Several big flaws in your assessment.
200-250MM funds flow is not fixed, it is at absolutely bottom oil prices at WTI ~$45. PWE has 75MM in FX monetizing reserve for next year.
As oil prices rise, funds flow will rise exponentially as fixed costs mostly remain the same.
You are not right even close. You are surely wrong. Hiding the truth does not serve for everyone.
If you pay attention to Notes only, it's your choice, but the stock is down and the market says it pays attention to total debts. The company is not out of the woods. They reserved 75M in FX gains for next year to extend covenants compliance to Q4 2016.
Take a look to November presentation. It clearly says Net debts were 2.414B, exactly as I posted. Down to ~2.0B after 400M repayment in Q4.
They may choose to apply entire 400M to Notes, but then their bank facility would rise by 165M. They have 650M undrawn, so it would drop to 500M (700M drawn).
Bank debt is also used for covenant calculation and carries high interest, so it is the zero sum game, the total debt will be 2.0B by the end of Q4 according to Nov presentation. I use 1.9B because I believe that Canadian dollar will rise to 0.80 with rising oil prices by Dec 31 resulting in Note debt to drop by ~100M as they are mostly in USD.
I think the report is not bad at all, inline with my expectations, it marks the lowest point for the company, and the market will realize PWE value, and the stock will rise even in short term, but the truth is important for everyone.
You forgot working capital deficit of 165M that is the portion of total debt..
Senior debt for covenant calculations was 2.249B, but total debt was 2.414B.
This is inline as I expected 2.3-2.35B with monetizing FX that didn't happen.
They will reduce or eliminate WC deficit in Q4 from asset sale proceeds as they did in Q1, but senior debt will get much less for repayment, likely 230M only out of 398M proceeds.
Still inline with my expectations of 1.9B total debt by the end of Q4 with the help of FX if Canadian dollar rises to 0.80.GLTAL
No, PWE has better value and more upside potential for investors. Short term trading is the other story.
I did not forget 98mln asset sales, and this money was already applied for debt reduction back in July. However this money brought net working capital to zero at the end of Q2, so by paying down debt they created working capital deficit of 100M you mentioned. This is the portion of total debt. So using 98M for debt reduction is just a debt neutral transaction.
I didn't forget 75M FX hedges. 100M net debt increase in Q3 is after applying 50-75M from monetizing on FX hedges. They should have spent 122M in capex in Q3 based on 500M annual budget and 191M and 64M spent in Q1 and 2.
But funds flow should be below 40M at such low oil prices and minimum hedges.
So 75M was applied to help capex.
And 100M debt increase is from paper loss from lower canadian $ in 1.7B Notes that should end up to 1.8B.
If they used 98M cash from asset sales, then total debt should stay at 1.7B despite reduced by 100M, with working capital deficit of 100M.
The total will be Notes +Bank+WC = 1.7B+500M+100M = 2.3B. Same thing.
For more accuracy i use the enterprise value as 2.9B as of September 30 by 2.3B debt plus ~600M market cap. But I agree this is too low even for core assets. However there's a reason for such valuation - covenant issue. If the PWE debts had covenants based on total asset values similar to many US companies, the market would have applied much higher valuation.
This issue has alleviated after recent 400M sales announcement, but still exist at current oil prices.
PWE needs 800M more debt reduction to bring total debt to 1B. This is not the easy task as best non-core assets were sold. This should take more than 16,000 bpd sales. Frankly some NW assets mostly with NG don't contribute to funds flows at current prices.
When this goal is achieved, the stock will jump. I believe it is worth at $5-6 at $75-80 WTI and much higher at higher oil prices. GLTAL
No, I'm correct, all presentations, even October show results as of June 30, the last ER published. They added 400mln additional announced asset sales only to be closed in Q4.
1.7 bln + 500 mln = 2.2 bln debt. By September 30 the total debt will increase to 2.3 bln because of FX , no doubt about it. Canadian dollar dropped to 0.75 US by 9/30.
They show 1.8bln in the presentation after accounting for 400mln sales to be closed in Q4.
yes, I was holding, but made nice accumulation at 50c. Things are better, but very slowly. Will need 2-3 more years to hold.
$1.7b in Notes from June 30 that will grow to $1.8b by September 30 due to FX conversion plus $500mm in bank debt. Not counting small operational loss.
Total debt should be $2.3b in the next report. But this will be the highest point. Note debts should slowly decline in Q4 and 2016 as I expect Canadian dollar to rise along with oil prices.
Some contradiction is here. One post calls for $900-950mm after NW Alberta and Swan Hills are sold, next post - $1.1b.
It seems to me the total debt will increase to $2.3b after Q3, and move back to $1.9b by December 31 after Mitzu and Weyborn sales are completed assuming no more debt accumulated in Q4.
$400mm for Swan Hills is not easy, but achievable, but who will pay $400mm for NE BC and NW AB for only 8% liquids? Would be nice, but I don't buy this prediction. Even $200mm is unrealistic in my opinion. But I agree they need to bring debt to $1b by selling non-core. Maybe next year. They need to sell more than 16K boed.
It's a shame article. Completely wrong. The author didn't know the subject he was talking about.
PWE doesn't and didn't have liquidity issues. With current debt levels ~$2.0bln after paying debt from recent asset sales they are at lower debts to production level than most producers.
