RE:70% FCF @ $70 WTI...Unfortunately, with the hedging program currently in place, these guys are realizing nowhere near a 70% FCF yield. The 70% FCF is more hypothetical then based on reality at this point, since those numbers assume that company is "naked"/basically entirely unhedged.
For the rest of 2020, anyways, almost 50% of production is in the mid 50s...
This obviously dampens FCF quite substantially.
As per guidance provided on the Q1 MD&A.
At 60WTI, they were basically expecting $55 mill in FCF for 2021 (pg.4 , Q1 MD&A)
Unhedged (using the old breakeven of 45 WTI, with each additional $5 WTI increment generating 70m cash flow)...FCF should be around $110M
60-45=15
15/3=3
3x70=210
210-100=110m
Obviously, there is an opportunity cost to the loss in cash flow due to the current hedges in place. The extra cash flow, were it able to be realized would go a long way in regard to the company's deleveraging efforts.
Is this a problem if we are in a multi-year bull market for oil? Obviously not.
That being said, theres plenty of people out there that don't believe that don't believe in the commodity supercycle narrative, and see the price spikes as a temporary blip due to a temporary supply chain crunch from Covid.
Regardless, I like the potential of ATH, and I like the fact that it remains relatively cheap, so i'm still holding some.
Todamoon18 wrote: A bit mind boggling to think of the FCF yield here @ $80-$100 WTI.
As cheap as this traded during peak Covid..well I would suggest its trading even cheaper now if WTI stays north of $70.