Post by
Farmer12 on Aug 15, 2021 1:52pm
Facts
1) Management has built Arc into a huge company, 5th or 6th largest producer in their class in Canada.
2) Arc will produce big FCF this quarter and at least 3 more after that, based on their hedges and forward strip.
3) There is a spectrum of belief regarding long term prospects for oil and gas. Some believe oil and gas use will quickly fall or almost disappear, while others believe oil and gas use will even increase over time, as the third world develops. For better or worse, the time horizon that Arc has, will color their decisions as they plug in numbers on their spreadsheet. Where, when and how much capital is invested.
Comment by
Quintessential1 on Aug 16, 2021 9:02am
Paying down debt should be done when interest rates and the cost of servicing debt is high not low. Increasing production and FFO will also reduce the debt ratio without paying down debt and right now commodity pricing is high. Arc should be increasing production not paying down debt.
Comment by
Grandcentral on Aug 16, 2021 9:24am
Arc is doing both. Reducing debt and increasing production. The best time to reduce debt is "when you can", nobody knows the future, we can only prepare for it.
Comment by
Quintessential1 on Aug 16, 2021 9:39am
The cost of renewing debt is known ahead of time and can be mitigated or not at that time. Debt is useful for growth when it is cheap and cost effective. What matters is your ability to service your debt when you need to.
Comment by
Grandcentral on Aug 16, 2021 10:03am
Every major oil and gas company is paying down debt right now because it's the correct thing to do. Arc is also increasing production. There is really nothing to not like. IMO and GLTA
Comment by
Quintessential1 on Aug 16, 2021 10:38am
Except the share price and the dividend yield. "There is really nothing to not like."