Bonterra Energy Corp T.BNE

BNE: A Micro Cap Gem

[Resilience2]

BNE: A Micro Cap Gem

Two articles:

 

https://bnnbreaking.com/finance-nav/bonterra-energys-strategic-growth-amid-canadian-oil-sector-evolution-a-microcap-gem

The 1st one isn't particularly strong but interesting snippet:

 

"The company's resilience is evident in its ability to navigate through these challenges by optimizing its asset base and focusing on underexplored regions. The impending opening of the TMX Pipeline presents an opportunity for Bonterra to significantly reduce transportation costs, thereby enhancing its financial outlook in a competitive market." - wasn't aware TMX could be a cost saving for BNE transportation cost wise. And focusing on underexplored regions sounds interesting; more capital efficient drill locations coming for growth? Montney? Belly River?

 

https://seekingalpha.com/article/4673959-bonterra-energy-is-a-strong-canadian-organic-growth-play

 Alpha article says it's a LT organic growth Hold that likely will pay out soon.

 

Summary

In this article, I introduced a microcap Canadian producer Bonterra Energy. This company produces oil-weighted, low-capital wells in the Cardium oil play. These wells have relatively short payback windows that are less than a year and produce reasonable amounts of FCF. The company has been using this FCF to retire over $200 million of debt over the last three years.

As a result of this improved financial condition, the company is approaching financial performance metrics that will allow it to start paying a quarterly dividend. The FCF analysis performed showed that a $0.04/share dividend can be supported with a margin at $75WTI and $2/MCF Henry Hub prices. The stress test showed that the dividend breakeven was $67.50/barrel.

This analysis did not take into account any favorable pricing that Bonterra could receive as a result of the opening of the TMX pipeline. A benefit of $1.25/barrel was shown to have sufficient financial impact to cover approximately 54% of the projected dividend.

In addition to progressing through its debt reduction program, Bonterra has accumulated a small secondary play in the Montney window in western Alberta. The initial economics of these wells appear favorable due to shallow depth and multiple zones available for development.

I like Bonterra as a slow organic growth story that may eventually be acquired by a bigger entity. The company's priorities are fiscally responsible and conservatively grounded. Purchasing this company below $5/share gives an adequate risk-adjusted opportunity for a long-term shareholder in my view.

R. 

 

[Lurkzies]

Great article! I am glad others are aligned to my estimate of YE 2024 debt being well within divy range. Also was not aware of the potential savings from TMX.  Thanks for posting this. Just strengthened my opinion of being a long shareholder!