145,000 boe of Production Destroyed, a Halloween ThrillerImagine having a Oil Companies producing 145,683 boe (ARC current hedges)
Selling you Oil at $44.16 WTI 43250 boe (net royalities)
Selling Gas at 2 dollars AECO 33333 boe (net royalities)
Selling Gas at $2.45 Nymex Prices 69100 boe (net royalities)
Cashflow per BOE = $20.36 Canadian (royalities accounted for)
All cost (tranportaion, Op, Transaction, etc) = 12 dollars a boe (slide 13 sept presentation)
So for 145,683 boe ARX will have netbacks in the 8 dollar range. (FCF)
ARC has basicly made 145,683 of its production generation 8 dollars a boe. Do you really think they can even sustain that production for 8 dollars a boe?
1 billion (2021 budget) to sustain 340,000 boe/day of production, so to sustain 145,000 they would have to spend 420 million dollars.
With 8 dollars netback that is 52,500,000 boe of production you need to produce.
52,500,000 / 145000 boe/day = 362 days of production with 8 dollar netbacks, you need to pay 420,million dollars in capital costs to sustain the production.
When taking into account the cost to maintain the product flat, the company will make Zero off all that hedged production
So what is their strategy, to hedge production at a price where they can simply pay to maintain it and not pay shareholder a dime?
ARC would be better off production 195,000 boe a day unhedged.
145,000 boe a day of production has been made worthless by management.
IMHO
IL = $44.16 boe U.S., $56.61 canadian =63%
AECO =$2.00 boe Canadian =55%
Nymex =$2.45 U.S. or $3.14 boe Canadian =61% (transportation not factored)