RE:RE:RE:RE:Well Gonatgasgo I took another look at the press release and I feel a lot more confortable than when I first read it Thursday night. Essentially, what they are doing (but cannot say in case the price of oil and gas comes down quite a bit) is they will use their annual AFF to fully invest in capex. No free cash flow but they will not over spend either.
At first, I thought they were going to increase debt to $200-300M, but this is not the case. They will maintain a very low balance on their line of credit at the end of each year. How low? It depends on the realized price of oil and gas.
We know that they realized $262.4M of AFF after 9 months of 2022.
They expect AFF of $300-320M for the entire 2022
Keep in mind the AFF included many hedges at very low prices and significant interest payment on debt.
2023 I think AFF for 2023 could exceed $350M (current 2023 hedges are at $5.45/mcf). However, their guidelines are $300-320M
Capex: $230-250M
Pay down debt of $150-155M
Balance on line of credit in Dec. 2023 of $30-50M
2024 I think AFF in 2024 could exceed $400M (production of 35-37,000 boe/d)
Capex: $400-450M
Balance on line of credit id Dec. 2024 of $30-80M
You get the idea. They will almost match AFF with capex keeping a very small balance on the line of credit.
The only people who should be disappointd are the ones who wanted a dividend or share buyback. Clearly Crew has proven the money reinvested in the company is getting a much higher return on investment than anything else.
Nothing different than the last 2 year plan. Except this time, they do not have debt to repay so much higher annual capex.
My disappointment was:
- potentially increasing debt significantly (not the case)
- reduction in production for 2023 (still true but more oil so profitability is not lower)
- it may take a bit longer before the stock price hits $10-12 (maybe, maybe not. Crew and others are spinning their wheels these days. There is clearly actions taken by Crew to move ahead of others)
The market is over reacting, I think. Let's see what we get on Monday.
gonatgasgo wrote: My summary with some observations.
Debt to EBITDA is at 0.5x. They want to keep it below 1.0x so they may increase the debt back to $300M or more (my interpretation) but they do not give a target other than 1.0x EBITDA.
They will not refinance the long term debt, but rather use the line of credit (my interpretation; not clearly stated).
Capex over the next 4 years: $1.4B - 1.5B
Capex including infrastructure
2023: $230-250M
2024: $400-450M
2025: $400-450M
2026: $325-375M
I am not sure if AFF will even exceed capex in 2024 and 2025. However, they should be significant free cash flows positive in 2026.
Production
2022: 32,000 - 33,000 boe/d
2023: 30,000 - 32,000
2024: 35,000 - 37,000
2025: 41,000 - 43,000
2026: 60,000 - 62,000
They are clearly an outlier here versus the majority who are limiting growth and paying back shareholders. They focus on LONG TERM growth and not annual growth. If you can keep your eyes closed for 4 years, when you reopen them it will look amazing.
Let's hope this is well received tomorrow but I am a little bit nervous.