RE:Fundamentally undervalued?This makes a lot of sense. I think the macro environment is by far the biggest risk. If central banks do not put in the brakes in a hurry because of inflation, we shall be good to see our oil investments to significantly reprice over the next 12-18 months.
BullMan123 wrote: Its kind of fun and interesting to read this sparring guys but att he end of the day the ATH investment thesis is simple:
Cash Flow per share x multiple = shareprice
Cash flow is simple:
Oil price - I'm positive and think it will stay strong and probably get stronger
Hedges - Some of the upsdie was capped by the hedges put in place but there is still upside
Costs - not to worried about these going higher anytime soon
Multiple (currently 2.0x @$77 2022 WTI accoridng to Peters) is less simple but breaks down as follow in my opinion:
Sustainability and outlook for realized oil price - market is not willing to price this yet.
Sustainability and outlook for production - fairly predictable and pricced by the market.
Reserve/resource option value - market does not price this today.
Balance sheet - recent near-death experience means the market will be slow to price improvement.
Other risks - hostile government in Ottawa priced but can alwys get worse. Take-away issues priced but can always get worse. Stupid stewardship of free cash somewhat priced given history.
I don't really care that much about relative valuation vs. peers, but referring to the 2.0x above, peers are not dissimilarly priced with juniors at 2.1x, Intermediates at 2.6x and seniors at 3.5x.
If oil prices continue to grind higher then all boats will be lifted, starting with the seniors (arguably already started), hedged or not, and if it is sustained multiples will expand. Anything left behind will be consolidated (accretively for shares to start).
That's how I see it and the day to day moves of the shareprice is just noise if the macro view holds.