Obsidian Energy

Obsidian is built so that small moves in oil prices create big moves in cash. Every dollar that oil rises adds roughly 9 million dollars of free cash flow. That is a lot of upside for a company worth around 695 million dollars, which is why the stock moves so much when energy headlines hit.

The company sold its Pembina assets for 325 million dollars and used the money to cut debt from 335 million down to about 179 million. It also refinanced expensive notes from 11.95 percent down to 8.125 percent and launched a buyback to retire more than 10 percent of its shares. Fewer shares plus less debt means each remaining share owns more of the business.

Revenue fell about 27 percent over the past year as production sales shrank and oil prices swung. Net profit margins are razor thin at roughly 0.2 percent, meaning almost nothing is left over after costs. When a company earns pennies on the dollar, even a small drop in oil prices can flip profits into losses.

This is a small company in a boom and bust business. Hedges cover a large chunk of production at just over 63 dollars a barrel, which caps how much upside shareholders capture if oil spikes. And heavy crude costs more to produce than light oil because it needs extra processing and trucking, so cost overruns bite hard.