Obsidian Energy (OBE) Q3 2026 earnings review
Obsidian Energy earns more per barrel, but output stays flat
Obsidian Energy earned much more cash from each barrel, while its output stayed where it was a year ago. The Alberta oil producer sold light oil at $117.05 a barrel, against $86.67 a year earlier. Chief executive Stephen Loukas is reaffirming a December exit rate near 31,000 barrels a day.
| Output, excluding the assets bought in June | about 25,600 boe/d 27,316 a year ago, 6% lower by our math |
|---|---|
| Cash flow excluding one-offs | $80.7 million 46% above a year ago |
| Kept from each barrel after costs | $36.24 $24.90 a year ago |
| Full-year output plan | 28,500–29,500 boe/d the middle needs about 30,900 in the fourth quarter |
⚖️ Verdict: ⚪ Neutral
The case is unchanged, because higher oil prices did the work this quarter while output stood still. The good news: the new Belly River wells at Crimson produced the best rates Obsidian has seen there, and Loukas plans output about 20% higher in 2027. One caution: net debt has climbed sharply since December and the plan needs a far bigger fourth quarter.
The question now is whether the barrels arrive. Either the new Belly River and Clearwater wells lift output towards the December target, or the money keeps going out for volumes that do not move. The fourth-quarter figures will settle it.
🐂 Bull Case
Each Barrel Earned $11 More Than Last Year
Obsidian Energy pumps crude oil and natural gas in Alberta. Netback is what it keeps from each barrel after royalties, pipeline costs and field expenses, and chief executive Stephen Loukas credited "the benefits of higher realized oil prices" for the quarter.
The producer kept much more of each barrel because crude prices rose while its field costs barely moved. Royalties went the other way, taking 16.6% of the sales price against 12.8% a year earlier. That shift cost nearly four percentage points of revenue.
- Netback: $36.24 a barrel, against $24.90 a year ago
- Light oil: $117.05 a barrel, from $86.67
- Heavy oil: $93.73 a barrel, from $67.93
These prices are not Obsidian's to set, so the gain can reverse. A non-cash credit of $6.0 million on contracts tied to its own shares also flattered the headline cash-flow number. The cleaner measure grew 46%, against 74% for the headline.
What to watch: the royalty share of the sales price in the fourth quarter. If royalties keep rising while crude slips towards the US$80 a barrel the plan assumes, netback gives back much of this gain.
Two Belly River Wells Beat Anything Before
Belly River is an oil zone under Obsidian Energy's Willesden Green lands in central Alberta. Two wells on the Crimson 01-05 pad came on stream late in the quarter after a long clean-up period.
Obsidian changed how it brings these wells on: earlier pump swaps, jointed-pipe cleanouts and a new downhole setup once rates settle. Chief executive Stephen Loukas called the outcome "the highest rates we have experienced in the area and further validating another fairway in the play".
- Crimson 01-05 pad, last 19 days: 2,131 boe/d, 65% liquids
- Its first 30 days: about 147 boe/d
What to watch: light oil volumes in the fourth quarter. The year's plan implies about 8,400 barrels a day by our math, and most of that must come from Belly River.
Obsidian Has Retired A Quarter Of Its Shares
Obsidian Energy has repurchased its own shares since February 2023 under a normal course issuer bid, the Canadian rule that lets a company buy its shares on the exchange and cancel them.
During the third quarter the producer cancelled about 0.9 million shares for $13.0 million. Across the whole programme it has retired 19.9 million shares, close to a quarter of the company.
Fewer shares raise each owner's claim on the oil in the ground, which is why output per share has compounded faster than output itself. Obsidian paid $15.08 a share this quarter, against $9.08 over the programme's life.
What to watch: whether the buying continues in the fourth quarter, when capital spending peaks. A pause would show that the balance sheet now comes first.
