RE:RE:RE:Small Cap Hedging Thats why i bought in heavy... i was thinking they are doing an assest sale. My biggest fear or stock dilution (upto an extent). So this deal is not that bad according to me...In this price environment, ath is cheap definitely.
Chris007 wrote: Overall, ATH is a decent value stock pick, even among energy stocks (though i guess one can easily classify the whole sector as "value"). The stock price is still ridiculously beaten up, even with the bounce from the bottom, and has room to run in this price environment.
Bottom line...in a robust price environment like this, its pretty difficult for any management team in the sector (even these guys) to do too badly. A rising tide lifts all boats.
Chris007 wrote: The 2022 strip is averaging around $74 WTI last time I checked...obviously higher prices in the near term, lower further out (as per the typical backwardation structure in a "tighter" market).
https://www.cmegroup.com/markets/energy/crude-oil/light-sweet-crude.quotes.html As per slide 5 of their presentation (in regard to the company's hedging strategy):
RISK MANAGEMENT
o Robust hedge policy targeting up to 50% of production
o Secure cash flow to protect sustaining capital program
Obviously at current prices, capex and sustaining capital are more than adequately covered. Even if the company hedges the full 50% of production in the ($70-80 range)...that is still plenty of FCF and would allow half of production to be exposed to spot prices (for better or worse).
The problem with the hedging in 2021, was that at the time they were hedging, the 2021 strip was substantially lower (mid/high 40s to mid 50s when they hedged a bit more later on)
NWOntario wrote: Can anyone provide insight into the realistic hedging options that a company like Athabasca has available. Do companies offering the hedges use a monthly average etc, when WTI is at the levels currently being experienced where there is momentum etc, are $70 hedges actually available? I imagine the short term vs long term hedges are quite different as longer term security means paying the price of lower hedges. But how low? Eric Nuttal has been very clear in his posts that $70 is probably the realistic floor and $80 is to early for longer term sustainable pricing. Without discussing the momentum drivers of countries/industry switching from gas to
oil, hurricane season, a cold winter etc as speculation drives the pricing up or down. What would a small company like Ath actually have at their access for
6-12 month hedges. I feel like we are continually disappointed at earnings due to hedging and the actual lack of FCF being generated due to our expectations with Eric's illustration charts. If we come down to earth about the Q3 2021, what should we be expecting?