Michael, Enjoy your write ups a lot. I own one E and P company Pipestone. A very substantial position. Every time I compare it to another company , I conclude that I wouldn't trade it for any other in the industry. Have you looked at it? 2/3 of the revenue comes from condensate and production is growing.
I don't like the management compensation scheme, still too much debt for me (although falling fast), high dilution coming with conversions at $0.85 per share bringing share count to 286 million, and have lost money on needless hedges. Not really cheap at with EV of 286 mm shares (diluted) x $4.30 plus debt = $1.3 billion for ~$400 million cash flow or 3.8 x which is at the high end of the Montney players I follow. Assets look fine, capital efficiency I estimate at ~$12,000 per BOE/day is unimpressive compared to other Montney players. Will get interesting if (a) they stop hedging (b) the stop the NCIB and repay all debt and preferred and start to pay dividends and (c) management compensation is less of a giveaway. I prefer Spartan Delta, Tourmaline, ARC and (in the Deep Basin) Birchcliff.
Appreciate the reply. The reduction of debt is slower than most companies in the area as they have the capacity to increase production from 25000 BOE from the end of 2021 to 46-48000 BOE by 2024. This without having to spend on takeaway infrastructure as it was built previously. I view it as a cheaper NVA.
thanks for the article. Own the stock as well. John
Thanks for the insight, Michael! Could you explain how you calculate Capital Efficiency (25000) and Enterprise Value (2.13 Bn C$)?
EV is 4x EBITDA for my estimates. Capital efficiency is the estimated cost to add 1 Boe/Day of production.
Michael, Enjoy your write ups a lot. I own one E and P company Pipestone. A very substantial position. Every time I compare it to another company , I conclude that I wouldn't trade it for any other in the industry. Have you looked at it? 2/3 of the revenue comes from condensate and production is growing.
I don't like the management compensation scheme, still too much debt for me (although falling fast), high dilution coming with conversions at $0.85 per share bringing share count to 286 million, and have lost money on needless hedges. Not really cheap at with EV of 286 mm shares (diluted) x $4.30 plus debt = $1.3 billion for ~$400 million cash flow or 3.8 x which is at the high end of the Montney players I follow. Assets look fine, capital efficiency I estimate at ~$12,000 per BOE/day is unimpressive compared to other Montney players. Will get interesting if (a) they stop hedging (b) the stop the NCIB and repay all debt and preferred and start to pay dividends and (c) management compensation is less of a giveaway. I prefer Spartan Delta, Tourmaline, ARC and (in the Deep Basin) Birchcliff.
Appreciate the reply. The reduction of debt is slower than most companies in the area as they have the capacity to increase production from 25000 BOE from the end of 2021 to 46-48000 BOE by 2024. This without having to spend on takeaway infrastructure as it was built previously. I view it as a cheaper NVA.