RE:RE:RE:BudgetMica is a great asset, the payoff of the lease will likely get better returns than the payoff of debt. They have a 20 year production profile there, so this move is associated with solid economic returns and will improve the companies FCF.
The Canadian assets do not get the same kind of returns that they see in Europe, so VET has improved the netbacks and the econmics of the Mica Play. The netbacks for the Mica Play will improve by 20 million dolars in 2025, simply from the lease buyout. Really that savings alone is responsible for 5% of the 2025 FCF projection.
I would ask, do you think reducing their debt 400 million which VET have in recent quarters, is reflected in their current share price? I can't say with confidence yes it has, but i do think the company is stronger for do it.
However my concern is that with a 2025 projection of 20% FCF per share, which is better than almost any company i can think of, the share price is trading at a discount.
VET are projecting 400 Million in FCF in 2025, they will get a full year of Croaita Production, Mica Production improved operating costs. Some wells in the USA,.
Over the last 4 quarters they had 750 million in FCF, with AECO 69 cents.
There also should be some additonal upside in Germany as well as Croatia with additional produciton coming on. SA-10 Block.
So VET bankline is 1.6 billion and really they are not using it as all the debt is term debt. The first quarter a portion of that debt is due, buybacking back shares they have almost covered the interest exposure on the debt? The dividend return with the increase is 4%.
However i feel they are being very conservative, and it is highly likely they will exceed this forecast, and it is difficult to increase capex spends in Europe because it takes so long to bring produciton on. They have a significant inventory of wells there already.
So my guess it that buy mid year, they will hit their debt target that will give them a super healthly balance sheet.
My concern is that while the shares lanquish at these levels the company is not properly valued, they should not really use their shares as any form of currency, because they are simply to cheap. So i think if they want to make an acquisition they will be limited by the capacity of their balance sheet. They really don't want to issue shares until they get a rerating in the share price.
IMHO
MHP