RE:RE:RE:BNE - Today's downturn... I'm on the coaster ride"and if it happens to be the best use of excess cash at certain times"
Agree Snow, like now? Aha think about this -
It costs approx 2.1-2.2mm to D,C&T a well per their program. Which is exceptional, but even at BNE's efficiency, it still doesn't beat drilling for shares at current prices.
BNE's stated corporate decline rate is 21%. If they shut down their drill program for the next year, production would decline to approx 9,954 boe/d.
So for a 20% hit to production, and assuming a 45% netback margin, current prices, FFO declines from approx 105mm to 86mm. But then the company could take the 57mm in capex, and pour it into a buyback program which would amount to 39.5% of the outstanding stock of the company at present.
So a 20% hit to productio and FFO, for 40% of the stock. Seems like a solid return. Plus, they still have 29mm left (86-57) to buy another 20%....
So if they stopped their capital program for one year, and spent all the money on buybacks instead, they could take out almost 60% of the stock, for a 20% hit to production. LOL.
Of course this ignores the fact that the daily bid would be over 55,000 shares if you work the math back, and would send the price skyrocketing.... so great! why not try it for a qtr? I could use the price appreciation... then do a secondary after you catalyze a short squeeze... (as efficient has alluded to), and pay off the debt with part of it, and re-deploy a larger capital program next qtr to catch back up if the shares are still high. Bing bango.
Wishful thinking, and unlikely to happen, but i mean... why not.