Was hoping for smaller hedge positionGood results considering that the company was in conservation mode with reduced Capex.
BTE has been paying down some debt and has no debt that is due in the near term. With increased free cash flow at the current prices, they will able to reduce it at a faster pace and bring down the debt to cash flow ratio.
Unfortunately, they have 48 % production hedged at much lower prices. I was hoping they had less than 30 % production hedged for 2021 or hedged or at a higher price. That would have generated a much bigger free cashflow. Seems that they were playing safe. This is one item in the financials that I don't. The free cash flow of $250m for 2021 is not bad but with lower hedges that amount would have been much bigger.
The breakup value for this stock much higher than its current market cap. Just the net asset value at year-end 2020, discounted at 10%, is estimated to be $2.78 per share.
Because of the injection of trillion of US dollars in stimulus, the US $ is being devalued and we may be at the beginning of the commodity supercycle. The oil has been running up even with all the shutdowns and airplanes grounded all over the world. OPEC plus has cut down 7 M barrels and the excess oil in the market is evaporating fast. I hope OPEC takes it easy in their next meeting in March and does not flood the markets again.
If the oil price remains above $60 for a while and into the coming years then BTE will become a real cash cow once all its current hedges expire. With economies opening up and airlines starting to fly regularly the above $60 will be sustainable.
A lot of analysts are not convinced that the current $60 plus WTI is sustainable in the current environment with the lockdowns. That is why a large number of institutions are on the sidelines and not jumping into oil stocks.