At $60 WTI unlike other US producers - at very low differentials and favorable Canadian dollar PWE is profitable in their sweet spot assets.
As for liquidity they have $1.2bln bank credit with $200mln drawn at 3/31. They sold $415 mln assets and paid notes and bank that is close to 150mln balance at 6/30
Also the 2nd quarter will generate free cash flow of $30-60 mln.
Covenant issue has relieved for almost 2 more years and will completely disapear in 6 months.
Liquidity? This qustion is for money burners. PWE had just one bad quarter in Q1 and since Q2 has started making money again. Don't look at paper loses, look at debt levels after each quarter. Debts were falling faster than asset sale proceeds. The only cash loss occured in Q1 2015 and much less than headlines indicated.
PWE will be a huge winner in 6-24 month period.
Sentiment: Strong Buy
Unfortunately this is the typical question from bashers. The problem is.....the information is wrong in the question. PWE has lost money in one quarter only - Q1 2015 out of last 6 quarters. And that loss was for obvious reasons at oil prices at $48 on average.
PWE will make decent money this quarter at current prices. GLTAL
Not exactly. As I said it will vary Q-o-Q.
Capex for 2015 is $625mm
First quarter capex was $191mm
Second quarter capex will be ~3X less due to breakup period in Canada (last year was $65mm)
3rd and 4rd quarters should be ~$185mm per quarter
Overall annual funds flow of $650 will even exceed capex, but quarterly funds flow will provide cash flow positve in the 2nd quarter, but slightly negative in the 3rd and 4rd quarters at C$70 light.
WTI should rise higher to $70-75US in the 3rd and 4rd quarters in my opinion, so PWE should get positive cash flows in all quarters accept first this year.
Sentiment: Strong Buy
$161mm in funds flow on avergae is about right, but will vary Q-o-Q. The 2nd quarter is different every year
Today settled prices for July (spot prices will match tomorrow):
All differentials from WTI:
Edmonton light (~49K bpd): differential: -$0.449US
WCS heavy (~12.5 bpd): Differential: -$7.469US
July settled today:
WTI at $59.52
C$/$US = 0.8116
Spot prices tomorrow will be:
Edmonton light (~49K bpd): C$72.78
WCS heavy (~12.5 bpd): C$64.13
PWE will not receive those prices. Realized prices will be ~3-5% lower, but not bad at all.
Hope this will help
Hedges at $50WTI were horrible, but for 15K bpd in the second quarter, out of 49K bpd of light oil production and 12,5K bpd of heavy oil production.
In fact PWE did not lock specific price, they bought swaps at $50 WTI. Specifically they will lose ~US$10 on every barrel (60-50) at current prices, less than that so far on average since April 1, but they are selling light oil at Edmonton prices and heavy crude at WCS prices.
Historically Edmonton and WCS were trading at large discounts to WTI. Specifically in the 1st quarter the discounts were (from PWE Q1 report):
For Edmonton - $6.80
For WCS - $14.73
In the 2nd quarter discounts dropped to the lowest in history, so far on average:
For Edmonton ~$1.0
For WCS ~ $8.5
Also C$ in the 2nd quarter is still very low at ~0.8US on average.
Such large drop in discounts, combined with significantly higher WTI prices while low C$ are helping PWE to realize substantially higher prices in the 2nd Quarter so far on average:
For Edmonton ~C$66
For WCS ~ C$56
For comparison in the 1st quarter realized prices were:
For light oil ~C$49.82
For WCS ~ C$30.2
As seen WPE will lose less than $10 per barrel on 15K production, but gain C$16 on 49K bpd and almost double on 12.5bpd
PWE is benefiting from not only higher WTI prices, but also from very low differentials and CS. This is equivalent to ~$67-69 WTI instead of $60.
Finally the 2nd quarter capex is expected to be 3 times smaller than in the 1st quarter due to break-up period in Canada. Last year it was $65mln. In 1st quarter it was $191mln.
Bottom line: revenue and cash flow will be substantially higher, but capex 3 times lower in the 2nd quarter. As a result the net positive cash flow is expected even with terrible partial hedges.
Sentiment: Strong Buy
I concur all recent moves this year were done for survival.
But I hate the word "survival". Many people and even professionals use it without a time frame. Yes this year moves were for survival to compensate for the big mistake of no hedging at huge netbacks.
Next moves will not be for survival, but I suspect that people will continue using this term
The 1st quarter was a disaster in the oil market for everyone, but it's temporarily. PWE 2nd quarter will bring nice positive surprises in my opinion. Investors are on the sidelines waiting for growth to resume.
I'm firmly believe the second quarter will mark substantial positive surprises when PWE reports the 2nd quarter results. Cash flow positive, slightly higher production than mid point of the guidance after adjusting for the recent royalty sale.
Sequential improvements will be delivered in the following quarters. Oil prices will stay above $60 towards $65 and then $70. PWE will get a big jump later this year. Finally.
Sentiment: Strong Buy
Last $97 mln sale wast too small and insignificant. PWE didn't even name a buyer and assets sold. Some speculation was rumored PWE sold at pennies. I don't think Roberts would sell for below reasonable unless assets require a lot more capex injection. We'll know at the next ER. I'm not worried about it. We just need WTI to rise to $65 in June and $70 next quarter. And NG to rise to $3.0 in June and $3.5 next quarter. This is more important.