RE:RE:RE:RE:Condensate was $82.28 todayskiptoggle wrote: Tuco, would you say that you'd love to see impairment charges resulting form $120 condensate if PIPE hedged 90% of production in 2020? I don' think so. Also I don't think that impairment charges in general are a good thing. Can you explain why this would be good for shareholders and to the valuation of the company?
I support the hedging program because it provides stability and that is what PIPE needs in 2020. The 46% of 2020 is a fair balance between stability and seeing the benefit of an upside. In terms of revenue lets not forget that ~50% of production is NGL. So we are looking at an earnings boost on 1/2 of 54% of production based on condensate price. Also base model prices are for $55 US WTI which is closer to $73 CDN. So yes, we are going to see a benefit from rising condensate, just temper our expectations with the fact that not all production will benefit from the increase. Conversely we are somewhat sheltered from any downturns.
Tuco110 wrote: Ruud, you keep refering back to the hedging program as a drag on revenue growth. Remember that the hedging is not at base model prices of $70 but closer to $78. You seem to be forgeting that even at hedged prices the company is making more than forecast in their production models. I agree that if condensate prices continue to raise it will result in commodity impairment charges on the financials but those are non cash accounting adjustments that don't affect cashflow. I personally would love to see impaiment charges that account for $120 condensate.
Wow, alot to unpack here. To keep it simple: I'm not an accountant so I may be mistaken but you don't actually pay out any money from a accounting impairment, it's like depreciation. I've made it clear before that I understand that PIPE wants hedge 50% of their production, so no, I wouldn't be in favour of 90% hedging at these levels. I just threw the $120 number out there as a figure I never expect to reach but I would still be happy with the hedging program if it got that high because it would mean we are getting about $60 per barrel above plan(not above cost) on half of our production while still being protected if the OPEC gang blew apart.