RE:Thank You MyHoneyPotYes, the dysmal VII management certainly left the Arc Mgmt in a tough spot with the terrible hedges the Seven Generations Team left them.
Well, good riddance to VII, ARX mgmt is cleaning up their mess and now left with great assets, and hedges rolling off.
Bravo Arc Mgmt, much better job than VII mgmt, hence why Marty & team were all packaged out and layed off.
MyHoneyPot wrote: I have had a lot of communication with ARC management regarding their Hedging, they are going to change their strategy. Even Trapped has jumped on the band wagon and is talking about the hedges rolling off.
Confrence Call
listening to the conference call it appears that ARC has decided that it will review its risk mitigation strategy (Hedging) and go away from the current dismal strategy of destroying shareholder value with a very poorly executed hedging strategy. Based on what I can see is that they have not layered on any additional money losing hedges to their current hedge book, so the shareholders are safe for the time being.
Example 2021
Swap 10479 boe $46.90 U.S
.
However, as an example of one bad hedge, in 2022 they hedged 10479 boe of oil at $46.90 that hedge by itself in an 80-dollar U.S. oil environment cost about 35 dollars a boe with royalties, and 134 million dollars U.S. in lost CF or about 165 million dollars Canadian. This on bad hedge cost the shareholders a full year of divided returns at 6.6 cents a quarter, and more than 2 quarters of dividends at 10 cents a share.
The company does not realize that they are no long a small dry gas producer, and when you get to this kind of scale, shareholder invest in energy stocks so they can participate in the upside of a commodity cycle. When there is no upside because of risk management why invest in the stock.
Ceiling 23767 $60.52
The ceiling they put on 23767 boe of oil at $60.52 is $7.21 U.S. higher than you are getting in 2021 and will add about 212 thousand dollars a day Canadian to the cash flow, and 77 million dollars to the yearly cash flow.
Hopefully the company has learnt its lesson, however shareholders will still be feeling the pain in 2023, and it 2024 will be the remnants of this flaw management strategy.
IMHO