RE:Peyto's net debtYash, even though debt is relatively cheap - to take the words of DG - it can snap back at you.
If debt was to remain at $1.2B over the next few years, it could flirt with some of the debt covenant. Everything is fine right now but what if NatGas prices were to stay around $1.50/Gj for a longer than expected time?
In other words, Peyto has to reduce its debt (to under $1.1B?) to follow the expected decline in Cash Flow. In my scenario, Cash Flow from operations could decline from $555m in 2017 to $320m in 2020 with current expected conditions on NatGas prices and Peyto's expected production profile.
The market correctly anticipated this by sending the shares from $40 to $10.
The priority is now to reduce debt while cash flow is still good, otherwise, shareholders might
end up being bagholders.
Current market cap. of $1.8B makes the share trading at less than 6X my expected 2020 EBITDA under a rather pessimistic scenario, placing the $11 shares at a nice level to start building a long term position. But we all know stock market pricing has a tendency to overshoot reality.