Started a new position
This company's shares were never offering as much potential as some of the intermediates but, it has changed this week.
At $7.90, it is not crazy to assume 50% to 100% upside in a so so recovery or with WTI at $55 - 60. Even the dividend that was minuscule is now representing a yield of 3.2%.
And you gotta agree with Nuttal that in a recovery people will flock to the most liquid and largest players first and this one is as good as it gets.
Valuation at $36,000 per flowing looks higher than many who are now in the $20,000's and lower however, you have to compare apples with apples. This company has refining assets which hurts per flowing comparison. I figure that they could be worth anywhere from $2 to $6 billion and if you deduct that from net debt, per flowing would drop to $23,000 - $31,000 or pretty much as cheap as players with much lower reserve life, much higher decline rates, % of ARO's liability and debt ratios.
Where it really shines and what counts is on free cash flow basis. Using 2019 numbers, which wasn't a great year for energy, at current price you get a free cash flow yield of 28.8% and free cash flow/EV of 17.7%. The latter is really impressive and certainly in top 3 in Canada
I did not even know about insiders buying lately so thank to posters for pointing this out. Alex Pourbais has been exceptional at turning around this company and I agree with every decision that he has made which is unique in that Canadian oil patch. He has acted like a true partner.
Some now appear to blame him for this no hedging policy. Not me. When I look at financial statements of all these O&G companies I see nothing but, red ink from hedging year after year.
Hedging would only make sense if you were doing it at very high prices then stopping altogether. However, that is not what happens as board of directors pick a certain percentage or range of production that needs to be hedged. So they buy them quarter after quarter and year after year and pretty much like buying stock options you end up feeding the underwriter or missing out on your timing.
Their strategy of running a lean and mean machine, with very low costs, low decline rate/capex need, low dividend payout ratio and low debt is defensive in of itself. Plus they have refining assets which make a killing on crack spread in such environment. It is a much better and smarter way to outlast competition in a downturn than relying on some luck with financial instruments that will kill your results on the upswing.