Share Price ThinkingNUVISTA is NinePoints Largest Holding
180,840,000 April 30, 2022 ($11.50 = 15,725,000) 10.5% of Ninepoint Energy Fund
My take on NVA is this, in Q1 they paid off 70 million in debt, in Q2 they will pay off about 150 million in debt, right there that is a dollar a share that should be added in share value.
Essentially reducing your debt by 50% in two quarters, they should get a hero badge.
Fixer Upper
Essentially I look at stocks on the basis of what their potential is to return capital to share holders, A fixer upper looks like this.
Too many shares - NVA has a modest share count is my opinion.
Too much debt - NVA was there and almost died, but after Q2 debt will be fine.
Hedging Issues - NVA is generally speaking a responsible hedger.
Low Returns - NVA wells are top quartile, and my guess is that some well have 10X returns
Commodity - Condensate excites me and 32% condensate is fantastic, high boe/value
Management - I like NVA management, a little nerdy, need more of their own capital invested
Plays - The are located in the best play areas in the Montney/ Liquids Rich, (Alberta)
Options - I have contacted NVA and asked them to allow options trading.
So my guess is this, after Q2, NVA will be producing close to 70,000 boe a day, currently for every boe of production has $1.92 dollars in terest expense, that will like drop to a dollar as a result of increased production, and reducing the debt in half.
The current long term debt is roughly 230 million at 7.875 % interest a yearly cost of $18,112,500 less than a dollar a boe, 75 cents. The notes can be redeemed on July 23, 2023. The notes have early redemption clause in the case of a take over, and a payout premium for ealy redemption. They will want to get these off the balance sheet as they do encumber the company in many ways, case in point they need approval to do a share buyback.
In Q1 $1.92 per boe was financing costs, they paid off a lot of debt in Q1, and Q2 will be better. In Q1 they paid off 14% of their debt, and spent 120 million on Capex, these two accomplishments need to be read together, because they set themselves up pretty well for the year.
The high end of their capex budget is 375 million for the eay, they have already spent and paid for/spent 120 million of that, or 32% of the expanded capex budget. Kind of funny that has added 20% to their capex budget in Q1, fine by me. So really the project capex is around 85 million a quarter for the rest of the year.
So really the increase in share price only reflects the debt buydown is my guess so far, and really not much has been awarded to NVA for the increase in production.
They really should be rerated a bit once their debt is closer to that 1.0X objective.
Production will be 70,000 boe/day very soon, that is up 15% from the beginning of the year and will lower operating costs, and all their debt and people costs assigned on a boe basis.
I actually think NVA will get its debt down, i think the stock will be $15 dollars by mid august or higher.
Share Buyback, NVA has a real delimna in buying back shares with such a small active float, and so many wolfs in the hen yard.
I think i would just keep the 3 rigs running and esentially what they did in Q1, if they do the same thing in Q2, and then again in Q3 and Q4, i think the stock will compound 10% a quarter, if commodity prices hold, which i think they will.
Q1 12 dollars, Q2 15 dollars, Q3 17 dollars, Q4 20 dollars.
66,000 boe - 70,0000 boe - 72,000 boe - 75,000 boe ( 2022 exit )
Q2 could be compromised because of the plant turnarounds, but with the lost production included it would be 70,000 boe/day. No one know exactly the impact of the turnarounds.
IMHO