PNE & Natural Gas Fact vs Troll of Fear & NegativityI have to respond to to the constant negativity and bad mouthing of PNE & its mgmt team. Lets put it to rest and hopefully the T troll will find some other bridge to hide under.
There isnt a single Canadian Nat Gas producer that hasn't suffered the brualtal period from 2014-2020.
If you take away all the noise and focus on the facts as they are which is about:
A) Supply & Demand
B) GM or Net Backs (Gas Price/mcf - COGS/mcf) x Volume
1) US Dry Gas Supply peaked in Dec 2019 at 97 bcf/d
2) CA Dry Gas Supply peaked in Dec 2018 at 18 bcf/d
3) Drilling dropped off a cliff in 2020. US drilling averaged over 1000 wells/mo in 2019. Dropped to 200 well/mo during Covid Pandemic onset. Feb 2021 Drilling was 380 wells and Feb 2021 Completions were 482 wells.
4) Ducs are dropping but production is dropping faster. Shale Fracked wells deplete over 50% in first year of production. Depleted wells come with baggage of ARO Costs.
5) US production bottomed in Sep 2020 at 88.9 bcf/d during Q4-20. Production is steady at 90.8 bcf/d. Companies are showing restraint as banks demand their debt repayments and long suffering sharholders demand returns on capital.
6) Canada's US Nat Gas exports are up 20% YoY.
7) US LNG exports are now 15% of production and Mexico pipeline exports are growing 10% annually and are 6% of production
8) Storage levels are lower in both Canada & US than the prior year and are below the average of the last 5 years.
Now on to Pine Cliff...
1) Pine Cliffs operations are slow decline gas wells. PNE mgmt bought up all the boring gas wells nobody wanted. They see value in long life production (slow depletion rates)
2) They wrote down assets what the price declined as is required in Accounting Cealing tests. That doesn't mean the gas is gone. It just means its uneconomic at prices used in the reserve calculations. Once written down they can't be written back up when prices improve (Conservatism principal)
2) PNE's wells decline at 7%-10%
3) PNE's has pricing flexability as they own some pipelines with crossborder capabilities.
4) PNE's debt is held shareholders and directors (shows commitment) who control 38% of the stock. Shareholder loans to the company should be considered a good thing as they are friendly compared to the bank.
5) PNE is generating cash flow and free cash flow. Free cash flow is after CAPEX costs to maintain production.
6) Prices are set to improve as production in US & Canada declines and demand continues to grow.
7) PNE will grow its cash flow and will pay off its debts in the next 3 years (1 year before the majority of the debt is due)
Ignore the fear mongerring of Mr T. Ignore the past writeoffs which all companies were legally bound to do.
We are investing for the future not the past. Focus on cash generation... and cash generation multiples. The stock will continue to rise if demand & supply remain tight. Its only a mater of time until the stock rebounds to 75 cents and higher. PNE is not TOU; but both are good companies. TOU is a big speeding locamotive and they are heads and shoulders above their peers. PNE is small but strategic... it will do well. Once the cash frees up thay will be able to spend and grow low risk production or choose to dividend out money to the shareholders. 2021 will be good to PNE.