Gassers like Birchcliff.......Will be in a heap of trouble IF NG prices at HH continue to stay this low in this range or ~$2 & change for a prolonged period. The last time Ng prices were this low, Birchliff was trading at 1/3 of what it's trading now. Of course its financial situation has chnages drastically, and we have to account for that BUT still, it just show how much further these heacy gassers can drop if things don't turn around in the energy markets. And i seriously doubt very much they will, because the US Gov't & the EU are both a proxy & financial war with Russia and need low energy prices not only to win those wars, but also to save Europe from bankruptcy.
For all intents & purposes, the Canadian oil patch, which is the one at risk here, need at least $3 ng at HH. The more leveraged you are to NG, the more this is crucial. Especially for guys like Birch who are not only highly leveraged because of being heavily weighted towards it in terms of production, but aslo unhedged as well. If prices don't recover soon, i fully expect the heavy gassers like Birch, Advantage, Peyto, Crew and a few others to find themselves in a very precarious financial situation & serious liquidity crunch. This would mean all those promises of share buybacks, high cap ex & generous divvy payouts would go out the literal window. Not to mention what it would do to their respecitve share prices.
If one wishes to still invest in the Canadian O&G space in this environment, make sure you do the required due diligence on these investments and you're well aware what you're getting yourselves into, as well as ALL the risks involved to mitigate any possible damages you might incurr while holding these positions during this period. Honestly folks, i don't see any turn around in the energy markets anytime soon, not with the obvious manipluation that going on here. BUT if things escalate further in the Russia-Ukranian conflict, this might change. But seriously, who wants to make ANY profits on the basis of more folks dying, i sure don't. But unfortunately that's the only trigger left that would make O&G prices spike again, and Putin is in the drivers seat for that to happen or not.
One good thing out of this mess & chaos, is that the prospect of the Canadian oil patch being forced into dark isolated corner once again, with no escape, it will "encourage" all those involved in that space, whether be it Gov't ( atall levels!!!), company mgmt & all investors to make drastic changes in the way they operate & invest. This has been a long time coming for the Canaidan space, things that were avoided or deferred in the past by these folks, cannot be this time around and they will be FORCED to deal with. That's why i stated last year that 2023 will be the year for some serious M&A in the Canadian sector and we WILL see some drastic changes & developments. And though it has already started off with a bang, it should pick up steam as the year progresses, until year-end Just some food FOR thought FOR investors FOR the week-end.
GLTA