RE:RE:RE:RE:NR Prelim Q2 ThoughtsYes you are mistaken.
They ended Q1/22 with a working capital deficit of about $80 million.
That is Accounts payable less Accounts recievable.
Those accounts payable get paid down first.
The remainder goes to other forms of debt.
We don't know their accounts payable balance on June 30/22 (end of Q2). That information will be part of the full Q2/22 release at the end of the month. But it doesn't matter.
For the same reason we don't know the drawn balance on their line of credit at the end of Q2/22. But again, it doesn't matter.
What we do know is they reduced their total debt by $113.6 million in Q2. (that is all Current and Long Term Debt)
We can also confirm this for ourselves from the same numbers by looking at the total netback, and subtracting out the known major expenses (Capex, Decommissioning etc). If it nets out to something similar, then we know they did indeed reduce their net debt by the amount stated. From my prior post, you can see it does indeed reconcile. It doesn't have to be exact, it just needs to be in the same ballpark to confirm that its real.
If you want make that sound less impressive because you are hoping to get it cheaper, you can compare it to some period in 2021 or 2020 or some other time in the last decade.
What matters is how much they reduced their debt in just 3 months (April, May and June)
OBE offers concurrent high growth and fast debt reduction, all with a cash flow multiple close to 1.
If that sounds too good to be true - that is because it does. But its still true.
Its also extremely cheap from any sort of buyout metric
The equity (using the Q2/22 average production), is trading at about C$22,700 per flowing barrel.
Make that enterprize value, the same production gives it a flowing barrel number of about C$33,000
This is what value investing is all about. Searching for value, then owning it until that value is realized
Buffet is doing it with OXY (OBE is below is minimum size threshold). I'm doing it with OBE.
I had great expectations for OBE in Q2. Those expectations are now reality.
Will it get cheaper between now and the Q3/22 release - maybe, maybe not. Sometimes undervalued stocks get more undervalued before the market catches on.
I will point out that WTI did a noteworthy thing today.
It got all the way down to $90.65 before turning around, and closing higher. About $6 down (over night), and then $6 back up.
There have been some strange moves in the WTI price over the last two weeks - essentially a divergence between the paper and physical markets. With the Paper market declining and the physical market increasing.
That happens when speculative positions change. ie hedge funds blow up, or huge long positions get unwound, etc. It can be caused by many things, but one thing they all have in common is they are short term, transitory events. When the positions are unwound, the paper and physical market positive corrolation returns.
I would not be surprized if that unwinding of whatever caused the decoupling finished today. Time will tell - but WTI dropped to $90 for no good reason, and then reversing itself and ended up where it started. That suggests something happenned, and then the opposite happenned.
WTI got hit negatively three times this week. In each case it declined during the night when US markets were closed. The first two times it then floundered at that lower level when the US markets openned. This time - the third time, it climbed back. It seems like something different happenned today.
Oil stocks fell with WTI. When WTI stops falling, so will they.