Birchcliff Energy Ltd T.BIR

BIR Current Fair Share Value

[GuidoSan1]

As promised, I am going to give my opinion on BIR's current share value in the most simplistic terms possible, no fancy industry abbreviations, terminology, etc. just simple wording for what its worth. I'll try not to be too disjointed.

The biggest run on oil and gas company's share value appreciation is coming to a close, take that to the bank.

BIR NG weighted approximately 65% - 35% liquids/oil

Back late in the second qtr. I offered that my group saw BIR's share price topping out for the year strictly based on financial metrics of the company around the $13 dollar mark full value including dilution.
I have the luxury of being involved with a group member who has financial models to strictly analyze a company's financial value, most of us don't and must reply on information gathering to the best of one's ability.

So in late August BIR topped out around the $12.40 mark. That was while NG was over $9 US average Henry Hub and WTI Oil was over $87 US. Let me repeat that NG=$9+, WTI=$87.
We won't even get into whatever both gas and oil was  actually sold in US dollars to the Canadian market via AECO etc. it is sad. You know it and can easily verify it.

By the way while I am at it, so tired hearing repeatedly about this unhedged B-S. NG is sold according to what the market is willing to pay BIR included. Think of it this way if you had a commodities based business. How could you ever run your business efficiently if the goods you are selling are $2 today, $4 3 days later, $2.50 a week later, $1.75 a week after that, etc. Bottom line you can't, and BIR or anyone else can't either. Being unhedged means little other than a very minor percentage possibility in season based on spot price when buyers have underestimated their seasonal usage due to extreme unforseen weather, (Geezus, Come on Brandon, lol)

Where are we now? NG = $6.50, WTI = $75 with NG speculated to trade at an average of $5.70 for 2023 and oil hopefully in the $80 range. A 25 to 30% haircut against share prices across the board IMO from this year's commodity price highs.

I further offered back in the summer our financial evaluation on redeeming the preferred shares was going to cost BIR a pretty penny somewhere between 7 and 10% (170 to 240 million) of cash value of the company, well they were redeemed end of September i believe it was and is likely being reflected in this quarters current share price.

Add to that a declared divy for 2023 if .80 per share, which the market makers will surely reflect in adjusted asking price of the share value of the company. Remember this is your money they are giving you back (that you earned taking their B-S lol) and reduces the value of the company's share price in most simple terms.

I see BIR forcasts a 5% increase in production for 2023 against what will be a likely one quarterly wash from cash flows so likely little movement in share price value for 6 months or so into 3rd qtr 2023 IMO.

So where does that leave BIR or any other oil/gas company that was approaching full value, liklely not much upside in appreciation other than the seasonal commodity price swings base on in this case seeing a sustained increase in winter NG/OIL prices in an extended winter.

Don't discount but be aware that the biggest traditional seasonal increases in NG and Oil prices usually happens in October/November and that is over, in a month the futures will be trading the front end of March and that is fully spring for over 3 quarters of the US, and most of the heavy populated gas using demographics.

So how would I look at BIR in the most simplistic terms of it's 9.50 current share price after gathering as much layman's fundamental and financial information possible? (Optimistically $10.30 in realizing next year's fully divy value with current share price).

To start currently I look at the $12.60 yearly price high when gas was at the lofty heights noted in August and immediately discount it 20% as for me in 20+ years of trading NG and Oil companies historically they trade at roughly 80% of their projected share price target values to allow for minor noise and seasonal swings along the way = $10.20 and further discount it next year's divy of .80 to get a share price of $9.40, hmmm very interesting....where is the price right nopw?, Hmmmm.....

In looking for simple value I would then assume the averaged analysts target price takes into account various models, financial, etc. to come to conclusion.

So let's do it, it's $14 so discount it 20% and I have $11.20 then take off the .80 divy and I have $10.40. That would be my target for a sell consideration depending on where we are in the winter futures. I would then lastly speculate on the next roughly 6 weeks to the year end report the chances of of both commodities rising for at least a 2 week sustained (to reports) period do to weather looking for an increase of 5-7%  in share price for every 10% increase in commodity price from where it is currently this week. In theory then if both NG and Oil go up 10% as example from where they are today then my exit price would likely rise from $10.40 to just over $11 etc. and on again from there with any additional 10% rise in commodity price.

