RE:RE:RE:RE:RE:Gear and Hemisphere announced new issuer bids
I am fine with YGR being on the look out for give-away land as tuck-in. However, just keep in mind that they already own reserves on 2P basis with the highest life index of any Canadian light oil producer right now at 25.6 years. But, if they can find pennies selling for dollars on adjacent land with high oil content I will support it.
For the life of me, I cannot understand this so negative reaction to buying back shares at 75% of PDP NAV, 2.9 times EV/DACF, $22,000 per flowing, free cash flow yield of 28% with a solid balance sheet. By the way, YGR is already at the very bottom on per flowing metric but, also the cheapest light oil producer by far on per flowing at $23,500 per flowing if you include ALL decommissioning liabilities into EV... Take a look at the other players on that standpoint and you will be shocked at how cheap YGR is.
So I am thinking it must be an order of degree.
OOU812 provided a very sensible plan or to buyback around $2 million worth of shares per quarter. This won't jeopardize any of current plans, will still allow to take advantage of really cheap land and to get production to 14,000 boe/d short term. I also think that it is about the max that could be bought under a NCIB considering potential impact on price (there is a right price to do this) and 25% restriction on trading volume.
Regarding us knowing more than management about the business, I would agree that we don't. However, what do they really know and what is generally observed behaviour in the patch?
You said yourself Kavern that they drilled a bunch of wells in 2018 in different spots to try to understand better what were the best prospects going forward.
That tells me that they don't know exactly what is underground. Even with this newly acquired knowledge, they still drilled some wells this year that were less than stellar on production and natural gas content. So do we agree that acquiring more land has to be done at extremely low prices to account for such risk? Do we also agree that drilling more wells is a much more risky activity than buying back into your existing production or PDP NAV at a discount of 25%?
On behaviour in the patch, we see a general aversion to share buyback and obsession with production and drilling. WCP is a prime example with them spending an extra $150 million in H2 to trying to expand production by 7,000 boe/d. How stupid is that with shares trading at very low multiples? They are not big enough yet? How is that extra production going to create massive value for shareholders?
CJ is also being appreciated right now for finally buying back their shares. However, what have they done so far that has been reported? Spending $6.2 million to offset issuance of restricted shares impact over next 2 years... Do we need to give another $6.2 million to these guys with a G&A of $2.02/boe, a large number of VP's for a company that is essentially a milking operation with only 8 (7.5 net) wells to be drilled this year and startup of power and blending facilities built last year?
So yeah, I think it is simply fair for long term suffering shareholders to question decision making at these companies.
Finally on trading, we seem to have LuckyEleven believing in this efficient market theory or that everything is being priced into the shares at any given time. LOL! If that is the case, I am wondering what this guy is doing buying things as a trade in Canadian energy or a severe case of downmarket? Should have left a long time ago and join the high tech crowd. And like I said before he keeps on claiming success on everything but, it really felt like he lost a bundle on CPG on the ride from $6-7 to $4. Same thing for his partner Bago who claimed that BNP was a no miss trade any time below $1.25...
You are more honest in your trading but, you have to admit that what happened here is unexplainable and could not have been predicted. There is no rational explanation as to why the shares have collapsed by 60% in 4 months. I know that they missed slightly on expectations in Q1 and Q2 due to weather, investing in gas facilites and 3rd party outages but, the decline is too deep to be justified by that alone. Then we had trading under $2 which did hurt anyone on margin but, it can't be so widespread. We also had that investment firm that sold its stake.
So it seems to be a combination of factors that contributed to this massive drop and large underperformance vs other players that are in much worst shape. Fear has simply overtaken any logic hence why this is a unique opportunity to buy back.
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