~$50M shortfall & Hanging by a thread?Well, earnings for Q1 shoiuld becoming in soon, within the next few weeks, for the Canadian O&G producers. Birchcliff included around early May. And trust me folks, for the heavy gassers, it won't be pretty at all. Especially the unhedged operators like Birch. Less hedges you've done in 2023, the worse the results are going to be. All those nice lucrative hedgesfrom 2022 are now ALL expired, gone.... Pooff all gone up in smoke, and what's left are scraps which NO ONE, NOT ONE Canadian producer is profitable at. Even the lowest cost Canadian darling Peyto is up to its knees in dodo & knee deep in dire troubles. Probable not as bad as our good friend Birch, but still not looking pretty for anyone else.
Just how bad willit bee for Birch & how long can they hang on for in this awful environment? I've run some numbers, and as the title states, they will have apeoximately a $50M shortfall for Q1 and it will get progressively worse for them as the losses increases till year end. And isee NO reprieve for them or ANY of the heavily weighted gassers in the foreseeable future. As the uncertainity of the US elections loom over the horizon, the eventual outcome for that event will be negative for the Canadian guys ....no matter what it is. Trump or Biden.......both will be a disaster for the energy sector. With the latter having the markets completely crash......eventually.
But should Trump win....which is the preffered outcome for the majoritywith a few losers like Canadian energy, I can see oil coming back down to earth to about $60 and NG prices getting hammered down to below $.50 US at HH. Eventually bottoming at ~$1, before ANY recovery happens in the latter part of 2025.......as the economy begins to heal. At those levels my friends for THAT extended period, smallish guys like Birch are as good as DEAD. So the question now is to these fools at Birch GET IT or not and will they .....eventually? I'm not a s/h anymore, so i really don't care either way. But getting clipped with ~$50M in losses, EACH quarter until NG recover to at least $3 US will be extremely excruciating & costly for all involved with Birch. And that could last UNTIL 2026.....maybe even longer!
At that rate, Birch will be back close to 3/4 of a billion in debt for 2024, as they borrow to service everything including their unsustainable divvy, AND back over a billion in debt in mid 2025. And those my friends are conservative figures.......so it could be worse! So how long can they hang on for? Well, i think their unfortunate experience in 2020 pretty much answered that, and i think they will use the same playbook here again and repeat history. And then when they can stand no more and their borrowing capacities/ability runs out.......you're looking at a pontetial PaintedPony or Pipestone situation, where they sell themselves for peanuts to someone like Canadian UnNatural.
For YOUR sakes.......i HOPE these guys GET IT before then..........
GLTA