RE:RE:RE:RE:RE:RE:K vs N vs P - cut to the chaseFaux, to summarize these are my 7 reasons to stick with Kelt over all other small E&Ps:
1st, on an EV/CF basis, its better value. I guesstimate 3.72 for Kelt, 4.97 for NVA, 7.48! for PIPE and 5.4 for TVE. I'll do more when I get a chance. EV I use all debt less deferred tax less abandonment + current assets + fully diluted share count less employee stock options, CF I use adjusted netback which is field netback less G&A less finance x Q4 production x 365.
2nd, as they drill more oil rich blocks, oil mix will go up which means their netback relative to their peers will go up. already q4 was $30 vs $28 for NVA and $33 for TVE for example.
3rd, capital efficiency vs debt repayment/buybacks. Almost everyone else is focused to a large extent on reducing debt - which is understandable in many cases - and buying shares back. That doesn't move the Enterprise Value needle at a given commodity price. That simply shifts #s around - from share count to share price and from debt to share price. Those corporate finance engineering exercises if you will are done at said company's EV/boepd - $49,000 in NVA's case, $61,000 in PIPEs case and $65,000 in TVE's case. Whereas Kelt is reinvesting at what I guesstimate was $15,000 per boe in 2021 using Q4 and 33% decline (25800 less 16300 less 5000) and I'm guessing somewhere around $12,000 to $15,000 in 2022. That is tremendous amount of value creation versus a peer that might only spend half of their cashflow or less on capex. The beauty of this when you understand it is that Kelt rather than trying to raise production every quarter can operate with the long term in mind and yes sometimes that means more infrastructure investment here and there and less short term (quarterly or even annual) capital efficiency knowing that they can make the best investment decisions today that will payoff tomorrow (tomorrow = 3-5 years).
4th, extra land. which we discussed already but for example, NVA reduced debt according to me $130M in 2021 but $92M came from disposing of certain Charlie Lake rights. Not only does the extra land have value, but it allows Kelt to continue investing all available cashflow on capex for years to come without running into a land bottleneck. Again compare to NVA, they've stated 65-68K boepd in 2022, what does that mean for Q4, 75K? Well, they've stated their ultimate productiion targets from existing lands are 85-90 - so at 75K, they'd be at 83-88% of "capacity". Last but not least, more lands/plays gives Kelt ROI optionality, more chances to strike gold. Its like in sports having more draft picks. We know they're doing that - oil pries are high now, redirect capex to Wembley.
5th, being debt free allows them to hedge less (though the 50% Q1 WTI hedges is ?) or should I say, hedge more opportunistically as opposed ot hedging automatically. It also allows them to be more opportunistic on capex (eg casing or whatever they've now bought twice earlier than expected to take advantage of better prices).
6th, stress test. If WTI were to go to $35, Kelt can still maintain production and perhaps continue growing some by my guesstimate whereas others who are heavily indebted would face the usual umbrella withdrawall from the bankers. Also, based on historical, heavy oil doesn't stress test very well at low WTI (which is why CVE is so focused on reducing debt I feel). So in that sense Kelt is very well positioned to keep doing what they're doing - building the future.
7th, if society needs to significantly raise production quickly, ie drill to fill pipelines and rail, this is a company you go to. No debt, lots of land.
Among Canadian small cap E&P companies, my view is that Kelt is the business model to follow.
Good Luck.