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Peyto Exploration & Development Corp T.PEY

Alternate Symbol(s):  PEYUF

Peyto Exploration & Development Corp. is a Canadian energy company involved in the development and production of natural gas, oil and natural gas liquids in Alberta's deep basin. The Alberta Deep Basin is a geologic setting situated on the northeastern front of the Rocky Mountain belt in the deepest part of the Alberta sedimentary basin. It acquired Repsol Canada Energy Partnership (Repsol Assets), which included around 23,000 barrels of oil equivalent per day of low-decline production and 455,000 net acres of mineral land. The acquisition includes five operated natural gas plants with combined net natural gas processing capacity of around 400 million cubic feet per day, 2,200 kilometers (km) of operated pipelines, and a 12 MW cogeneration power plant. These assets include Edson Gas Plant and the Central Foothills Gas Gathering System. The Company has a total proved plus probable reserves of approximately 7.8 trillion cubic feet equivalent (1.3 billion barrels of oil equivalent).


TSX:PEY - Post by User

Comment by houbahopon Mar 12, 2022 6:34am
133 Views
Post# 34508642

RE:Transcript from Seeking Alpha

RE:Transcript from Seeking AlphaI also took time to read the  transcript. Thanks for posting it.

Two thing you won't see in it that might explain a big part of why the stock is so depreciated.

The macro factor. The Natural gas industry as a whole is depreciated. For example, just look how cheap Tourmaline is when analysing their statements. Other energy companies are trading at similar levels.

The Peyto factor. Way too much expensive hedges. Peyto had a lot of success with their hedging program in the past. They are programmed to repeated it and today, this hedge book is costing dear. Hedging a part of production makes sense. But hedging 80% in an environment where Nat Gas prices raise, it kills the pupose. Maybe aiming for a lower percentage would reduce the risk.

Impact? If a fund wants to invest in the Natgas industry to gain some exposure to its risks/reward profile, the last place it would go is in Peyto. Why? By selling all its production in advance, Peyto reduces this risk/reward to a minimum. When investing in Peyto's future cash flows, you invest more in the like of the fixe income / bank industry with a little upside to the long term price of NatGas.

Funds attracted to fixe income are quite sensitive to leverage and will shy away. P/e ratio will stay low compare to companies in other industries having different risk/reward profiles.

Peyto's attractiveness should improve in 2022 if Darren Gee can deliver on the debt issue.
Also, during the year, hedges' negative impact will be greatly reduced and the time left before Kitimat becomes operational will continue to diminish.

There is a lot of positive in here but patience is required...
 
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