ARC Resources Ltd T.ARX

620.475 Million shares End of 2022

[MyHoneyPot]

620475000 * 16.25 = 10.082 billion dollars Market Cap

That is the marketcap of ARX with 340,000 boe (40% Liquids)

TOU market cap is 22.36 billion dollars they produced 528,000 boe in Q4

So TOU is valued 222% higher than Arx, and Arx produced more FCF they they did Q3.

What gives?

I expect in Q4 because of the unusually exceptional gas prices TOU might produce more FCF than ARX but my bet is that it will be close. 

So competing in the gas world ARX looses on evaluation and competing in the Liquids world they loose as well. ARX has the best liquids condensate play in North American and needs to represent themselves that the premium condensate player. 

ARX is trading at a 50% discount.

IMHO

[Quintessential1]

Yes it is.  Arx has more total revenue than Tou.  So the key to increasing value in ARX is debt reduction and reducing the share count, and reducing the cost of revenue (hedges) something that ARX is doing in spades with over 17 million shares reduced per quarter they are on track to exceed the NCIB in 1 year. If they are buying back now (and they should be buying back as much as they

[Volkomm]

I wonder if $ARX is going to continue with an accelerated debt reductions. The next notes are 2026 at only 2.35%. That's some pretty cheap debt in this environment. Wish these guys would release a capital return framework like everyone else. 

[Quintessential1]

In the Q3 ER it says longterm debt is $1.1 B and net debt is $1.5 B   I assume the lonterm debt is made up of the notes and the other $400 milion is revolving credit? Would it be prudent to eliminate the revolving credit and leave the $1.1B in notes while they buyback shares in 2023 and then maybe they can buy back the notes early at a discount and pocket the interest saved on top of

[GunnerG]

See Note 10 to the FS for an explanation of Net Debt calculation.  Page 70 of Q3 report. See Note 7 for long term debt explanation.  $1B is senior notes and .1 is credit facility (rounded of course).  Page 68.

[Quintessential1]

Thanks Gunner.  So $137 million ($.1B) is all that is left on the credit facility?  That should be gone in Q4? I am not quite sure I get the net debt calculation.  Am I correct in thinking that is simply operating costs incurred and bills that need to be paid basically already covered by the budgeted funds for operations? So neither one of the tranches of notes left actually

[GunnerG]

Hopefully this clarifies some things for you.  Anticipating good news very soon from ARC. From Investopedia - The net debt formula is calculated by subtracting all cash and cash equivalents from short-term and long-term liabilities. Net Debt = Short-Term Debt + Long-Term Debt – Cash and Cash Equivalents. There are two issues of senior notes.  One for $450M 2026 maturity 2.354

[Quintessential1]

Yes thanks.  I think what I kept getting tripped up on is short-term debt which just turns out to be current liabilities which are basically operating expenses that haven't been paid yet.  Most of that is covered by the budget. GLTY and all

[ukrop13]

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[GunnerG]

I was surprised to see accounts payable and accrued liabilities up ~$600M Y/Y. Lets see what it is in Q4.

[northman]

Assuming the revolver is paid off completely when the financials come out next month, do you think they will put the extra cash towards a dividend increase? Also, if Attachie were to go ahead, do you think they would fund the play with debt, operating cash flow, or a combination of the two? Personally I would prefer that they fund Attachie with term notes, and hedge production to guarantee

[Quintessential1]

I assume the short term credit facility is essentially paid and all that is left are the long term notes. For the next three years (The next debt matures in 2026) that leaves about 600 million that they were using to pay down debt .last year. Attachie West Phase I is estimated to cost $700 million. (Is part of that already part of the 2023 budget?) Wouldn't it be better to use FFO that

[CashFlowADay]

Funded with cash flow my guess over 1-2 years with costs being larger than anticipated due to OFS inflation

[CashFlowADay]

If ARX pays this down early, then they are braindead

[GunnerG]

I see MHP still trying to compare TOU and ARC market cap.  What gives? $5 billion more "property, plant and equipment" and 4X the drilling inventory?  Related somehow? Drilling inventory = cash in the future when they drill it.  What gives?  Duh

[MyHoneyPot]

Really Gunner, there is not another play like Kakwa on the planet.  There is no comparision. IMHO

[cnotes22]

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