RE:Net debt versus total debtI think you may have transposed those numbers as I see net debt at $62 M and bank debt at $42 M
I really appreciate your explanation of the differences as I have tried to clarrify it for myself in the past. Maybe you can let me know if I have it basically correct. The bank debt (I believe most companies refer to it as longterm debt) is what they must pay back under certain terms and time frames and they of course pay interest on it and is what they would like to reduce when they discuss debt reduction.
The difference that is added on (and called net debt) are operational bills and expenses that are due or are coming due (basically accounts payable) that should be offset by operational revenues (basically accounts receivables) and based on which one is highr you end up with either surplus free cash flow or a deficit.
I am really appreciating all of the differing opions offered up as they all have merrit. My view is that we will see small amounts of debt repaid as I believe they were and are generating FCF at $70 WTI regardless of what the presenation says as I think they have under promised in order to over deliver. That being said I also think they will leave shareholder returns alone until they pay down all or most of the bank debt and we see higher commodity prices.
A couple of things that I have not seen taken into account are the narrowing WTI-WCS price spread (bullish?) and increased interest on the existing debt (bearish?)
I have seen posts stating that CJ gets a premium to WTI but I am not sure if and how they are affected by WCS prices.
Thanks again and GLTY and all
JohnnyDoe wrote: As per the other thread, as of September 30, net debt was 42M and total debt was 62M. The 20M difference is a working capital deficiency and it is NOT debt that is repaid. It's debt that stems from the way the industry works where their revenues are received on one day each month, specifically the 25th of each month. The working capital deficiency actually fluctuates and can end up as a working surplus if wti skyrockets which it did in Q2/2022.
So the debt needing to be repaid is 42. Page 9 of their current presentation shows cash flow allocation based on 80 wti and it shows cash flow use if there is incremental cash flow. The first priority for incremental cash flow is paying off debt. So, what can we surmise from that priority? Two things. First, at 80 wti they cannot eliminate debt in 2023. Secondly, there's no plan to increase shareholder returns until the debt is addressed
As an investor that wants the dividend income, my take is that the current 6 cents a month dividend is as high as it will ever go if production remains in the lower 20k range. There may be special dividends declared but raising the base dividend at these production levels is reckless