RE:RE:6 reasons why IMO Kelt is best kept secret in small cap E&PWhile it wasn't in the past, shale oil and gas is a very viable business now and the trend (natural gas) its its friend because of the associated natural gas which btw, long term will benefit the Montney vis a vis the Permian (and certainly vis a vis offshore). So don't get me wrong, all boats will rise. Its simply my belief that Kelt's lands have a name plate of at least 150,000 boepd so that based on Q4, they're at 1/6 of play "capacity". Wembley alone could be 68,000 boepd (870 locations x 1,200,000 EUR per well) based on what Pipestone and Nuvista have stated their nameplates are.
Today the end game for all Canadian producers should be to increase production as fast as possible subject to egress, infrastructure, not increasing debt, not causing industry inflation and not causing commodity price collapse. Easier said than done obviously but the smaller you are (Kelt) the less impact your production increase will have on the overall market. The focus on buybacks, dividends and debt reduction may become a thing of the past real soon.
Other than Kelt, my own analysis has shown that NVA seems to be the best value proposition among all the small and mid caps in terms of cashflow, growth and nameplate capacity and for what its worth, seems like TD thinks the same (new target of $18.50). Yet Kelt has been outgrowing NVA, has more growth potential (In my amateur hour speculation, its my belief that Kelt's lands have 2x the nameplate of NVA's lands), has of course much less debt (though this may be a moot point by the end of the year) and at the same oil %, is more profitable (though these will approach each other as NVA's interest and hedging costs come down and Kelt's oil mix goes up). Don't take my word for it - follow the quarterly reports on daily cashflow (production x adjusted netback (field netback less G&A less financing costs) and you will see that Kelt is closing the gap on the best (NVA).
The downsides for me are 4 fold: 1) being taken out early - given insider ownership and BoD control, unlikely), 2) taking on a lot of debt and having to deal with the bankers.... - unlikely to happen again. 3) commodity price collapse - it might make sense to hedge opportunistically. 4) disappointing play results - seems like if anything they are exceeding expectations and haven't yet tapped all of the potential (Oak middle montney, Wembley D1).
Last but not least, if there was a company where the government (CPPIB?) could invest money to have them ramp up production, this would be a very good candidate. They have the most untapped potential. Oak for example, almost everything is in place other than an agreement with Blueberry FN (which it goes without saying has to be done respectfully and properly - fwiw, ESG to me means FN first and foremost).