RE:RE:RE:New land for PEY at approx. $391/ac during Q2They drilled an AB montney well a few years ago and never completed the well. I would be stunned if they drill another. They are comfortable doing one thing. Drilling gas wells in
alberta cretaceous targets. this is a company that rarely does anthing outside a very narrow comfort zone.
SecondhandGnus wrote: Uncut, I was indeed praising this $6MM Q2 lease purchase, which is probably new AB Montney land (mentioned for the first time in about a year) or Chambers/Brazeau acreage (PEY's best area)--I'd venture to say that nobody on the Peyto board is as pro-growth as I am.
As far as the hedging being mechanical or not, both the amount and relative hedging (including seasonality) have gone up over the past two years, and DG specifically mentioned layering in extra hedges for this summer due to pipeline concerns. Peyto had their debt covenants changed at least 3 times, which I believe to be the cause. Gee indicated hedging should decrease as leverage ratios continue to improve. Their basis deals haven't been added that consistently, either. You are of course 100% correct on benefits of hedging during tough times, which has helped them more often than not.
The company has spoken about terming out more debt, so they aren't going to zero leverage, but it is dropping fast--I expect them to hit 1:1 D/CF by the time they release Q3 results. I think your question about how well they succeed with lower leverage is extremely important, and thankfully their well IRR have increased almost tenfold to 200%+, so I'm extremely confident in their prospects. Cheers...