No one should be surprised......At what has happened here with Birchcliff. I warned you guys months ago that the heavy gassers were in deep trouble IF NG prices remained around $3. And they've been hovering around just under $3, so much worse than even i expected. This isn't rocket science folks, it's simple mathematics and just running the numbers, which i believe Birchcliff mgmt probably did also, and they were PROACTIVE (note that word folks because it will be very important in thev future for s/h). in their response. Not the resuts that s/h were looking for, i know, but it was either reducing capital spending & guidane OR something much worse. Like a capital raise or cutting the divvy.
I personally would have preferred another option, which i did mention several times on this board they should consider, but if they didn't go that way, this was the next best thing. Please note that i'm note a s/h here so i have no bias or motive either way. The fact remains that BIR is heavily exposed to NG price weakness as their heavily weighted to it in their production AND they DID NOT hedge anything (from what i gather) to protect their cashflow for the next 12 months. Which is surprsing to me they did not when NG hit $10 last year BUT they were hedging quite a bit a few years ago when NG was around $2. So not sure what their thinking was here. Did they think that NG above $10 was sustainable for a long period and would go much higher or did they hesitate for other reasons? Who knows, but whatever the reason, it has backfired on them and now theyv are paying the price. Being hedge free does have it perks, just not when NG is trading sub $3 bucks and it costs you just that much to bring it to market.
So what could turn things around for Birchcliff? Well, NG prices arounf $5 at HH would help tremondouly but i don't see that happpening anytime soon for obvious reasons. And what reasons are that that you say? Well, with all the problems, supply issues & conflicts in the world right now, oil should be tradoing closer to $100 & NG way above $5.....but they are not. Because doing so would BK Europe (and several other places!) and would give Russia much financial leverage. So the American & European Gov't took upon themselves to make sure that didn't happen. So they're basically waging a financial war ontop of the proxy war theyr engaged in eright now with Mother Russia. So they will manipulate both oil & NG prices as much as they need for as long long as required, to suit their needs. This is WHY gassy ep's like Birchcliff need to find OTHER alternatives to stabllize, to grow and to flourish. And it won't happen by staying on the sidelines doing nothing, hoping & pryaing things change for the better.......
My suggestion.......the same one i keep on mentioning here everytime i post something. Birchcliff needs to find a suitable dance partner to get BIGGER, for economies of scale and other critical synergies along with putting themselves on the radar so investors outside the Canadian space will notice them. And this can be only accomplished with size & being considered a crucial component in your repsective industry. I've said my piece, and i hope both the company's mgmt and the Albertan Gov't. both culprits and responsible for the company's current situation, will understan & realize they need to make drastic changes as i've outlined here..... if they wish to survive-thrive,
GLTA