RE:RE:ARX Performance undermined by Balance Sheet ManagementI have been telling MHP to look at 6 month and 1 year sp movement. ARX has done much better.
The boy is a WACKADO not to mention WRONG.
Quintessential1 wrote: And If wishes were horses, beggers would ride.
If TOU did better than ARX then why is ARX share price outperforming TOU's?
GLTA ARX BULLS
MyHoneyPot wrote: In Q1 this year ARC Resources, in a low commodity price environment still managed to have significant Risk Management Losses, that directly impact the company’s evaluation.
The realized risk management loss for Q1 2023 was $150.5 million dollars, add 16 per cent which was ARX royalty rate in Q1 and the losses total $174.58 million dollars. Compare that to TOU who had a risk management gain of 110 million dollars.
In the calculation of Funds from Operations ARX Realized loss on risk management costs is a line item, 150.5 million is the actual cash settlement, but the number they used in their funds from operations reconciliation is 127.5 million. Some magic the accountant is doing here, finance must have their fingers in that number.
The whole point here is that if ARX didn’t have the ACTUAL HEDGING LOSSES OF 150.5 million, they would have saved 24 million on royalties and their actual Funds from Operations would have been 24.3% higher 891 million dollars. (717 + 150.5 + 24)
If ARX had Funds from Operation that were 891 million dollars, then:
The Free Funds Flow would increase from 230 million dollars to 404.5 million dollars (not exact but close enough for this purpose)
If ARC would have had a Risk Management gain like TOU of 110 million, then Arx's Free Funds Flow would have been 515 million dollars.
Tou FCF in Q1 was 525 million dollars, if ARX had the same risk management performance as TOU their FCF would have essentially been identical.
In 2022 the realized risk management cost for ARX was 1279 million dollars, add 15% approximately for royalties and that cost would be 1470 million in 2022 costs related to risk management.
Rerating (How to get it quickly)
ARX deserves a rerating, but it would get that rerating a lot faster, while commodity prices are relatively low if they were to buy back the ugly risk management contracts that are causing these losses every quarter since the two companies merged, the under performance of the balance sheet is really a management issue.
Eliminating ARC risk management will allow the share to go up to $30 dollars where they should be and ARX CFO should be removed from his risk management responsibilities.
This isn’t personnel in fact, rather than trying to spend another 2 billion dollars on buying back your stock to get a fair evaluation, simply stop and fix the risk management loss issue, which has lost the company billion of dollars.
Buy them back like you would buy back stock, it keeps the cash on the balance sheet, it will not evaporate the way these share buybacks have to date. CVE took this action themselves last year.
ARX production is not the problem, the problem lies in the risk management which is undermining the stock evaluation and performance of the company from a shareholder perspective.
IMHO