 85.54 69.54 -349.68
Net Margin (%) -9.28 23.89 -205.31 -212.84 -73.33
EPS -0.01 0.04 -0.34 -0.35 -0.2
Return on Equity (%) -0.39 1.21 -9.76 -8.96 -4.79
Return on Assets (%) -1.13 3.37 -25.31 -21.01 -10.1

Access our Ratings and Scores for Obsidian Energy Ltd.

Market Share Versus Profits

Revenues History
Earnings History

OBE-US‘s change in revenue this period compared to the same period last year of -48.34% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that OBE-US is holding onto its market share. Also, for comparison purposes, revenues changed by -15.51% and earnings by -132.81% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from -32.99% to -11.11% for the same period last year, while operating margins (EBITDA margins) went from 37.11% to 38.33% over the same time frame.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

OBE-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to -50.23 days from 29.92 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

OBE-US‘s change in operating cash flow of 133.75% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s operating (EBIT) margins contracted from -21.67% to -41.24%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -98.33% to -11.34%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Obsidian Energy Ltd.

Company Profile

Obsidian Energy Ltd. is a conventional oil and natural gas producer in Canada. It explores and produces oil and natural gas resources. The company engages in the business of acquiring, exploring, developing, exploiting and holding interests in petroleum and natural gas properties and related assets. Its portfolio of properties includes Cardium, Viking and Peace River areas of Alberta. The company was founded on December 27, 1979 and is headquartered in Calgary, Canada.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of OBE-US.