Highwood Asset Management: A Missed Opportunity in 2024

Highwood Asset Management Ltd. (HAM) has been a beacon of growth in the oil and gas sector, but its full-year 2024 earnings report has left investors with a sense of missed opportunity. The company's revenue surged by 210% year-over-year, reaching CA$109.5 million, but this impressive growth was overshadowed by a 39% drop in net income to CA$28.0 million. The earnings per share (EPS) of CA$1.88 also fell short of analyst expectations by 14%, raising questions about the company's financial strategy and future prospects.



The company's capital expenditure strategy, particularly the $60-65 million 2025 capital plan, has been a double-edged sword. On one hand, it has driven significant production growth, with average corporate production increasing by 48% to 5,966 boe/d in Q4 2024. On the other hand, it has led to a volatile financial performance, with earnings missing expectations despite the revenue surge. The company's borrowing base has been increased from $110 million to $120 million, allowing it to extinguish a Promissory Note on November 26, 2024. This move is expected to have a positive impact on interest expenses, as the credit facility bears interest at approximately 7% per annum.

However, the company's financial performance for the full year 2024 showed a revenue of CA$109.5 million, up 210% from FY 2023, but net income decreased by 39% to CA$28.0 million. This discrepancy highlights the potential volatility in earnings due to high capital expenditures. Additionally, the company's earnings per share (EPS) of CA$1.88 for FY 2024 missed analyst estimates by 14%, indicating potential challenges in meeting financial expectations. The company's market cap has increased by 50.14% in one year, reaching CAD 90.77 million as of March 21, 2025, but this growth comes with the risk of increased debt and interest expenses if the capital investments do not yield the expected returns.



The company's capital expenditure strategy has been instrumental in driving production growth and financial performance. However, the associated risks include potential volatility in earnings, increased debt, and the need to meet high financial expectations. The company's ability to manage these risks will be crucial in determining the success of its growth strategy.

In conclusion, Highwood Asset Management's full-year 2024 earnings report is a mixed bag. While the company has shown impressive revenue growth, the drop in net income and missed earnings expectations raise concerns about its financial strategy. The company's capital expenditure strategy has driven production growth, but it also comes with significant risks. Highwood Asset Management will need to navigate these challenges carefully to ensure its long-term success.