ARC Resources Ltd T.ARX

Peer to Peer Analysis: TOU

[SideshowBob1]

Arc Q3

Total debt: 1.54B

Market Cap: 9.54 B

Enterprise Value: 11.08B

EV/BOE = $32,394/BOE

Cash flow from Operating activities: 2.955B (9 months ended) 

Operating netback/BOE: $44.09/BOE (9 months ended)

 

Production/Day:

Crude oil: 8149

Condy: 82,203

NGL: 50,891

Total Liquids: 141,243 bbls

NG: 1227mmcf = 204,500 BOE

BoE/day: 342,034

40% Liquids

 

 

Tou Q3

Total Debt: $565 million

Market Cap: $20.5 B

Enterprise Value: 21.065B

EV/BOE= $42,303/BOE

Cash flow from operating activities:  $3.577B (9 months ended)

Operating netback/BOE= $25.82 (9 months ended)

 

Production/Day:

Crude oil: 10,817

Condy: 31,895

NGL: 68,718

Total Liquids: 111,430 bbls

NG: 2314 mmcf = 385,666 BOE

BoE: 497,952 BOE

22.5% Liquids

 

 

Arx’s liquids ratio is 40% vs Tou’s 22.5%

Arx’s netback/boe is 71% higher than TOU’s. $44.09 vs. $25.82

The market is valuing TOU’s BOE’s 31% higher than Arx’s.

Despite having 45% more boe/day TOU only has 21% more cash flow from operating activities than Arx.

 

At time of writing TOU has a market cap $11.665B more than Arx. TOU enterprise value is nearly double Arx’s. This is not warranted by fundamentals. 

 

[MyHoneyPot]

TOU also has a royality over all it properties, that costs money every quarter. It will be interesting when Q4 results come out, but the properties are encumbered.  Last year ARX has some really bad hedges that cost them more than 1 billion in hedging losses.  This year we should see Kakwa ramped up to 200,000 boe/day, they adds significant value.  Since day 1 i felt like tou is

[Squint1]

The offsetting factor is the expected decline rate in cash flows.  ARX liquids may yeild higher cash flow but is forecast to decline more quickly as below.   Tourmaline ARC   2021 Reserves/Prod. 2021 Reserves/Prod.   Reserves

[MyHoneyPot]

So you get the returns quicker and you can move on to your next project. ARX has hundreds of thosands of acres of Montney in Alberta that are not online in some of the best area's. IMHO

[GunnerG]

Didn't I tell you recently that Tou has 5X the drilling locations  wake up    

[MyHoneyPot]

I have heard it all, and i think TOU is a great company, its like ARX owns the Permian Basin in Canada, that is Kakwa, Wapiti, the Deep South, etc.  They have no over riding royalities, GOR's which are a real pain.  I think ARX has a much better production balance that TOU. TOU has way better management and does not waste share holder capital on buyback, that have to date provided

[GunnerG]

I also mentioned before Tou got hundreds of millions for those GOR. For a guy who wants all his returns yesterday, thought you would want that. Also, the premium in lands you talk of is easily covered by the a small portion of TOUs 5X drilling locations. One of the biggest reasons for market cap difference.   

[SideshowBob1]

Drilling locations are a poor metric to base much valuation too IMO. A bird in hand is worth two in the bush. And are you in the habit of counting your chickens before they've hatched? And it can be assumed that Arx's drilling locations are worth 71% more than Tou's assuming netbacks remain constant. Strong outperformance today, almost as if Arx is... MASSIVELY undervalued. 

[GunnerG]

Lol  Bird in the hand, Chickens n eggs, every O&G can be viewed with those silly analogy's   71% higher?  Cannot waste my time doing the calculations but again, 5X the drilling locations easily covers that 71%. Their is a reason for the market cap difference that MHP and others cannot fathom.  My TOU is up massively and the dividend has given ~25% return in five

[SideshowBob1]

You should 'waste' a little more time doing calculations Gunner then you could catch a clue. 5X the drilling locations = at least 4/5 of those locations are Tier 3 acreage, you can't take that to the bank.  I get it, Tou has treated you well and you are married to the position, but you should divorce that broad before she takes half. At these valuations Arx is the beauty queen.&

[GunnerG]

I own both Tou and Arc, for different reasons and will continue to accumulate both at the right times. Could you provide me a link to that data showing 4/5 Tou drilling locations in Tier 3 or is that just a made up calculation in your head.  Thanks in advance, but I am expecting you don't have any concrete data.