RE:RE:RE:RE:RE:$7.5Very informative analysis, but I would think that whatever happens to nat gas in Europe would be largely irrelevant to Peyto as a North American producer !!
TerribleEng wrote: Full-cycle breakevens are closer to $2.20/GJ. The cash price that gets quotes is only the operational cost. Once you factor in the Drilling & completion cost, and the cost of land acquisition it goes from that $1.50 mark to $2.20/GJ, maybe a bit more. You need to consider full cycle costs, otherwise the company ceases to exist as they would run out of drilling locations. The other thing is you should last factor in debt payback into that, it needs to be subtracted from your reserves.
They have limited ability to hedge. When you say prices were $4, you are talking front month contracts and NYMEX. Peyto produces Canadian gas, and AECO 1 year out never went above 12month average of $3. For anything within a year, they are pretty much hedged out and have no capacity to materially hedge more.
It has move tons. It is up 400% from 2019/2020 winter pricing. Before COVID this thing was trading around $2.50. Comparing them to Nuvista is a bit silly. Nuvista in the depths of the COVID energy panic had their credit lines cut past their borrowing. They were facing a margin call and were on the verge of a forced marriage like Painted Pony. They went up 32x not because their current stock is valued more by investors, but because in the depths they were written off as not a going concern. If it wasn't for these credit facility cuts the stock may not have feell anywhere near as far.
Peyto is valued at a premium to most other stocks on an EV basis, mainly due to their low costs. They need to reduce their debt to more manageable levels, not one person cares what Debt/CF looks like currently. They care what it looks like at the bottom of the cycle when creditors are calling. At $2/GJ AECO it's not great, they were pushing 4-5 last time and needed credit waivers.
Peyto has got a pretty easy path to $15 with the forward curve out two years. Any farther than that and you need to be really optimistic. There are just cheaper places to buy reserves at higher prices than that. Right now, the worst thing that could happen is some sort of Russian skirmish because the Biden's needs their Burisma holdings to skyrocket, and encourage the whole world to raise gas production while Russia is sanctioned....only to flood the world in a few years when Russia re-enters the market. *Unless you are only in it for the pump*