ARC should trade 60% higherHere are some thoughts, in a comparison with TOU which is their most like company.
Arc produced 335,701 boe a day, while TOU sold 414.387 boe equivalent of energy a day.
Arc value of their boe is 34.90 while TOU value is 24.67
This means that an ARC boe is worth 41.46% more than an ARC boe.
This means that CF wise. Arc = 34.90 * 335,701 *90 = $1,054,436,841 More cash flow for ARC
TOU= 24.67 * 414387 *90 = $920,063,456
This means that ARC Produced 15% more Cash Flow than Tourmaline. Operation Costs ARC = Op cost 4.53 Trans 4.49 Royalties 3.02 = 22.86 + Hedge Loss = 20.89 50.7% uplift
TOU = Op cost 3.70 Trans 3.99 Royalties 1.51 = 15.47 + Hedge Loss = 13.86
So every boe that ARC produces they get 50% more dollars than TOU This is essentially FFO, Funds From Operations without all the balance sheet stuff, and management compensations and other income sources.
(Hedge Losses Included) So essentially
ARC FFO = 22.86 * 335,701 boe * 90day = 690,671,237 33% more FFO than TOU
TOU FFO = 13.86 * 414387 boe * 90day = 516,906,343
Comments - Tou hedging loss was $1.60 a boe compare to Arc 1.97 a boe
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- Arc’s costs are higher but they are process 3X the liquids
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- TOU underspent this quarter in Capex while are has a average capex quarter they outspent TOU by 80 million in the quarter on Capex.
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- Tourmaline has a market cap of 11 Billion Arc market cap is 6.8 billion, tourmaline is trading at a 62% premium to ARC and I believe ARC out performed it this quarter.
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- Both have good balance sheet and TOU has off loaded debt in monetization of assets in Topaz and ARC still own all assets and have no royalty overrides. (Kakwa alone has 3 billion worth of infrastructure)
Conclusion
Arx had a great quater and should be trading 60% higher to have the same market evaluation at TOU, but ARC generates more cash flow, more FFO, and is worth a whole lot more money than TOU in my opinion. The are currently producing 33% more FFO than Tourmailine, they spent 80 million more capex this quater.
If the capex spend was the same ARC and TOU would generate very similar cash flow. TOU report the number a little different than ARC.
ARC should be a 17 dollar stock.
Up UP and Away
IMHO