RE:Takeaway from the June presentation Which is why I think all of this points to some mergers happening in the future in canada.
If the cost of capital continues to remain high, if financing market is tight, and if banks keep forcing hedging on companies with weaker balancesheets...indirectly the lenders behaviour could force companies like Baytex into mergers even if commodity prices are stronger.
USA banks have shown us they want larger companies because it equals stability.
It is possible that higher reclamation liability companies with older legacy fields like Baytex, Obsidian, Surge, etc look at different combinations of mergers in order to be bigger and have more financial flexibilitiy.
Basically it is possible only Montny play companies get access to capital. And if the case then rest need to be larger.
People need to stop thinking like the old days are coming back. No junior explorers out there.
I don't get why Obsidian and Baytex dont merge. They both face alot of the similar issues.
Reclaimation in Peace River is not likely going to be fun...I mean it is far away from services some of those wells...and wells in that area drilled before 2005 -2004 are starting to die and shut in..some are basically dead.
Obsidian and Baytex have close fields. I am sure they could get cost savings just on future reclaimation. In the future I think companies will have to start looking at reclimatin internally and buy the equipment.
Shareholders in obe or bte have a way better chance of ever getting a return in a divy if the companyies merged.
Like what is the current realistic path for BTE, OBE, SGY, etc...hedging is eating up to much of the gains to really put dents in debt fast enough. Remember wells are slowly producing less as time passes.
Best chance of lowering interest expenses is betting bigger.
Eric Nuttall should really start describing the exit stratgey better. Dividends are so unrealistic unless these companies get bigger. Run the numbers with realistic assumptions.
USA companies only have interest in montny and so little buyers for companies with legacy fields.
who...
Unlucky13 wrote: First of all the hedging.
The hedging program for 2022 is better but still incredibly conservative and missed the mark. They hedged 38 percent for 2022 and half of that at $53. That missed the mark big time. They are looking the forecast for oil at $55. A huge miss given current oil prices. The three way hedge tops out at $66, so if oil goes to $80 they get punished. Terrible overreaction once again and management can't figure it out. Even a monkey could throw a dart at the Board better. Even my harshest critics have to agree with me on this one. They are limiting upside if oil really spikes.
The five year plan will generate $1 billion at $55 USD. Net neutral at $35 a barrel. The hedges limit the upside dramatically. If all things go well they will make as follows.
At $60 USD wti they make $1.5 billion up to the end of 2025.
At $65 USD for wti they would make $2 billion up to the end of 2025. Per year that's roughly $200 million a year, at $55 over the next 5 years, $300 million, at $60 and $400 million at $65. Funds form operation doubles at $65 compared to $55. The five year plan to repay debt at $55 a barrel is conservative but oil can easily swing lower here.
One announcement by OPEC can derail this and it's a wise assumption to think oil will be $50 plus for 5 straight years.
Key takeaway is that BTE said this is illustration and forecast and actual results may vary. If $65 wti happens that's 5 years to wipe out the debt and at $55 they only wipe out half over 5 years.
Seeing the takeaway? It's all based on the oil price. BTE is exclusively a bet on the oil price and oil has to stay high, above $60 to start putting a dent in the debt. I am not sure oil can stay this high for that long, as it really is built on a house of cards.
It would have been more reassuring to get the full price unhedged as oil is above $65 now.