RE:RE:RE:Nuttall DetailsThe 2 years part is just a rhetorical device...it asssumes thats the company's share price will never move as it deleverages/buys back stock....obviously there is also the fact that there are actual limits to the amount of stock a company can buy back via NCIB...so yeah, hes trying to says the stock is VERY cheap based on cash flow generation ability of the assets. However, does it really apply to real-life, not really?
1. you can't just buy back all of your stock via NCIB in 2 years
2. the stock price will move (upwards) as the company delevages and buys back stock
3. And the most obvious...oil prices are notoriously volatile and diffult to predict. which leads to the hedging dilemma (to hedge or not to hedge, and at what price?)
Unhedged, the company is a cash flow monster.
Operating breakeven is approx 45 WTI...Asssuming a 10WCS differential, each 5 WTI increment generates approximately 70m in cash flow.
70-45=25
25/5=5
5x70=350m in annual cash flow (assuming UNHEDGED and $10 WTI-WCS differential)
Capex is also in the ball park of $100m this year, so FCF of $250m @ 70WTI ....once again this is assuming the company is "naked".
In reality, with hedges in place, a whole lot of the FCF generating abilities of the company is being restrained (for atleast this year).
Case and point. Look at the companys guidance this year MD&A pg. 4
If WTI averages this year at $60, the company only expects to generate $55m in FCF
If unhedged, it would be close to $110m
60-45=15
15/5=3
3x70=210
210- 100 in capex = $110
bosstrade wrote: Quickly before golf. $70 wti-$43 cost = $27 x 34,000 bpd x 365 =$335 mill x 2 yrs = approx $700 mill therefore $350 mill to debt and $350 mill to buy shares (500 mill shares x .70)
All ballpark because I'm just doing while eating lunch before golf.
Company ridiculously under valued.