Peyto Exploration & Development Corp T.PEY

Alternate Symbol(s): PEYUF

Energy Oil & Gas E&P

Peyto Exploration & Development Corp. is a Canadian energy company involved in the development and production of natural gas, oil and natural gas liquids in Alberta's deep basin. The Alberta Deep Basin is a geologic setting situated on the northeastern front of the Rocky Mountain belt in the deepest part of the Alberta sedimentary basin. It acquired Repsol Canada Energy Partnership (Repsol Assets), which included around 23,000 barrels of oil equivalent per day of low-decline production and 455,000 net acres of mineral land. The acquisition includes five operated natural gas plants with combined net natural gas processing capacity of around 400 million cubic feet per day, 2,200 kilometers (km) of operated pipelines, and a 12 MW cogeneration power plant. These assets include Edson Gas Plant and the Central Foothills Gas Gathering System. The Company has a total proved plus probable reserves of approximately 7.8 trillion cubic feet equivalent (1.3 billion barrels of oil equivalent).

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Peyto Exploration & Development Corp > Energy Trends

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Comment by malx1on Aug 24, 2024 1:53pm

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Post# 36194753

RE:RE:RE:RE:RE:RE:RE:RE:RE:Energy Trends

TerribleEng wrote: I was short some gas players since the summer of 2018, when all the trouble with the choke points at James River on NGTL (mainly NE Montney players). Not Peyto due to their large dividend. I did short Peyto in late 2019 when it was obvious that the basis trades and the hedges they were putting on couldn't support the capex budget anymore. Paying out that dividend hurt.... a lot while I was short. The market was in a structural glut, and then I got lucky with covid. I covered all my positions on the day Russia/SA went to war on price (in the mid $1 range).

I waited for the dust to clear, bought ARX/VII later that spring. Then really backed up the truck on Peyto Jan 2021 in the $3 range. At that point Peyto was making 30% FCF, and it was clear that the gas market was rebalancing. At one point gas/energy was 70% of my portfolio, and Peyto was about half of that.

I have continued to reinvest dividends, and institute my own buyback opportunistically. Now a days, Peyto is around 20% of my portfolio, as I have slowly re-weighted things. The big re-weighting was on the Freeport Explosion.

I do wish Peyto didn't have those hedges and large basis trades, so they could have capitalized on the windfall and went debt-free. They could have then used a clean balance sheet to survive the cycle. But I have matured to that idea, and now just build that into my model. Going forward I think stocks like Peyto will benefit with rates going down and investors looking for yield moving funds around. The lower rates will also help Peyto out on their debt service.

Thanks for sharing, all you guys.

Seems there's an opportunity ahead for PEY to meaningfully deleverage if they can refrain from any further dividend hikes the next 5yrs.

A wall of global NG demand on the way, it will provide opportunity for PEY to ramp up cash flow and meaningfully reduce DEBT.

They must avoid dividend increases until net debt is $500mm range.

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