From Money Pit To Money Maker
“I skate to where the puck is going to be, not where it has been.” — Wayne Gretzky
A company I’ve been closely following for many years is in the middle of a major inflection.
AI data center demand is boosting the prospects for a major project that has been draining cash and is finally set to begin operations. And a second major project is starting to ramp, which could nearly double the company’s production by the end of the decade while significantly expanding its margins.
Meanwhile, the company trades below the value of its existing operations, meaning that I effectively get both of these company changing developments for free.
A saying by Wayne Gretzky that has become popular in investing circles is that to be successful, you need to “skate to where the puck is going to be, not where it has been.”
In other words, the best investments come from anticipating where value is moving before the market fully recognizes it. I believe this company is a perfect example of such an opportunity.
The value proposition is now so strong that I wouldn’t be surprised to see a premium buyout, which could limit some of the long-term upside, but would deliver a gain for shareholders from current levels. This just happened with another Canadian small cap oil and gas producer that I owned and had hoped to write about on Bison Insights, at a 45% premium including spin-off value.
Journey Energy ($JOY.TO)
Journey Energy is a ~11,000 boe/d (59% liquids) low-decline Canadian producer. After its year-to-date rally, the company is valued at ~$270 million ($205 million equity market cap and $65 million net debt).
Journey’s base business trades at a discount to YE2024 PDP (the value for its existing producing wells, based on a third-party reserve evaluator, assessed annual as of end of 2024) and provides a value “backstop” for the inflection, which are two major developments not currently materially contributing to its financials.
Duvernay Joint Venture
Journey and Spartan Delta ($SDE.TO) formed a joint venture in 2024 to develop a ~69,000 acre block in the heart of the Duvernay located in Alberta.
So far, nine wells have been completed and placed on production and have significantly exceeded initial productivity estimates.
In recent presentations and in my discussions with Spartan Delta’s operating team, they expressed confidence that well productivity should continue to improve in the years ahead.
I have seen this pattern before. Before taking over RMP Energy (later rebranded Iron Bridge Resources) in 2017, I consulted with technical experts who advised that the Gold Creek Montney asset could deliver far stronger results if it was properly capitalized and developed. After gaining control and assembling the right team, we significantly enhanced production rates from the area. I then guided the sale of the company at a significant premium to Velvet Energy, which later sold the asset to Spartan Delta, who improved results even further.
Just as Spartan raised well performance at Gold Creek, they are accomplishing this in the Duvernay, with early results pointing to a similar trajectory of continuous improvement.
Such improvement makes an already big opportunity for Journey transformational. Looking ahead, the JV plan calls for 12 wells (3.6 net to Journey) in 2026 and 16 wells (4.8 net to Journey) annually from 2027 through 2030.
Two ways I consider the value Journey’s Duvernay joint venture are the following:
1) PV-10: As shown in the chart above, each well is expected to have an NPV of roughly $11 million at a $65 WTI strip and ~$3.00 AECO. Journey’s share of the JV includes 60 net locations, implying a total discounted value of $660 million (60 wells × $11 million per well, validated by Spartan Delta’s investor materials).
When factoring in the planned development schedule and discounting back to the present, the NPV is approximately $380 million. I expect additional upside to this estimate given Spartan’s track record of improving well productivity (and based on their presentations and my discussions with management, who indicated that further gains are likely.)
2) Cash Flow Multiple: Based on the development plan shown in the company slide above and reiterated by the CEO in a recent presentation, Journey’s share of production is expected to average 6,500 boe/d by 2030. The July 2025 strip provides a $47/boe netback, which multiplied by a full year of 6,500 boe/d of production, implies roughly $110 million of annual cash flow. With a 30% improvement in well productivity, cash flow would increase to about $145 million, and with a 60% uplift, to around $175 million. Applying the peer average cash flow multiple of 3.5x implies a potential valuation range of $385–$610 million for Journey’s Duvernay interest.
Power Generation
Journey expects 31 MW of new power generation from its Gilby (October 2025) and Mazeppa (June 2026) Alberta power generation projects, which will add to its 4 MW facility already operating at Countess.
The value thesis on these assets is very simple: AI data center grid connection requests to Alberta’s grid have recently topped 16 GW. For context, 2024 electricity demand for the entire province peaked at 12.2 GW! To preserve grid stability, the AESO has capped new large-load interconnections at just 1.2 GW through 2028.
Assuming the cap is filled, system load on the Alberta grid will increase by roughly 10%, which should drive meaningful appreciation in local power prices. The cap also makes Journey’s 31 MW of new gas-fired generation potentially extremely valuable, since data center developers unable to connect to the grid will need to “bring their own power” through behind-the-fence or contracted generation like Journey’s assets can provide.
The most recent and comparable small-scale transaction for a ready to operate gas-fired power generation facility in Alberta was AIMCo’s 2023 purchase of FutEra Energy, a co-produced geothermal and natural gas power generation facility with 21 MW of nameplate capacity.
The net effective valuation of the project was ~$92 million, implying a little over $4 million per MW of capacity.
Applying that valuation to Journey’s ~36 MW of total capacity implies a look-through value of over $150 million.
I’m not suggesting that Journey’s power assets would command that price in today’s market. Alberta power prices have fallen considerably since the time of the FutEra transaction, reducing both the cash flow these assets can generate and the prices they might fetch in a sale.
