RE:RE:problemmalx1 wrote: shenty46 wrote: problem with peyto is that if ng prices rise more, their hedging losses also increase, and if it falls ungedged portion is impacted, and next years ng prices are trading near 5 dollars, from the present 9 dollars.
Money is mobile. Hedges only delay the impact of commodity price shifts. Nobody complains when ng price falls but they all cry foul when price increases. There will come a time when higher priced hedges are layered in, and ng prices will find a new equilibrium and Pey sp will lag, yes, but not forever. If you are a long term pey investor, none of this variance matters. Otherwise, buy a competitor with no hedges. Nothing forcing people to hold pey if they don't like the risk mitigation strategies. Maybe they are just impatient.............. Let's look at this from different perspective. Had pey not implemented hedging, company could have been bankrupted by extended pandemic. Simple. The hedges are why pey is still standing. Today some medium term pain before the long term gain. Ride it out or buy a diff company.
We all have to let go of what has been done, however questionable or unconstructive it has been. Peyto is trading at a discount now because of it, so if you're confident about prices remaining elevated going forward, access to the Cascade power plant next year, etc. consider this an opportunity, as the horse has yet to leave the barn. That said, natural gas prices are plenty fickle, and though I'm cautiously optimistic going forward, I'm a little worried that Peyto is now too confident, continually adding drilling locations, building more processing capacity (despite only using ~60% of it), and drilling like it's the gold rush, which is all very justifiable given the blue sky, but the lack of hedging that accompanies it is a little concerning. They're not buying health insurance when they are healthy. In theory, that's how you ought to do it. Another black swan event, or even a mild winter, could have natural gas prices at every North American hub trading sub $3 again. I recognize that there is less room for hedging given where the hedgebook currently stands, even looking out a year, but for such a conservatively run company, it kind of baffles me that they're not locking in pricing on more production this winter, or at least until the Cascade power plant is up and running, especially given the backdrop of continually growing production. I wonder if it's the investor community (institutional or private) or the BOD that are pulling the strings, or keeping them taut, when it comes to the hedgebook. FOMO definitely seems to be at play here though. Anyway, GLTA. I'm still sitting on my $100K investment in PEY, though I'll continue to write OTM calls on my entire position at least until the hedgebook looks a lot more constructive, independent of the pricing environement.