Birchcliff Energy Ltd T.BIR

No Hedge Here - Fast Becoming The Envy of The Patch

[Barkis]

$7.60 US gas is worth about $9.60 CDN to Birch 

Birch's ~400,000 mcf/day productio gas is pulling in close to $4M/day for thier gas alone.

Most other gas producers have bees in their bonnets and have hedged - be careful which name you buy.

I think BIR's management sees it clearly.

AAV (Advantage) hedged  a fair chunk of their production at <$5 - ouch.

Best kept secret around these parts it seems - judging by the low share price.

https://www.youtube.com/watch?v=2PePXnXxRGE

[clamlinguine]

Not only are they hedged, it's one of the stupidest hedges going, iirc. Some kind of Canadian dollar thing that costs them big time on their HH volume. Check page 6 on the presentation. I tried to find the details but I'm done looking. I saw it a few years ago and thought they might not survive it. Now it's just a drag. Does it ever end? 

[Barkis]

Just the facts mam, From latest Annual report. Foreign currency risk is the risk that future cash flows will fluctuate as a result of changes in foreign currency exchange rates. The exchange rate effect cannot be quantified but generally an increase in the value of the CDN dollar as compared to the US dollar will reduce the CDN dollar prices received by Birchcliff for its petroleum and natural

[clamlinguine]

The fact is they ARE hedged and I already told you that I'm NOT up to digging up the details again, as I did years ago. I can't believe that POS deal they signed is still going on. I own some Bir and was considering to buy more but will hold off now. If someone here clues me in on the details of that hedge, and I find out it's not as bad as it was way back when, maybe I'll buy some

[Barkis]

How old are you now? - it may be memory loss on your part sorry to say - hedges usually don't last years.  Either way let's run with your ride that there are these mysterious hedges. I am on the bid.

[robert41]

Clam they may have been hedged years ago Jeff's mantra has been they are un hedged he's been beating this drum since 2020. I know they have higher transport costs than other gas CO's. Every other gas stock I own crew aav pey explain their hedges in detail. So I would think Bir would too. 

[PlutusofCrete]

Hey Clamlinguine, Hedging is a path paved to hell....that was Jeff Tonken in this last interview on BNN. I would look it up for you but I'm too busy...can you help me with digging it up?  clamlinguine (108) User Actions   7 minutes ago 9 Reads Post# 34651448 RE:RE:RE:No Hedge Here - Fast Becoming

[clamlinguine]

I think they get paid in CAD for their HH volume maybe? I will look a bit more then. It costs them $1.47 per mmbtu on 38% of their volume if I read it correctly. 

[Barkis]

Clamlinguine. They do have a AECO/HH basis hedge on for 147,000 mmbtu of gas per year for the next 4 years or so if that is what you are getting at. As far as I can tell that hedge seems to be slightly in thier favour as the AECO gas is still selling for less than HH leass US$1.20. Either way that hedge is not very material IMO in the current scheme of things. It time proves me right you are

[clamlinguine]

Barkis, that must be it because it amounts to 38% of the volume. It is costing $1.47/mmbtu on page 6. If you can explain the exact detail, I'm interested. It seems like the same crazy, unnecessary hedge that drove me away before, may not be as bad now. The way the old one was set up I could envision a scenario where they would have had to pay the americans to take their gas. Things were way

[clamlinguine]

I will provide my recipe gratis. Here it is! https://dinnerisserved1972.com/2011/09/15/61-linguine-with-clam-sauce/

[Barkis]

Thnx. Clam. Looks doable. Thought maybe you were a shorter but it seems I am mistaken. Either way I will try to find a good shortbread recipe for everyone here.

