Rookie Field Operations now a Rookie CFOIt has been quite a horror story to get Kakwa working, it is not easy to produce the most liquids rich, prolific, high netback play in the entire Montney. There is non other.
I don't know whats worse to loose million of dollars by inefficiet junior field operators, or with the stroke of a pen have the rookie CFO put in place the worst hedging strategy in the entire industry, the ultimately will cost 3 billion dollars. (It like making a widget that your boss sells at half price)
NuVista, and Paramount have had 10X stock appreciation this year, and both stocks have play areas that are and extentions to the north of Kakwa. POU average well in 2021 has a projected 5.7X netback, and many of the 2021 wells that have already paid back, some 2 times (slide 9, POU Corp Presentation) Paramount Karr property has an implied capital efficiency of 5,500 boe/day.
So with 12-16 wells per year POU can keep 43,000 boe a day flat at Karr for 20 years, and karr being to the north is a little more sour, while ARC has Kakwa, the sweet spot of the play.
So 67 wells will be drilled at Kakwa, and it will keep 180,000 boe flat, sound like it been confirmed by POU, that is about the right number of wells to maintain production.
The fact of the matter is that every other boe outside of Kakwa, has a return that is 1/2-1/3 of what Kakwa produces, and with neighboring companies share prices rocketing, while ARC's is in the dumper. The rookie management is just squandering the free cash flow platter that was handed to them on Attachie, and other dry gas projects with a fraction of the returns.
This is why Kakwa being 70 % of ARC CF, positions ARC to have more CF than TOU because it has all these liquids (Kakwa 85% of ARC's condensate, 80% of ARC's NGL's).
ARC really should be trading at a premium, but it is the rookie manage that destroyed so much value with their hedges, and a CEO who is clueless where to invest for the best return. That is the problem with ARC resources, you can buy back shares until the cows come home.
Once Management starts meaninfully communicating the virtues of Kakwa, and investing in the best play in the entire Montney, ARC stock will remain a discounted stock.
As Kakwa goes so will ARC's share price.
IMHO