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Investment Q&A

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Q: Can you provide me with your analysis of Journey Energy please? Price has gone down more than other O&G plays. WIll continue to hold this if the fundamentals are good. Can they do well with WTI at this price?
Thank you.

Asked by Tulio on January 19, 2024

5i Research Answer:

JOY is a small-cap oil name that is now trading at 7.4x times' Forward P/E. In the last few years JOY reinvested heavily back into drilling without any capital returns at all. With a weak oil market and illiquidity due to size, these factors explain somewhat why JOY was down more meaningfully than other oil stocks. The balance sheet is okay, with a net debt of $50M and net debt/EBITDA is currently around 0.7x. For oil names in general, we tend to prefer companies with a low-cost structure and healthy capital returns rather than small sizes such as WCP, TOU, IMO, SU.

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