RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:No SupportRexmember made a quicker, better, more expansive and detailed answer than I could have managed.
If anyone interested in PNE has not done so, I second his suggestion that the podcast that Mr Hodge and crew did the day after then financials were released is well worth listening too, as it addresses your points, and more. Also worth mining are the older interviews available on the corporate website, where the the history is recounted of how the model that made Bonterra the cash cow that it was (and will be again) was spun off to create a NG focused company, and how it has grown from nothing to what it is today, and the promise Pine Cliff holds to be another Bonterra, and perhaps more.
We know that the financial climate has changed and bank lending become more difficult and costly. ESG has made borrowing painful, when it is possible at all. So your question about who PNE borrowed from is pertinent. Not that I expect you will get an answer, but you have made an intelligent guess.
As expensive as the term loan is, the question for management is will it make money? Clearly they think it will, and I am comfortable with their judgement. Others, like you or our jumpy friend Mr T, clearly are not and see better options.
The past decade has been a struggle, particularly for Bonterra which was caught out in the oil price crash. Cost control, debt reduction and a constant eye on worst case scenarios have become the lens through which all gets discussed. Politics and ESG cr*p I need not expand on. It seems to me that all this is now (or soon will be) behind us. My view is that we need to stop looking back and start to lean forward, and both the acquisitions you ask about do that.
You are a trader, and apparently enjoy that and are good at it. I am more an acquirer; content with longer terms without the stress or expense of chuning my investments.
Mr Hodge argues that the Certus deal was one they had looked at many times in the past but this time the numbers worked; and in the short term it is oil income they want. They could drill it out now, but don’t have to and can wait until they are more confident that they can do it entirely from cash flow.
They did take on debt (having had cash in the bank for much of the purchase) but not a lot and the dividend cut was to ensure that they were living within their cash flow. Their projections are very conservative and I expect that they will revise these upward. The plan is for oil to will pay the bills; NG will be the payoff eventually. Rexmember lays this out clearly.
Bonterra’s deal is another big step towards its revival, if it increases volumes and cash flow as they predict. How they are going to allocate capital to achieve this is still under wraps, and in competition with the potential of its Montney play, and just keeping up the Cardium production. And, I continually advance to them, re-starting a dividend; even if only as a marker for the future.
You have made the point (on other boards) that capital efficiency is key and that the Northern plays appear to give better, faster returns sooner. The devil is in the detail, and I suspect that there are good things that Bonterra could do in the Cardium too. In contrast to Pine Cliff, Bonterra is very tight-lipped. All the companies are as they look for deals and wrestle with capital allocation.
But you are good at numbers, and like Pine Cliff, Bonterra again seems to have room to maneuver, and the deal is evidence that it is doing so. Will the share price go up and down; of course, and I wish those who enjoy playing that market good hunting.
But it is not the only approach.