RE:LEG 2014 Capital UpdateIn all honesty I was disapointed in the 2014 Capital plan. I would have liked to see 50 million or so go to pay down debt. The debt is not out of line with industry peers, it is however, on the higher end of the scale and it is higher than I would like. The thing is you can lower your cash flow to debt two ways, lower your debt or up your cash flow, Legacy's choice is to grow cash flow vs lower the debt. There is actually some logic to that because your cost to borrow is still super cheap, the cheapest it has been in decades. Cash flow is super strong +- 2.25/ share even at a 3 times multiple that is $6.75 per share. Industry average is 7 times cash flow, so you have got some metrics like debt to cash flow in line, and you have cash flow per share out of line. To me at some point the stock closes that gap from 2.5 times and 7 times.
There are so many oil companies in the market who blew themselves up with a divy that was unsustainable LTS, RPL, PWT, PGF, ECA, BNP the list goes on. The proper thing to do is grow to a point where you get your debt to cash flow to 1.5 times and make sure your pay out is WELL BELOW 100% then start to look at a divy. Did some companies do it better yes White Cap grew faster and executed better so some companies did it better I agree 100%. One thing I noticed is that lack of interest and participation in the confrence calls, very few questions from analysts. Slacker is right the market does not like Legacy right now and clearly it is being used as some kind of hedge, maybe go long WCP short LEG. However, I believe that if Legacy continues to execute, there is a good chance that the market responds poisitively. This is my take on it any way, very frustrating when you think you can see the value and the market does not see it at the same time you do. If your logic is right then there is a chance that others will see that logic the same way as you. Cheers Matthew