Still, this transaction is a useful benchmark for considering what Journey’s ready-to-go, gas-fired power generation assets could be worth in a scenario with structurally higher local power prices, which recent developments suggest is where the market is headed. And increased demand for behind-the-fence power could support a high price for these assets in a sale.
Journey’s experience with these assets also gives them the option to replicate this model in the future, providing a potentially strong outlet for reinvestment as cash flow grows from the Duvernay development.
Why is the market not giving Journey full credit for their assets?
Despite Journey stock significantly outperforming so far YTD, the company still trades at a discount to the NAV of its base business, arguably allowing investors to get the Duvernay and the power generation for free. I see two major reasons for the discount:
1. Rising operating expenses and poor operational performance.
Since the pre-COVID period, Journey’s operating expenses per boe of production have risen by roughly 50% despite peer operating expenses remaining flat and power prices (which Journey states is its biggest cost driver for field power costs) declining materially from the 2022 peak.
Additionally, Journey has consistently underperformed their production guidance, which in conjunction with the rising operating expenses points to severe issues with operational performance.
2. Project delays and cost over-runs on the power generation assets.
In addition to poor operating results in the oil and gas side of the business, Journey’s new 31 MW of power generation projects were originally expected to come online in the late 2023 to early 2024 period, but still have yet to come online and are now tens of millions over the original budget.
Broader Management and Governance Issues
The increases in operating expenses, repeated production misses, and cost overruns on the power generation projects have not been adequately explained by the company, in my opinion. Other issues, such as past incentive compensation misalignment and the board chairman’s history as the former CEO of a bankrupt oil and gas company, are why I have previously called for governance changes at Journey.
I have paused my commentary on the company as it has become clear that the largest shareholder, Alberta Investment Management Company (AIMCo), which recently faced its own governance and compensation issues, has chosen to support Journey’s current management team, making meaningful change difficult for now.
These managerial and operational issues have been a significant headwind for the stock. But at the same time, the value of Journey’s assets appears to be enormous, and a major inflection is underway as the Duvernay joint venture ramps up and the power generation projects finally begin to come online into an AI-driven electricity boom.
Oil and Gas Price Concerns and Outlook
Oil prices have fallen to their lowest levels in nearly five years, and I don’t know when we’ll hit the exact bottom of the cycle.
What I do know is that, historically, when oil prices fall below the marginal cost of new production, it has been the best time to buy oil stocks. At these levels, short cycle production begins to plateau and decline. Eventually, as global demand continues to grow and surpasses supply, prices are forced higher to incentivize new production. When prices rise, so do the equities, and sometimes the equities rise first.
On the Canadian natural gas side, I do have a near-term view: prices will likely rise.
My view is grounded in fundamentals and supported by recent comments from Mike Rose, CEO of Tourmaline (which produces ~15% of Canada’s natural gas), who expects prices to flip higher by the end of the month as gas demand increases with the completion of border pipeline maintenance, the ramp-up of LNG Canada, and colder weather setting in. The forward AECO curve supports this outlook, projecting prices around $3.00/mcf over the next several years.
Journey produces a significant amount of gas from its base operations, and each dollar of uplift per Mcf translates to an additional ~$8 million in annual cash flow, so a near term increase should provide a boon to their Q4 results.
Thesis Summary
As we head into 2026, Journey is inflecting from a money burning governance catastrophe into a strong cash flow generating enterprise. The Duvernay wells are significantly outperforming initial expectations and are on track to add over $100 million of annual operating cash flow by the end of the decade. As power generation comes online, it will stop the cash drain from these projects and begin contributing positive cash flow, with substantial upside given the expected surge in electricity demand. And the base business already has a PV-10 above Journey’s entire enterprise value, providing a solid backstop of value and cash flow on top of these two high-upside assets.
*Disclaimer: I and funds I advise own Journey stock and may buy or sell them at any time without further notice. Bison Insights has a “cooling off” period for compliance where no shares are traded in a reasonable time period before and after publication. There can be no assurance of return or accuracy of anything written. Any investment decision requires diligence and, if appropriate, an advisor should be consulted. I am not your advisor, and this is meant for general information and educational purposes and not as personalized investment advice. No personalized advice can or will be provided by Bison Insights. Past performance may not repeat itself. The views expressed here are solely my own and do not necessarily represent the opinions, strategies, or positions of any other person or organization.
What a shame that the management and governance is so lacking. They really need to execute and unlock the value of this company. I started buying a year ago and remain optimistic.
Josh - As always a solid report with great insights: This reader's takeaway and purely my opinion.:
1) A buyout will save existing shareholders, leaving mgt/the board to think they're corporate geniuses. The absence of a buyout leaves shareholders with a company that succeeds in spite of itself. Unlike UNTC that aggressively uses FCF to pay down debt and better the company's/shareholders position, no inkling of that from JOY. The fact that AIMCo. is willing to leave things be smells but that's the overall trend of the financial/political world today.
2) The electricity generation and gas fired power operations will be winners. On the exploration side, Spartan Delta is laughing all the way to the bank as the "benefit split" between SD and JOY points to a deal made by JOY mgt desperate to stay afloat.
3) I'd rather put my money in UNTC where the company is improving and management has a vision and works to execute it for the betterment of the company and its shareholders. Should AI expansion and supply/demand metrics get turned upside down, JOY will not see the body check coming that sends them into the boards, head-first.