🐻 Bear Case
Output Has Not Moved In Five Quarters
Chief executive Stephen Loukas opened the results by pointing to "the expanding scale of our development programs in Peace River and Willesden Green". The output figures do not show that scale yet. Obsidian averaged 28,113 barrels of oil equivalent a day, barely different from the second quarter.
The Wilson Creek assets Obsidian bought in June brought in roughly 2,500 barrels a day. Strip those out and underlying output was about 25,600, some 6% below the same quarter last year by our math. A third-party compressor failure cost about 600 barrels a day in July and August.
Nine months of capital spending came to $194.4 million, with property purchases of $101.1 million on top, yet volumes sit where they were a year ago. Decline at the older heavy oil wells has swallowed the new drilling.
What to watch: the December exit rate. Loukas is "reaffirming our ~31,000 boe/d December exit rate", and the year's range needs about 30,900 a day in the fourth quarter by our math. Missing that would make the 2027 growth plan harder to believe.
Debt Pays For The Growth And The Buybacks
Net debt is what Obsidian Energy owes after setting cash and working capital against its borrowings. It stood at $363.3 million at the end of September, against $240.1 million last December. The Wilson Creek purchase and the buybacks account for most of that rise.
Free cash flow — cash left after capital and well-cleanup spending — came to $1.1 million in the quarter and $11.9 million for the nine months. In July the producer sold a further $75.0 million of its senior notes. Quarterly interest reached $7.1 million, against $4.5 million.
Reported profit says little here. Net income of $18.0 million leaned on a non-cash gain on contracts tied to Obsidian's own shares, and last year's figure leaned on the sale of its InPlay stake. Excluding both, the two quarters earned about $2 million each by our math.
What to watch: net debt at December 31 against the $400 million the plan plots, and the November review of the borrowing base on the syndicated credit facility. Leverage above about 1.2 times cash flow would start to crowd out the buyback.
Hedges Cost $56 Million So Far This Year
Obsidian Energy sells part of its future output forward at fixed or capped prices, which protects it when crude falls and costs it when crude rises. Crude rose. Settling those contracts took $56.0 million out of the first nine months.
Oil contracts alone cost $64.0 million, partly offset by $9.4 million of gains on gas. The third quarter was milder, at $3.2 million.
So the cash this price rise produced was thinner than the netback table suggests, by about $7 a barrel across the nine months.
What to watch: the hedging line in the fourth quarter, when collars cover roughly half of November's oil between a US$88.40 floor and a US$100.02 ceiling.
Heavy Oil Keeps Shrinking Despite New Wells
Peace River is Obsidian Energy's heavy oil area. Output there fell to 9,999 barrels a day from 12,586 a year ago. Two rigs drilled there all quarter.
The new wells came in modest: two Bluesky wells at Harmon Valley South averaged 408 barrels a day in their first month. The water-injection programme meant to slow the decline is still young, with sixteen injectors now running across three fields.
The plan still sends $113 million of this year's capital to heavy oil. By our math the fourth quarter needs about 11,700 barrels a day there, and a third rig arrives in early December to help.
What to watch: heavy oil volumes in the fourth quarter, and whether the injectors show up as a slower decline rather than as more wells.
👓 Other Themes
Third Rig And New Battery Start In Q4
Obsidian Energy began several building projects this quarter. It finished a tank farm upgrade at Crimson 13-27 in October, is laying an all-season road at North Walrus, and will start "a new battery and associated pipelines" to join the acquired Wilson Creek property to Willesden Green, finishing in 2027. A third drilling rig reaches Peace River in early December.
💲 Other KPIs
Money customers owe Obsidian rose 51% from a year ago, outpacing the 37% gain in quarterly sales. Dearer crude accounts for part of it, and the Wilson Creek barrels add more. Receivables now equal 52% of a quarter's sales, against 47% last year.
