RE:$3.2 billion net debt If you believe oil will be at $50 for two years then you should not be wasting your time or our time on an energy board. The oil industry at $50 does not survive at that price nor do many OPEC countries have the abilitity to last that long.
We are alreadt witnessing BK and the N.A. production decline has already started with demand accelerationg as we speak combined with the fact we are in a seasonally weak period.
I have used WTO $45 for Q1 ending at $55 for Q4 which I think is consevative for an average price of $51.25 and an avg Cdn $.7975.
The hedges I have aroung 70,000 to 75,000 bbls thruoghout the year which I am not sure about but they say they are hedges over 50% for this year.
I have adjusted my model a bit and Cash flow is about $1.9 bln drip dividends $374 mln and $873 mln cash dividends. I assume $1.2 bln cap exp of which $180 mln is plant and rest drilling.
Free cash flow is negative $183 mln assuming my model is reasonable for 2015 and production would decline perhaps 8%. But I can bet you they make an aquisition sometime this year, which will add to production, and we won't see that decline as a result. No doubt it will add to cash flow and be anti dilutive after the share exchange or share issue. Another important reason the dividend which helps support their currency won't be cut at least as far as I can see for now.
Debt at $3.2 bln would go to $3.4 bln and debt/cf 1.8 times and Debt/Ebitda 1.7 times. The drip helps them in this situation as some $374 mln is not paid out in cash.
The hedge program and low debt will help them this year. If prices rally watch the forward curve for WTI going out to 2016 such that should it get over $65 I suspect they will add to headges in some fashion dor that period too.
Take my numbers with a grain of salt as I have been wrong many times before and am only providing some of my opinions and estimates. Maybe my model needs some adjustments in some areas still ...I don't know but will see how it ties into the first quater when it gets reported. (I have $466 mln net corporate cash flow as an estimate)
I just think to says $50 for two years is a bit harsh..not impossible but if that is what you think then I do not know of any energy investment worthy for your porfolio and you should be on the pharmacutical board.
splurge