RE:RE:RE:RE:RE:Nuttall....change in strategy?houbahop wrote: Just as an example to show how stretched is the elastic:
In March of 2020, spot Natgas was trading around $1.75 at HH. Today.
Back then, PEY was trading around $1.50 with an all time low of $.90 while TOU
was trading around $8.00 with an all-time low of $6.75.
Natgas is back at the same price and two of the top canadian producers trade 7-8 X above.
Keep some powder dry...
With all due respect houbahop, comparing Match 2020 to today is absurd. For one, the landscape was completely different. COVID was unprecedented. Nobody knew what implications it would have and the market behaved accordingly. Effectively every stock was discounted, especially those heavily indebted, for good reason. Second, oil was trading at less than half of today's price, which generally makes up for 30-40% of Peyto's revenue (inclusive of other NGLs), despite being a much smaller percentage of production. Oil even traded negative for a day, illustrating how dire sentiment was. Third, the current hedge book is nothing likely it was in 2020. Fixed price hedges are roughly double what they were, and account for a larger percentage of production, and the basis deals on variable production are cheaper as well. They're also more diversified, which should help some. Lastly, along the same lines pertaining to hedging (and perhaps ultimately SPOT pricing), the forward curve is much more constructive than it was in 2020 for natural gas, for both AECO and HH. Peyto can still hedge 2026/2027 pricing in the $4/mcf range. A large percentage of production for 2024/2025 is hedged at that pricing, so there's not nearly as much relevance to SPOT for Peyto. I reckon Peyto will intimate that they will downsize their 2024 CAPEX budget iwhen they release their reserves report later this week, which could almost entirely take SPOT pricing out of the picture. Keep in mind as well that royalty rates are determined on AECO pricing, so given Peyto's hedging, while lower SPOT prices are a headwind on the revenue side, they're a tailwind on the cost side, and given the percentage of production that's hedged for this year and next, the loss of revenue should largely be absorbed by the savings in royalty payments.
Anyway, all that said, it's probably prudent to keep some powder dry, as you suggest. Let's just not conflate 2020 with 2024 and catastrophize Peyto. However dirty or cold the bath water, the baby is fine.