Peyto Exploration & Development Corp T.PEY

Alternate Symbol(s): PEYUF

Energy Oil & Gas E&P

Peyto Exploration & Development Corp. is a Canadian energy company involved in the development and production of natural gas, oil and natural gas liquids in Alberta's deep basin. The Alberta Deep Basin is a geologic setting situated on the northeastern front of the Rocky Mountain belt in the deepest part of the Alberta sedimentary basin. It acquired Repsol Canada Energy Partnership (Repsol Assets), which included around 23,000 barrels of oil equivalent per day of low-decline production and 455,000 net acres of mineral land. The acquisition includes five operated natural gas plants with combined net natural gas processing capacity of around 400 million cubic feet per day, 2,200 kilometers (km) of operated pipelines, and a 12 MW cogeneration power plant. These assets include Edson Gas Plant and the Central Foothills Gas Gathering System. The Company has a total proved plus probable reserves of approximately 7.8 trillion cubic feet equivalent (1.3 billion barrels of oil equivalent).

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Peyto Exploration & Development Corp

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Comment by ceremonyon May 27, 2018 4:57pm

63 Views

Post# 28086415

RE:RE:RE:RE:The $120m question: Pay down debt or buy back shares?

yes I am well aware of that arbitrage. and in a PERFECT world peyto would do that. but it is FAR from perfect for peyto right now, wouldn't you agree?

if I was peyto CEO and I wished to put the shareholders in grave danger of losing their entire investment in the years ahead I would do EXACTLY as you describe.

And if I was a homeowner wanting to roll the dice a bit, I would take out a second mortgage and go buy STOCKS with it.

WHAT COULD GO WRONG?

ask yourself why Peyto has not back a single share of stock yet. what might the CEO be thinking?

EquityInvest wrote: Ceremony: Yasch22 was looking for a "case" where buy-backs trump paying down debt. Cutting down dividends is always prudent but this almost, always negatively impact shareholders value. In this case, as Peyto currently pays 6.92% dividends vs 4.39% interest on loan, reducing the number of shares outstanding through share buy-back is a better strategy.

ceremony wrote: a prudent steward of capital would CUT THE DIVIDEND in that case.

EquityInvest wrote: Yasch22 - As you are looking to justify share-buyback as a superor strategy over paying-down debt, in terms of improving shareholders value, one case that can be made is that it at current sp of $10.41 Peyto is paying out dividend at a rate of 6.92% (.06/m * 12 months / $10.41) which is much higher than the available 4.39% re-financing rate. In Peyto's case, it is more of a drain on its cash flow to continue to pay 6.9% dividends on the current outstanding shares rather than continue paying 4.39% interest on short-term loan. It will benefit the company more to buy back shares thereby reducing the number of shares that the company will be paying dividends on. However, share-buy backs do not always work out as "bad-timing" can ruin the strategy (i.e., greater market sentiment continue to deteriorate).

Just my opinion.

Yasch22 wrote: Ceremony -- or anyone -- I'd be interested in seeing a case made for buying back shares as a superior strategy to paying down debt.
Assumption: You know Peyto will generate $120m in net cash in 2018. Which is the better course to follow: pay debt or cancel shares?<br />