When people think about liquids rich players, or more oil weighted they often think about companies like CPG or WhiteCap in the midcap space.
Who would think that ARX produced 50,000 more boe/day of Oil/Condensate than TOU in Q3 2022, or about the same as CPG.
- Today gas price is around 3.60 on AECO or about $21.60 a boe.
- Today condensate price is around $78 dollars or about 104 dollars Canadian
One boe of Condensate is equalivent to producing 4.81 boe of dry gas, the kind of gas Sunrise Produces. So in a comparision between ARX and TOU, TOU has a market cap more than double that of ARX yet ARX produces about 125% of the liquids that TOU produces, which is the most valued commodity in the entire production mix.
So if we werr to say ARC produced 50,000 boe more liquids than TOU and those liquids are equal to 4.81 boe of dry gas. Then 3.81 * 50,000 = 190,000 boe of additional dry gas production to do an apples to apples comparision between the two companies.
Last quater ARX produced | 342,000 boe add liquids adjustment 190,000 = 530,000 boe
Last quater TOU produced | 482,000 boe (40,000 boe/day of liquids) = 482,000 boe
So using AECO gas prices in the $3.60 Canadian ARX would generate about 10 percent better cashflow from their production than TOU. Considering all costs are equalivent.
So now that gas prices have come down to a more normal range, Arx should be trading at a higher evaluation that TOU because it has the ability to generate more FCF.
IMHO