They can, but generally they don't hedge like that. They hedge for specific objectives to insure cash flow and protect dividends as an example. Hedging has some downside, it cost money to hedge, and generally if you look at hedges over a long time span that there is not net benefit.
At $70 US WTI or about $84 Canadian which where most analysis predict oil will end up this year funds increases by almost 500 million Canadian which all free cash flow
probably after next quarters earnings. Cash flow should be positive based on their annual projections at 65 dollar oil Canadian. Since oil is about 72 dollars Canadian, that will add about 700,000 dollars a day cash flow for the quarter or about 60 million. If CAPEX is lower because of lower drilling costs the combination could lead to a nice surprise
both wrong check their annual report their debt is the same as PWE 2 billion sorry looked at yahoo should not have done that as yahoo is wrong a lot of times
The main difference in to is debt BTE has abut 500 million Canadian in debt while PWE has about 2 billion. PWE needs to sell the duvernay to get its debt down to the 1 billion range. PWE has the potential for higher net backs than BTE. If oil gets up to 75 WTI and stabilizes there PWE valuation should be in the 10-15 range. as free cash flows will be about 250 million assuming they spend an additional 250 on CAPEX. That is about 60 cents a share.
That is marginal costs of production as it appears to me when the market is in balance . That number is based on the costs of deep well drilling and the less efficient shale wells. Economics is not perfect and that is why you see swing in prices in both direction. In the current environment prices got to high and forced on additional production, which will eventually be cutback and probably eventually overshoot in the other direction. how long this will take is any ones guess it took about 2 years on the gas side when prices got down to 2 before production cuts set in and forced gas up to 5-6 last year. Oil is different though as oil revenue effects budgets of some countries and the process may take longer because of that.
depends on the price of oil. Breakeven in cash flow for this company is about $55 WTI or about $68 dollar Canadian (from conference calls and slides) At 80 dollar WTI would give then about 2.5 million dollars a day in free cash flow (simple math or about 900 million per year) now some that would go to additional CAPEX to grow the company, but it would leave about 500 million in cash to do with as they see fit. At current price (about $72 Canadian for oil) they are barely breaking even and can't grow the company). What is your outlook for oil. I am in the 70-80 camp by years end
One of the problem with the stock price is the market perception of the future price of oil. At $60 WTI the company is slightly positive on cash flow but can't pay a dividend and can't grow production. At this price the value of the company in probably somewhere between 3-6. So it is undervalue at this oil price. There is to much uncertainty of the direction of oil price going forward GS says it will be 45 at years end other say 70 . That is part of the problem. If oil stabilizes between 70 -80 which is where I am the company can grow production and resume the previous dividend of about $.0.50. The stock should be in the 10-15 range. If GS is right an oil goes down to 45 the stock value is between 1-2 as the company will have to reduce CAPEX in order to maintain cash flows and production will reduce through depletion.
Latest seeking alpha article highlights this. As a side not an Ag commodities expert that I follow said that their will be food shortages in a few year, because of increase demand from India as more of its citizens go into middle class. That should drive some of the China UAN exports to India increasing the price of UAN if the economy stays as is. One of his big picks is Agrium
They can survive. All you have to do is look at their budget for the year based on $65 Canadian oil price. $59 WTI oil is about $72 dollar Canadian. Their budget should a slight negative cash flow after CAPEX. At $72 Canadian oil, cash flow will be slightly positive at the CAPEX they are projecting. The trouble is they are not growing there production at that level of CAPEX, but just staying even. They do not need to sell any assets to survive, but to grow the company they need at least $70 oil WTI and would be wise to sell the Duvernay to get their debt down to 1 billion range. Under those conditions you are looking at $10-15 stock price with 0.50 cents per year dividends
In listening to their conference call my understanding was they set the floor at certain price ranges. To do that it would cost them money, it did not sound like they inter into any swaps that fixes the price. if I am wrong someone correct me the conference call was a little vague.
what is the log term price of oil. At $60 WTI PWE should be worth at least $3-5 they are cash flow positive (cost after CAPEX) at that price and should be able to grow production. At $70 oil PWE should be worth north of $10 a share Cash flow should be growing at 1 million per day with 1 cent dividend. At $90 worth north of 20 at $ 50 oil the stock price is probably at 2 or less as the company will be struggling to maintain bank loan positions. This stock is highly leverage to the oil market.