RE:RE:RE:FCF i like pioneer's approachMHP, I disagree. A conservative approach to its balance sheet is precisely what led to ARX being awarded VII in the first place and hence being declared investment grade. In other words, there's no way this would have happened had ARX not demonstrated rigor in paying down its own debt, which enabled it to take advantage of this opporuntiy by being in very solid financial shape.
I see a lot of merit to getting the ~$2.4B down to a more manageable level before spinning off cash or buying back shares. JMHO and GLTA shareholders :)
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I disagree that paying down debt, that is triple BBB investment grade and cost you 2.34 percent over 5 years is a good use of cash. In fact i see not value in paying off debt at these levels.
Share Buyback
The outstanding share have a greater impact at consuming cash than any cureent debt does. Also they want to have a meaningful dividend, 3% is not meaningful, in risk adjusted world.
The company could easily afford a 1 dollar a share dividend, which would send the share price into the mid teens, and give them more levers and more fiscal flexibility than paying off debt that they can raise at 2.34 percent.
Share Appreciation
They should come up with a concrete policy like pioneer did. Arc sold say, above maintenance capex a quater of FCF will go to debt, a quater of FCF will go to new projects and half of the FCF will go to dividends and special dividends.
Get the share holders out of the Back of the Bus
Its time the share holders are no longer put to the Back of the Bus, reducing Corporate costs by 45 million in this transactions show people what it looks like when you have PIGS at the trough. That was half of what ARC paid out in dividend to the share holders in 2020.
When the shares appreciate and are trading in the 15 dollar ranges and the market cap of the company is in the 10 billion dollars range, 2 billion in debt at 2-3 percent that is chicken feed. There is nothing wrong with ARC balance sheet and maybe they should add more debt at 2.34 percent interest.
They need to pay the shareholders while they can in a generous manner, and worry about paying theyselves a lot less. Growing production should not be a priority. If the shares were trading at 15 dollars which they would with a 1 dollar dividend, they could sell 100 million more a pay off the debt entirely and still keep paying the dividend.
Paying off 3 percent debt is stupid, the company should have better things to do with the money the least of is to increase the dividends and pay the share holders.
IMHO[/quote]