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Obsidian Energy Ltd T.OBE

Alternate Symbol(s):  OBE

Obsidian Energy Ltd. is a Canada-based exploration and production company. The Company operates in one segment, to explore for, develop and hold interests in oil and natural gas properties and related production infrastructure in the Western Canada Sedimentary Basin directly and through investments in securities of subsidiaries holding such interests. It has a portfolio of assets producing around 35,700 barrels of oil equivalent (boe) per day. Its operating areas include Cardium, Peace River and Viking areas of Alberta. Its Cardium asset is a fully delineated and de-risked asset. It is focused on manufacturing repeatable low-decline and high-netback light-oil wells across its Cardium land base. The Viking is a light oil, horizontal development play located in central Alberta. Its operations are focused on the Esther area. Peace River is a stable, cold-flow, base production asset. It operates on a contiguous and an acreage within the heart of the Peace River Oilsands region.


TSX:OBE - Post by User

Comment by JohnJBondon Apr 01, 2022 5:36pm
194 Views
Post# 34568836

RE:RE:RE:RE:RE:Q3

RE:RE:RE:RE:RE:Q3OBE has already forecast performance costs of $19million based on the share price moving up to $8.

If you think the performance cost will be $7-10 million given that the share price ended Q1 at $11.08 (38.5% higher than $8), then you may not be hearing what the company has told you.

In Q1, OBE's market equity increased by about $475 million.

The Management team has performance bonuses tied to the increase in equity.

The performance cost is going to be more than the $7-10 million you suggest.

Its going to be more than the $19 million it would be if the share price had got to $8.

I don't know what it will be given the share price got to $11.08.     I've estimated $24-40 million based on two prior quarters we can extrapolate from.    I may be low.

It appears to be a non-cash cost until the employee leaves the company.

It also appears to be a one time cost.

I don't know if it is locked in every quarter - or if the actual cash payout is determined by the share price on the day employment ends.     ie, if the share price drops in a subsequent quarter, is prior quarter performance reduced.

Its nice to have managerial performance tied to share price - because they benefit when shareholder benefit - ie their goals are aligned with shareholders.

It does take a bit of getting used to when share price gains are large.

It also affects the corporate strategy.  

This management team will make the most money for themselves if they take this company to the highest possible share price, and then all leave the company at that time.  

That happens when someone else buys the company at a share price premium.

It follows that is the corporate strategy.

ie, don't expect any small parts to get spun off

ie, don't expect any parts to get sold off unless it will make the share price increase, and make the company more attractive to an acquisitor.

ie expect every decision they make to be focused on two things.

1.   The anticipated share price impact
2.   The anticipated increased attraction to an acquisitor.

While other management teams are working on securing their job 10 years down the road, OBE's management team may be focused on how to maximize the share price through a take over in the next 24 months.

As far as the PROP land is concerned - it may mean a conflict between exploration drilling to build up the known resource, vs develpment drilling to build up production.    This may explain the 50/50 approach they've adopted with at least  two wells.    It may also explain the lack of additional development wells in Jan and Feb.
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