Does a Governance issue exist that is impacting shareholdersReally with Terry being a operational guy, maybe he is to trusting and not looking deep enough into the fiscal management side that is skewing the results of ARX’s performance every quarter.
Looking toward my favorite ARC company comparison, the entire board of directors at TOU are responsible for the risk management program, not the CFO. The fact is that the ARC CFO is not even on the board of directors, so is there a governance problem in this portfolio that represents ARX board of directors?
Here is a TOU Governance Statement Regarding their board
Tourmaline’s Board of Directors is committed to playing an active role in supporting the realization of the Company’s strategy through upholding the highest standards of corporate governance and fulfilling its duties of stewardship and accountability.
The oversight role of Tourmaline’s Board of Directors encompasses strategic planning processes, risk management, communication with investors and other stakeholders, and standards of business conduct. The Board is also responsible for selecting, monitoring and evaluating executive leadership and aligning management’s decision-making with long-term shareholder interest.
So there in no argument that the long term intrinsic value of the ARX shares will be higher as a result of share buybacks.
However the broken nature of the risk management program in the hands of the CFO has been and continued in Q1 to skew the results of ARC operations. The balance sheet is broken in my opinion, and skewing the results of operations, which is impacting the value of every share held by shareholders today.
The purchase of shares today is a long-term process and with 2 billion dollars already spent on share repurchase, has resulted in a failed attempt to get the share price trading at an reasonable evaluation for the shareholders that are holding the stock today.
The share repurchase program is failing against a broken balance sheet, hampered by massive risk management losses at the root of the company’s evaluation problem.
ARC should review the governance of their Risk Management Program, and this should be done at the board level. Board accountability should exist taking responsibility for these risk management losses.
We are now in a low commodity price opportunity window here and to still see the massive hedging losses we had in Q1. Make ARX uncompetitive with companies like TOU with respect to their hedge book and management performance
The ARX board should take this opportunity to fix ARX hedges before they buy one more share back, the share will appreciate in price. This is the best thing management can do to reward current shareholders.
The buyback of ARX will not work while the balance sheet is broken and carrying this huge risk management liability. They should fix this liability before they buy back another share and ARX will compete with TOU in enterprise evaluation. Time to buy back the hedges and put proper governance in place for the risk management program.
IMHO