Share Buybacks in Q3So in Q2 2022 all the FCF will go to paying down debt on the balance sheet, they don't have approval to buy back share yet. The NCIB can't happen without lender approval.
The group is holding 230 million in notes, this means NVA will require the note holders approval for share buybacks to commense, and this will not happen until Mid June they project. The also need to get their NCIB in place, likely after their lenders approval. Maybe july 2022.
(22.8 million share buyback) would reduce the share float to about 205 million shares.
15M? 37M
205 million Minus - [( NinePoints + Paramount )] = 153 million share trading (GMT?)
It looks like between nine points and paramount, they may hold north of 25% of the company, the NinePoints number is a calculation I did, may be wrong (April 30 NinePoints held 180 million dollars in Nuvista). Does anyone know what GMT position is, it does indicate (22.5 million shares), i am not sure if that is still accurate.
Hedging in Q2 will be messy
I read through their hedges, and i do think NVA does a good job generally of hedging, but companies that were recently on the brink of bankruptcy and the next thing you know they are drippling with cash in a commodity boom. Very difficult to manage and predict. You will always leave money on the table, i have left a litter there myself.
Depending on their Capex spend, they will meet their debt objective, or be very close to it at the end of Q2.
Wells
It looks like a mistake in the presentaion i think slide slide 7, "I" is really a seven well pad that was brought on in the last 2 weeks of Q1, in an area of pipestone they have had excellend success.
Also schedule to come on in Q2 is another pipestone pad (7 wells) and a wapiti pad (4 wells), so really during the Q2 timeframe they are really adding around 18 wells, should be a huge quarter.
Capex
I am not sure what the capex spend will be in Q2, i estimated a 100 million but looking back to Q2 2021 they only spent 40 million, but those were different times. They need to complete and tie in 11 wells, capex was high in Q1 120 million, i am guessing it will be a lot lower in Q2.
Commodities
Gas is on a tear, and oil has been over $100 dollars U.S. all quarter, my numbers are pretty conservative. I anticipate a 30% plus improvement over Q1, and i expect oil to only get stronger for the next few months. Gas is an bonus i would not of expected.
Hedges
Overall i think NVA does a good job with hedging, but this quarter hedging losses will be huge, with an improved balance sheet, more risk can be absorbed and you don't need as comprehensive hedging backstops, when you have money put away for a rainy day. Hedging is never 100% right or wrong, except if your ARX resoruces (All Wrong).
With essentially 18 wells coming on in Q2, and commodity prices way higher than Q1, they could come very close to meeting their debt objective.
I am not sure buying back shares is the best thing for Red Ridinghood right now, with more than one big bad wolf wanting in. However their plan looks like the immediate outcome will be debt reduction, and then the real problem will be what to do with all that cash?
Q2 will be a repeat of Q1, maybe better, 18 of the last 50 wells essentially being added to production at the peak of the commodity cycle, good timing or luck, i will take it either way.
In Q1 one 7 well pad came on in the last 2 weeks of the quarter, the full impact of that 7 well pad will really be realized in Q2.
IMHO