(Idea) Cardinal Energy: A Top Canadian E&P Worth Waiting For
By: Jon Costello
(Idea) Cardinal Energy - Transitioning To An SAGD Growth Company
Note to readers: Figures are in Canadian dollars unless otherwise specified.
Cardinal Energy (CJ:CA) released first-quarter 2026 results on May 7, 2026. The results marked a milestone in the company’s move away from conventional producing assets and toward steam-assisted gravity drainage (SAGD). Its Reford 1 SAGD project produced above nameplate capacity, the board sanctioned a second SAGD project at Reford 2, and the balance sheet was repaired via a $104.7 million bought-deal common share offering.
I’ve liked Cardinal since I initiated coverage in 2023, and I bought the company’s $7.00 strike warrants in size at $0.44 in April 2025. The question today is whether the stock is worth buying at its current price of $11.80, or whether investors should wait for a selloff before buying. For the moment, the valuation work points to the latter.
Why I’ve Liked Cardinal
My August 2023 article carried a buy rating and a $10-per-share price target. That represented 40% upside from the $7.15 trading price at the time. The bull case was based on a discounted cash flow value of $9.69 at US$80 per barrel WTI and a 10% dividend yield. The reserves report showed an $18.54-per-share NAV with an 11-year reserve life.
The bull case was that Cardinal offered the best risk-adjusted income proposition among Canadian conventional oil producers, including low-decline assets, high free-cash-flow conversion, conservative management, and a margin of safety against mid-cycle WTI prices. The company routinely paid out all of its free cash flow as dividends, and the shares traded at a high dividend yield, so its shareholders could be confident of receiving an attractive return as long as oil prices remained supportive.
I reiterated my bullish view on the shares in April 2025. This time was more of a “pound the table” call with the shares trading at $5. I expected the shares to increase by more than 150% over the next two years. Around that time, instead of buying the stock, I opted for buying Cardinal’s $7.00-strike warrants at $0.44.
By early 2026, events in the Middle East brought the shares within range of fair value. Operational success supported the valuation, as Reford 1 was online and Reford 2 was sanctioned. The stock currently trades at $11.80.
In light of recent developments, Cardinal’s investment thesis needs another update. The company continues to be among my favorites in the Canadian oil patch, and first-quarter results and the Reford 2 sanctioning have changed the calculus underpinning the investment thesis.