This asset records tax relief the producer expects to claim later, and it shrinks as profits use it up. It has fallen from $273.3 million at the end of 2024 and $261.5 million last December. Behind it sit $2.3 billion of tax pools, so Obsidian expects to pay no cash tax for about a decade at US$70 crude.
The charge for using up the reservoirs hardly moved: $17.67 a barrel against $17.75 a year ago, by our math. Across nine months it ran at $17.86 against $17.04, a rise of about 5%. Adding Wilson Creek has not changed the rate much so far.
🔮 Guidance
In place. The year is planned to average 28,500 to 29,500 barrels of oil equivalent a day. Nine months came in at 28,346. By our math the fourth quarter then needs about 30,900 at the middle of the range, roughly a tenth above the third quarter.
Planned. Spending of $300 million to $325 million covers the year. Nine months used $194.4 million, which leaves about $118 million for the fourth quarter by our math — more than any other quarter of 2026. The third rig and the Wilson Creek battery explain much of it.
Budgeted. Cleaning up old wells carries $7 million to $11 million for the year. Only $7.0 million went out in nine months, so the middle of the range leaves about $2 million for the fourth quarter. A year earlier the nine-month figure was $18.5 million, and that drop helps free cash flow.
Targeted. Field costs are set at $14.00 to $15.00 a barrel. Nine months ran at $14.72 and the third quarter at $15.08. The middle of the range therefore implies about $13.95 in the fourth quarter by our math, which only extra barrels over the same facilities would deliver.
In the plan. Overheads sit at $2.00 to $2.10 a barrel. The third quarter came in at $1.83 and nine months at $2.00, so by our math the fourth quarter carries about $2.18 — the heaviest of the year, even with more barrels to spread the cost over.
From the plan's midpoints. Cash flow excluding one-offs is pencilled at $306 million for the year. Nine months delivered $213.3 million, so the fourth quarter needs roughly $93 million by our math. That sits above the $80.7 million just reported and far above last year's fourth quarter.
Negative. The year is planned to end $16 million short of covering its own spending. Nine months were positive at $11.9 million, so by our math the fourth quarter burns about $28 million. Heavy winter drilling is the reason, and borrowings cover the gap.
Higher by year-end. Obsidian expects to owe about $400 million, net of working capital, at December 31. That is $37 million above the September figure and $160 million above last December's. The plan also shows leverage at 0.9 times cash flow by mid-2027, which depends on the 2027 volumes arriving.
Unchanged. Loukas is reaffirming an exit rate of about 31,000 barrels of oil equivalent a day for December, some 10% above the third-quarter average. Ten more Belly River wells and seven more injectors are what carry it, together with the third Peace River rig.
New. Loukas expects "average production growth of approximately 20% in 2027 compared to 2026", assuming prices hold. On the middle of this year's range that points to about 34,800 barrels a day by our math. No 2027 capital figure accompanies it, though the plan does assume roughly $160 million of first-half spending.
❓ Key Questions
Why did royalties take so much more of each barrel?
Royalties rose to 16.6% of the sales price from 12.8%. The materials give no reason. If this is the end of royalty holidays on new wells rather than price alone, the netback gain is less durable.
What will 2027 capital spending be?
Loukas named a 20% production increase for 2027 but no budget. With 2026 spending at $300–325 million and free cash flow negative, the 2027 figure decides whether growth or the balance sheet gives way.
Where does the fourth-quarter step-up come from?
The plan implies about 30,900 barrels a day, split roughly 8,400 light and 11,700 heavy by our math. A field-by-field answer would show how much rests on the Crimson pads alone.
When do the Clearwater injectors show up in volumes?
Sixteen injectors now operate and eight started since September, yet heavy oil output fell a fifth from a year ago. Management has given no expected date for a measurable response in producing wells.
What does the New Ventures land actually hold?
Obsidian has over 150 sections and about $10 million of second-half exploration spending, including the Pekisko subcrop. No resource estimate, well count or spending plan beyond 2026 has been published.