RE:RE:RE:RE:RE:RE:RE:RE:RE:January BuybacksGood points, Quint. The two things that will tank an E&P in this environment (in my opinion) are large acquisitions (i.e., dilution / debt, even if they're immediately accretive to EPS growth) and massive capital projects that won't pay off in the near term. The market just won't react well unless they're extremely well conceived, messaged and executed. I'm usually not one to place too much emphasis on the importance of management's ability to communicate 'stories' effectively, but I'm sure everyone agrees that it's critically important now.
That being said, declines are real (especially with mature shale plays) and additional production will need to be brought online to ensure long-term optionality and business continuity. So, from a strategic perspective, they're 100% right to be pursuing Attachie, but it will really come down to the details in terms of how fast and at what cost (both dollar cost and opportunity cost).
If they can balance it all, I'm still really in favour of measured debt reduction (I agree it's in an extremely manageable place at this point) and buybacks on top of developing their BC assets.
We know this is going to be an outstanding report tonight. So, for me, I'll be looking much closer than usual at their forward guidance in terms of CAPEX, debt reduction, buybacks and their overall shareholder return strategy.
Quintessential1 wrote: Yes it's a stretch on a wish list.
The more I think about Attachie the more I want them to leave it on the shelf until they have properly assesed the BRFN deal, give infaltion some time to ease off and see which way commidity futures are heading. OPEC thinks O&G production is under supplied. If that is true that should show up soon in commodity pricing even NG. Even if they hover at these prices ARX makes pretty good bank this year but it would be better to not add to cap-ex until the one-time expenditures for Sunrise and Kakwa are off the budget and just start fresh in 2024. Without needing to pay down debt (I think we are all kind of agreed that debt will be at their floor and doesn't need to be touched until 2026) that leaves a lot of room for those buybacks at a 2% tax discount to 2024. As much and as many as they can and if that leaves them at 550 million that would be great. It really is only another 70 million shares to buyback and isn't that what they bought last year?
After all that they could sanction Attachie properly with higher production and less hedging than in 2023 and throw all of the returns towards dividends for a year or two if any is left over. Does anyone know if the buyback tax is forever?. Anyway Sanctioning Attachie will eat up a lot of FCF until 2026 when they need to pay down that first set of secured notes debt.
Anyway that is my longterm wishlist for my longterm investment. Feel free to share yours.
GLTA ARX BULLS