Desjarding 2.5$ targetOne of the reasons the stock traded at a discount in 2020 and 2021 was its elevated debt. At the time, the company had US$450m of notes coming due in February 2022, and the Street (ourselves included) was uncertain about ATH’s ability to repay the obligation. The debt was restructured in 4Q21 with term, and the company’s prospects could not be more different from a year ago. But, we believe many investors still have the ‘old’ Athabasca firmly implanted in memory. In fact, many investors we hosted in the meetings admitted that they had not really looked at the company for four or five years (or longer)! For those who were familiar with the story, there is still an element of ‘wait and see’, and the focus on reducing debt without any guidance on a more fulsome capital allocation framework was brought up as a concern by some. While we agree that those are valid concerns, we reiterate that Mr Broen and Mr Taylor were both adamant that ATH was not going to move into ‘high-growth’ mode and that before providing guidance on what the company plans to do with its excess FCF, it needs to demonstrate to the market an ability to pay down debt (which it is doing). Last October, ATH announced that it had refinanced its US$450m notes with US$350m of notes due in 2026. The new notes are subject to a ‘cash sweep’ mechanism, which requires ATH to allocate at least 75% of FCF toward debt redemption at 105% of face value. The cash sweeps occur on a semi-annual basis until the total debt outstanding is at or below US$175m. Once this is achieved, ATH cannot make further redemptions under this mechanism and is then free to allocate FCF as it sees fit. What seemed clear to us in the meetings was that shareholder returns will be prioritized over production growth once debt-level targets are reached, and that large portions of FCF are likely to be allocated to shareholders. ATH believes that it can reach the US$175m debt level in early 2023, which means an initiation of a shareholder returns strategy is likely at that time (or perhaps earlier if current oil prices hold). Until then, the company has stated that 100% of FCF will go toward debt repayment to reach the US$175m as quickly as possible. Although debt remains the company’s top priority, almost every investor asked what a shareholder returns plan would look like once the company is ready. While nothing is set in stone, Mr Broen discussed share buybacks and dividends—with a preference for the former given the company’s current stock price (something we wholeheartedly agree with). As we noted, details on a capital allocation framework are expected in the back half of the year.