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ARC Resources Ltd T.ARX

Alternate Symbol(s):  AETUF

ARC Resources Ltd. is a Canadian energy company. It is focused on the exploration, development, and production of unconventional natural gas, condensate, natural gas liquids (NGLs), and crude oil in western Canada. Its operations are focused in the Montney region in Alberta and northeast British Columbia. Its operations in Alberta are located near Grande Prairie and the region includes Kakwa and Ante Creek. Kakwa is a condensate-rich and high-deliverability natural gas play with top-tier development opportunities. Its operations in northeast British Columbia are located near Dawson Creek and the region includes Greater Dawson, Sunrise, Attachie, and Septimus and Sundown. The Greater Dawson operating area includes Dawson Phases I, II, III and IV and Parkland. The Attachie is a condensate-rich, natural gas play primed for large-scale development. Sunrise is a dry natural gas play with a low-cost structure, well deliverability and direct connectivity to liquefied natural gas Canada.


TSX:ARX - Post by User

Post by MyHoneyPoton Jan 21, 2022 1:05pm
176 Views
Post# 34343428

Pennies in the Piggy bank on Your Dresser

Pennies in the Piggy bank on Your DresserARC raised  450 million dollars at 2.354% interest March 10, 2021 2.354 Interest Money

If you are running a public company, and you cost of capital is in the 2% range and you can't make money with that capital you should find another line of work. Nuvista in july last year did a private placement at 7.875%. So the cost of capital for ARX is pretty well 25% that of nuvista. Nuvista is not paying back this 7.875% debt any time soon, they are developing pipestone where the returns are very much higher. 

People that owned ARC in 2019 received 60 cents a share in dividends and ARC pretty well had have the cashflow per share that it does today, so investors that purchased ARX as a source of income have been throw under the bus by current management.

Management is Desperate

They don't understand that the investment community sees their FCF  and CF and values the stock and give them lofty price targets. However their plan to spend so much of the capital internally is repulsive on pet projects goes against the premise of returning value "Cash Dividends", to shareholders. 

Eliminating Shareholder Base

The legacy ARC shareholders may not want to be part of managment grandious plans, and schemes to spend all the FCF that ARC generates on self serving interests. Reducing payable dividends by reducing the number of shares, and all their full cycle capital plan. My guess in the original ARX shareholders were here for dividends. 

ARX by comparision to other companies has a highly unleveraged balace sheet or else they would not get capital lent to them at 2%. 

Derisking Production

ARX messed up derisking produciton and put three years of hedges in at the low point of the commodity cycle, if the risk management program was working correctly no more than 1/4-1/3 of their hedges would of been made at such a low price. I give them a F on the risk management front, and that low grade echo's throwughout the entire industry with the largest risk management costs of any company in Canada. 

ARC Dividend

Arc's dividend is 66% of what is was in 2019, and they have more than twice the FCF per share. Management is not respecting their dividend seeking shareholders, they are pusuing their own agenda's.

Paying off 2% debt is like having a piggy bank sitting on your dresser with all your investment, and you want to mom to top it up 2 cents on the dollar on a yearly basis. You should dig a hole and put that money in the ground. That is what they are doing with shareholder money paying off 2% debt. 

The could be adding meaningful, high return liquids production at Kakwa that is 1/2 cycle and low cost, providing much better then 2% returns. 

IMHO

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