When Will Birchcliff Energy Ltd (TSE:BIR) Become Profitable?

Birchcliff Energy Ltd’s (TSX:BIR): Birchcliff Energy Ltd., an intermediate oil and gas company, explores for, develops, and produces oil and natural gas, light oil, and natural gas liquids in Western Canada. On 31 December 2017, the CA$903.71M market-cap posted a loss of -CA$51.03M for its most recent financial year. The most pressing concern for investors is BIR’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for BIR, its year of breakeven and its implied growth rate.

See our latest analysis for Birchcliff Energy

Expectation from analysts is BIR is on the verge of breakeven. They anticipate the company to incur a final loss in 2017, before generating positive profits of CA$47.44M in 2018. So, BIR is predicted to breakeven approximately a few months from now. What rate will BIR have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 72.72%, which is rather optimistic! If this rate turns out to be too aggressive, BIR may become profitable much later than analysts predict.

TSX:BIR Past Future Earnings Mar 18th 18
TSX:BIR Past Future Earnings Mar 18th 18

Given this is a high-level overview, I won’t go into detail the detail of BIR’s upcoming projects, but, keep in mind that generally oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing I’d like to point out is that BIR has managed its capital judiciously, with debt making up 37.52% of equity. This means that BIR has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of BIR which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at BIR, take a look at BIR’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should look at:

  1. Valuation: What is BIR worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether BIR is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Birchcliff Energy’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.