ARC Resources Ltd T.ARX

Share Buybacks

[MyHoneyPot]

Lets guess that ARX has purchase back 50 million shares, we will not know until after this quarter but that is my guess.

So i am making the assumption they now have roughly 680 million shares outstanding. 

Lets assume a buyback price of 16 dollars, so it would of cost approximately 800 million dollars.

ARX will save the cost of the yearly dividend of roughly 40 cents a share, or 20 million dollars for the year. ( Chicken Feed )

So 20 million dollars will will be the improved FCF ARC will get from these purchases. This is about 3 cents per share in improved Cash Flow after spending 800 million dollars, sounds like a great return. 

Hedge Buybacks

If they spent the same 800 million on hedge buyback, it would result in 800 million or more FCF. That would be about $1.15 share in improved earning and the cash would still be in the company. It still would be on the balance sheet in the form of earning or reduce debt.

With Share buybacks your thowing the cash out the window and hoping the market gives you a fair evaluation, however it is contingent on things like Management Performance which is highly in question at Arx, Cash Flow, and Business Strategy.

Interest rates are going up and you can now get GIC at a 3% plus, making ARX dividend measly and way to low. People are looking at a potential market pull back.

You can throw your cash out the window buying back shares and if the industry does not like your management team, if your growth plan is weak and not communicated or your dependant on Treaty8 nations for your future, good luck with that. 

Really i don't agree with share buybacks and increasing cashflow and dividends and production would be the best thing for shareholders. Share buybacks should be opportunitstic, and a line item for accountant to put a dollar figure into every quarter.

IMHO

[Zaphod]

Well done

[Rileym7833]

I agree with the logic that few shares means fewer dividends paid, but also I think it's important to consider that a 10% reduction in shares outstanding increases shareholder share of the existing cash flow by 10%. It's more than a 3% value. This should be done opportunistically like you said, same goes for hedging.

[MyHoneyPot]

Your right about the cash flow consideration, and lets look at it another way. 10% share buyback 73 million shares 17 dollars a share equates to 1.241 billion dollars. If Arx is trading at 20% FCF per share that would be 3.40 a share 1.241 billion / 680 million shares =  $1.82 share So if they bought back hedges, there FCF could go to $5.22 a share or a 53% increase Buying back the

[NothingBurger]

It's pretty simple. What's the FCF yield for Arx? That's our return on stock buybacks?

[GunnerG]

OMG.  That's your problem MHP, someone shows you where your logic and/or numbers don't make sense and you just come back with a new set of numbers and/or logic. No winning with a person who cannot admit they are wrong.   Fact 1  Hard to understand why you are here other than to try and show everyone how smart you are.   Fact 2 In almost every post you make

[red2000]

I think ARX have to buyback shares 1st, max 10%, before 2023 and paid the debt afterwards !! Only 10% of the oil production hedged nad the gas production hedged suppose to be around 25% for 2023 ! Only my O ! Gl all !

[Rileym7833]

Taking it a bit further here, my thinking is: buybacks are only advantageous with low share prices, same goes with acquisitions. Debt repayment is only advantageous if the debt isn't structured well (forcing hedges, high rates, etc) Expanding on production only makes sense if we have adequate export capacity or domestic demand. Commitment to having tact and transparency is what I will be

[Shaleguy]

Riley. Well said. Now would be a very good time to increase production. As a pre-merger VIi shareholder you know that in March of 2020 VIi reduced spending in a $40 dollar WTI and $2.50 per MCF environment to $650 million to keep production flat at 180,000 boepd. Prior to that they investing about $1 billion for DCET to maintain 220,000 boepd. They had reduced D and C to. 6.5 million per well

[Rileym7833]

I remember the budget cuts and know that with old economics they were profitable at low prices. While commodity prices are up its also good to remember input costs are way up now as well. Simple things like access mats cost ~50% more. It might not be the worst thing to conservatively boost production, but it would be a shame to overspend and increase our decline rates only to crash prices and have

[Shaleguy]

You right about input costs but we have 8 years of operations experience at Kakwa. Even a cost increase of Three million per well is only 120 million. The number of wells drilled has no bearing what so ever on decline rates. It's how moderate you pull the wells. Again it took VIi awhile to learn this. Has anyone checked the schedule of LNG Canada? I ran into a welder in Nelson working on the

[NothingBurger]

If you think the valuation is not very good on the stock then isn't buying back shares exactly what you want management to do? At current strip ARX is probably generating a 30%+ free cash flow yield. Yes there are some short te hedges that have downside on this, but they are temporary and will roll off eventually. I agree the shares are undervalued here so why not buy back as much as you can