Birchcliff in BIG trouble?So.....you're probably wondering WHY i'm saying this lol. And please don't fret or panic (just yet!) as i will enlighten you WHY i say this.....
As most of you have figured out by now, Birchcliff's stock has been on a steady decline for over a year since reaching those lofty highs in the middle of 2022. The stock being catapulted to those levels due to a temporary spike in NG pricing, reaching nearly $10 at HH for a short period, before the stock gradually decaying to these levels due to the same culprit.....but in the opposite direction this time. As this was a overall sector related malaise and not company specific, why is it that Birch has been one of the hardest hit? Despite the culmination of many positive achievments since those dark dark days of 2020? Well.....let me explain.
So why is Birch's stock at the bottom of the barrel......one of the hardest hit in terms of stock performance in the last 12 months, when compared to some of it's peers? And all this despite record production & cutting its enormous debt load by 2/3? Well, as wonderfull as that sounds and as great an achievemnt that was, Birch has the unfortunate burden of bearing the reputation of being one of the very few if not sole entity of a hedge free energy producer. While being free of hedges contracts is fantastic in a energy price boon where the price of the main commodity you sell steadily rises, when the opposite happens, quickly, or prices stagnate for long periods below your cost, then you're in a whole mess of trouble. Like our friend Birch is right now!
So just how bad are Birch's financial troubles and just how bad is it's balance sheet? And is the integrity of its mediocre divvy in question? As i don't want to get too deep into this, the main purpose of this commentary is JUST to give investors (s/h) a heads up & make them aware of their dire situation......if things continue on this course. Nothing more. But just to lightly touch upon their "delicate" financial situation, their cash on hand is extremely low, so they'll need a cash infusion somewhere down the line. Especially if they want to continue paying out that small divvy, which i'll get into breifly in jsut a moment. And more imposrtantly, they're NOT making ANY porfits will Ng's pricing this low, so this alone will affect cash flow quite substantially.
As for the status of their books, more spefically their debt situation, while it was great that they managed to get their debt levels down by 65% from an eye popping cool 1B, it's unfortunately going back up for obivious reasons.....as they're not making sufficient profits (or any for that matter!) from sales of their principale commodity. And they need to......if they want to continue paying that tiny dividend. Which i'll get into, i promise, in a moment. The reality is that no one is making, except probably Peyto at sub $3 HH Ng pricing, and if it continues to be like this, our friend Birch is going to have ot make some serious decisions.
So with all this said, how long can they hold out, waiting for NG prices to come to a more viable level before their hands are forced? As you can see, their "delicate" situation while NOT extremely urgent, not at the breaking point just YET.......it is getting very close to it. And i'm guessing that IF NG prices are more or less the same going into Q1 of 2024, Birchcliff will be in a VERY precarious situation and their hands WILL BE forced. And i'm also guessing that the divvy will be at risk at that point and most likey elminated to save the company and buy them some extra time. As they CANNOT continue on this dead end path, to keep borrowing money, increasing debt again to unstable levels, in order to payout their dividend.
I know this looks bleak, BUT i'm failry certain that when it comes to that time, Birch mgmt will batten the hatches and make the 'right" decisions for the company & its s/h to ensure its continued survival. As they've done so many times in the past. I cannot lay full blame ob the company or it's mgmt for what has happened, and besides i could really care less as i'm not an actual s/h in the company, but i they're at least partly to blame for their durrent unfortunate situation. By not having "wisely" & properly managed, their Risk managment portfolio with hedging against some possible decline in NG pricing.
In addition, and please don't get me wrong folks, i'm not basing for no reason, i actually like the company and their unique business model & approach in this sector. BUT there's enough "valid" reasons there that you don't need folks like me to point out by continually criticizing the company on these forum from the "errors" that were committed. Hopefully things will turn around for the Birch Master, and things will look brighter than they are now. But in the meantime, or at least in the short term, Birch "might' have to go through a difficult period, with some needed sacrifices and maybe some transitions, in order to reach that place.
I hope this post helps some of you get there also..........
GLTA