Bottom line there is not much left to full value again and it is highly unlikely we will see any big rise in commodity prices while they continually raise the bank interest rate over this inflation and currency devaluing B-S.
Less the commodity variables for BIR or most OIL/Gas stocks for the forseeable future, anomolies to the plus side or a pending sale which could add roughly 15% on buyout to share value or some additional stupidity on the company's part to the down side, BIR as I see it is likely in a tight trading range for the foreseeable future.

Good luck to All, hope it made some sense it is a condensed version as best and I may be completely off base except I really haven't been to date lol, cheers, PS, SDE is coming to a complete close for me shortly also but fully in consideration of buyback until full value less discounts is achieved...........

[Donhow]

I thought the preferred cost $88 million for 3.52 million shares at $25. They save about $3.5 a year because they don't have to pay preferred dividends. That make a slight change in your calculations of around 90-150 million. Consider the cash flow to be around 1000 million per year sustainable at $3.50 gas and $70 oil for maybe 25 yrs. By this time next year they could pay $1.00 dividend and

[PlutusofCrete]

Thank you for the detailed analysis. I pray for a higher share price than in the $10 range....have too much invested in BIR. Good luck to all. 

[HighOctane89]

Well one thing is for sure , as guido pointed out nat gas is more weather sensitive than oil . If you have been paying attention to the weather we have another polar vortex due next week with freezing temps right down to Texas . Expect some well freeze off's and ice plugs in pipes as this cold settles in , that should give a bit of a kick to the price to nat gas .

[GuidoSan1]

Excellent work Don good to see someone paying attention, yes correct on the 88mil unfortunately no tax savings against that amount so adjust accordingly again from there on flow thru cash expense. Wow your pie in the sky analysis begs another look, Tonkin's been selling the same story for years for those in denial of actualities, how could all the analyists covering this company be so wrong

[robert41]

Hey GS1 thanx for your thoughts... for me I keep it simple I'm not a trader I liked the opportunity on all these o and g companies in the spring of 2020. My feeling with Bir was to hold for a nice divi. My shares are free now as my position is half what it was. Have been fortunate withthis and cr. I bought pey and aav later so doing ok there but nothing great. For those seeking a nice yield on

[GuidoSan1]

Hi Robert well done and good classic trading strategy while the sector remains strong overall especially with company's that have proven reserves 20+ years out. Commodity prices do and will always rule the day for now yay lol. An example where I differ from one on my associates on some stock opportunites. I mentioned I3 Energy a while back a Brit company with excellent holdings and growing

[Donhow]

"Birchcliff continued to deliver exceptional results in the third quarter, highlighted by quarterly average production of 78,079 boe/d, which resulted in record Q3 adjusted funds flow(1) of $267.4 million ($1.01 per basic common share(2))," "As previously announced on October 13, 2022, Birchcliff paid a special cash dividend of $0.20 per share to our common shareholders on

[GuidoSan1]

Sure no argument Don, but pray tell why then does the share price languish at what could be considered current fair market value after various considerations to date? Could it be that these goalposts are yet to be realized and many of us know BIR's track record for F-ing a good thing up along the way more than once lol. I think I have lol. The stock market is ever changing and to maximize

[Billybabin61]

tks for your analysis Guido, it's important to have some critical discussion to get more insight. I have a few questions on some of your points: You said: By the way while I am at it, so tired hearing repeatedly about this unhedged B-S. NG is sold according to what the market is willing to pay BIR included. Think of it this way if you had a commodities based business. How could you ever run

[GuidoSan1]

I'll leave all those further speculations to you Billy as stated by the company I have no position in the company currently as stated so................... I could again who knows but there would have to be a 50 percent potential return for a 20-30% return realized.  Given foreseeable commodity prices for now that scenario fails to present itself for this company IMO, cheers.

[CHECKMATE77]

Well done !