the NCIB conundrum and making this pig a cash cow
The Normal Cours Issuer Bid (NCIB, share buyback) is the flavor of the day but will it benefit CPG shareholders? CPG can buyback shares and add reserves/share for about 1/3 of the cost of drilling. So, buyback 10% of the shares at a cost of almost $500M and increase NAV/share from $18 to roughly $19 (= so what?). However, divert 1/3 of the capex to a share buyback and production falls by 10% as does corporate cash flow. Of course, there is the logical argument that by reducing capex by 1/3, CPG effectively is forced to high grade the drilling and F&D costs 'should' decline, but will it be material?
Will the market reward or penalize CPG even more? My guess is the latter.
The only hope for CPG is to develop a new and major core area with low F&D costs, high netback and thus a high recycle ratio. E. Duvernay may do that but I doubt it. Of course, $100 WTI wouldn't hurt either.
The more I look at this pig (that I still own), the more I see only one strategy. Turn this pig into a cash cow. Cut capex by 50%, do a NCIB, sell all marginal assets, increase the dividend and fire the BoD and the executive. Can the new CEO accomplish such a task?
Or, sell to CNQ in a 5:1 deal