RE:RE:RE:RE:RE:RE:RE:Finally! A day to buy!! EOMMagicPinstripes wrote: I also agree with the idea of being fiscally responsible. I would also hope that investors in Peyto would know what they're buying into - a company with a proven track record of being profitable each year since inception (with the sole exception being 2020), a company which hedges most of its production to ensure a transparent and sustainable capital budget, and a strong commitment to returning a portion of profits back to shareholders in the form of dividends.
I would argue that Peyto is like the 'Tortoise' in the fable of the Tortoise and the Hare. They don't race at full speed towards the finish, but complete in a slow, methodical, and consistent way. I compare that to a company like Birchcliff, of which I am also a shareholder, and I much prefer Peyto's strategy over the large swings of extreme profits following by extreme deficits that Birchcliff has experienced.
Yes, Peyto has a substantial amount of debt; and that does hurt the share price and eat away at profits via interest payments, but you also know that Peyto will slowly chip away at that debt over time. If forward pricing increases, especially as LNG Canada comes online next year, then I'd expect Peyto to continue its hedging strategy to ensure that it's being fiscally responsible - not only to pay down debt, but to ensure it can remain profitable and support its capital budget and dividends.
When I bought into Peyto, part of the allure was the .01 monthly dividend at the time. I was specifically looking for a company that would be consistent in returning some capital back in the form of dividends and Peyto checked all the boxes for me. It still does. In fact, since the post-pandemic dividend increase, I've already earned over a 100% ROI. While I certainly did not predict that would ever happen so quickly, I'm certainly not opposed - even though I did think, at the time, that the increase was excessive. I still do. However, with Cascade coming online and exposure to Alberta Power Pool pricing (not hedged) I think that could be a great way for Peyto to bring in additional revenue to support debt repayment and/or dividend increases and/or increased production.
Go Peyto!
MP
MP, I think you make some valid points and I'm glad you've managed to do well with PEY. I would push back on a couple of things though if I can. 1) Peyto does have a proven track record of profitability, but my contention is that profitabilty isn't the mark of a good company, or one that is a good steward of capital. It's certainly necessary over the long run, but it can also bankrupt a company (almost happened in 2020) if the balance sheet becomes strained and covenants potentially get breached. Peyto is a top tier operator and have done a great job deploying capital to build infrastructure and grow production meaningfully over time, but when you effectively give all of your FCF (and sometimes more) back to shareholders, the viability of the business can very quickly be under siege if the winds change, and any gain that has been made by shareholders through dividends could just as a quickly be taken away by price depreciation. 2) The thought that Cascade is going to be a boon is an overly optimsitic take at this pojnt. Power prices have come down considerably since last summer when JP boasted about Peyto receiving in the ballpark of perhaps $10-$15/GJ for their contribution. There's been no real transparency on what their contract looks like, but unless there's a built-in minimum, Peyto could very well only be receiving a fraction of that...perhaps barely a premium to AECO or HH at all. Here's the link for the Alberta power pool prices:
https://www.utilitynet.net/analytics/powerpoolprice.html Anyway, all the best. I will also happily continue to collect the dividend. Realistically nothing is going to change with the dividend policy at Peyto, so I'll just continue to hedge some of the balance sheet risk through the option market.