[clamlinguine]

No problem Barkis. I recommend more garlic and parsley than the original recipe. haha. So it appears they have signed up to take $1.23 US less than Henry Hub rate for the gas they ship down to Louisiana. I wonder why? Maybe they got an upfront payment? Maybe that's what it takes for an Albertan to gain access to that market? Maybe cheaper transport? Anyway, it doesn't seem to be too

[Barkis]

It is a lot of gas involved. Maybe they just wanted to mmake sure they got something decent for the AECO gas they produce. A lot of times the AECO price went really low (pipeline issues mainly I think) but it looks that has been resolved. I don't think it is a physical contract just a financial one. I think they should be able to settle it and take if off the books a at profit. If anyone

[Barkis]

Clam. I looked into those Aeco 7a/HH basis contracts. You can find the current basis at https://www.theice.com/marketdata/reports/254 Site is hard to use but it looks like current month  is HH less $2.40 US meaning if you bought that contract you would be locking in  HH less $2.40 for 1 month. $7.80 US gas to less US $2.40 is $5.40 US which equates to the current ~7.00 AECO price

[robert41]

Thanx for posting all this its interesting and far beyond my pay grade.

[Barkis]

Your welcome Robert. No need to go what I just went thru. Just remenber the current AECO 7A/HH basis is built into the daily AECO gas price. As long as the HH price less $1.20 is greater than the current AECO we are good to go. At a current -US2.40 basis our contracts give us an extra $1.20 US on that 147,000 mmbtu.

[Aldan007]

Hi Guys, let me try to explain my understanding of how the HH/AECO Basis Swap works: This typeof swap simply provides you the binding to the HH price without physically delivering it to HH. BIR still only delivers the corrsponding volume to AECO hub, but gets the HH hub price minus USD 1.20. The big advantage is: they get HH pricing without having to pay the transportation cost - thus they don

[Barkis]

Yes that does help.  This is the comment on the basis swaps in the latest fiancials. Looks like they plan to hold onto them. "Birchcliff has not designated its financial derivative contracts as effective accounting hedges, even though the Corporation considers all commodity price contracts to be effective economic hedges. As a result, all such financial instruments are recorded on the

[robert41]

Hey Barkis or anyone else want to take a shot at this.... let's say we are debt free, 260 million shares out and gas is around 6 dollars oil 80 bucks given current production any idea what Bir share price would be? I'm not sure how a company like that would be valued. Thx

[clamlinguine]

Thanks Alden, for the further clarification. It's backed up by the fact the presentation shows the transportation costs for this gas is the same as aeco. (45 cents) The presentation shows pipelines going down to Louisiana on the graphic so that was a bit contradictory. So I guess as Barkis alluded, as long as HH is $1.20 over aeco we aren't losing out. This wasn't a great contact type

[Barkis]

Hi Robert, Sometimes using BCF / Year and past yearly costs is a good way to crunch numbers BIR does about 130 BCF / Year At $6us or $8cdn we get each BCF earning $8M CDN  130 BCF / year x 8 = 1,020M Liquids at 80us should gives us another 16,000 x 80 cdn = 1.3M /day or $450M /year (I used 80cdn instead of 80us  to take into account lower than WTI priced liquids in the mix) So 1

[robert41]

Thx barkis... given demand and storage perhaps gas will be north of 7 for the year or more I have no idea i wish I understood the business better but it looks like it could be going that way. If $7 gas is the new normal for years these share prices are a gift... but I'm no expert just my thoughts. 

[Barkis]

Robert - bigger considerations are at play now. Must be hard being a US rep and having to go to Europe to explain why they should be paying  >$30-$50 bcf or more for US LNG (effectively shutting down a lot  of EU industry) while US citizens and US industry get gas for $8. The Pope is wants to see Putin to confess a bit and try to stop the madness. My advice is stay away from the

[robert41]

I like everything you post until you get a little political and conspiracy oriented...I think it's best to keep it off the boards. Most of us are intelligent enough to form an opinion I'm 60 and have seen a lot. I would never preach to anyone. You don't know me I don't know you if that changed maybe a conversation on how much we hate Trudeau is warranted but not on the boards. Jmho

[Barkis]

Sorry if I offending you Robert. Best put me on ignore and undo that once in a while if you want to see my certain posts occasionally. I draw the line at censorship - and what you are seeing now is censorship and mind control. Take Care.

[Barkis]

I see. Yes it would have been a big problem to take into account when HH gas was trading at $2 - $3. I was not in the stock back then. The only way it could become a problem now is if they AECO gas gets much more expensive than HH gas. Idon't think that is going to happen but it may be something to keep an eye on  once Canada starts exporting LNG. Also Alberta is in the process of