Opinions
Eric Nuttall
Headwater Exploration Inc.
HWX-T
BUY
Apr 15, 2025
Stock price when the opinion was issued
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Great exposure to the WCS-WTI gap shrinking this year as the Transmountain becomes fully operational later this year. The 6% dividend will grow 10-15% this year, and they plan to grow overall by 50% over 2023. Strong cash flow as they expand. Interesting exploration plans. Fantastic results.
(Analysts’ price target is $8.88)
Premium contentPremium contentWe reiterate HWX as a TOP PICK. Management reports production remains on target for annualized production of 20,000 boe/d for 2024 and capital has been allocated on several projects for the balance of the year. It trades at 11x earnings and supports a 27% ROE. Its dividend is backed by a payout ratio under 65% of cash flow, which still allows quarterly cash flow to grow. We recommend trailing up the stop from $6.25 to $7.00, looking to achieve $9.00 -- upside potential of 20%. Yield 5.4%
(Analysts’ price target is $9.32)Premium contentOur PAST TOP PICK with HWX has triggered its stop at $7. To remain disciplined, we recommend covering the position at this time. When combined with our previous recommendation this will result in a net investment gain of 2%.
Small-cap yielding 8%, sustainable in low $50s. Wouldn't be surprised if it dialed back capex, which makes the dividend even more sustainable. Almost a pure play to Clearwater, an exceptional resource. Owns in his income fund, on his list to add to the main fund. Inexpensive. Respected management.