Athabasca Oil Corp T.ATH

ATH Status and outlook 1-3 months.

[MLEWICKIMBA]

Why I own ATHABASCA OIL Corp.

1. Debt 162M USD as indicated by the ATH CEO -- 10% x162 = 16.2 Approx -- 16.2x1.36 = 22M in annual interest payments.  Divide 22M CAD by 1,200,000,000 in Sales and  this is 1.8% of sales.  This means less than seven days of sales to cover the annual interest expense to carry the debt.  LOWEST in the INDUSTRY.  ATH is Fully DELEVERED.....  TVE is about 25 days.

2. Cash on hand is at the level it was before they did the debt refinancing.  This is absolutely an achievment in managing the company and no firm in the sector has 400M++ Liquidity for 1.2B in Sales.  Absoltely no firm!!!!

3. Production and Sales have not skipped a beat because the new production assets are producing 4,200 BPD EST. versus the loss of 2,500 BPD from the asset sale on September 14, 2023.

4. Last year Q3 had over 37K++ in BPD production.  This year in Q3 it could be similar.  We will watch out for this soon.

5.  As of September 14, 2023 ATH had repurchased 25M shares for 80M CAD Cash Outlay YTD starting April 1, 2023.  The target for 2023 has been reduced to 140M CAD from 150M CAD so easier to achieve in the next 86 days,  This is important I will admit.

6. I expect in the latest price surge ATH bought back more shares than they were or the cash is on hand and now with the price dip they can use that cash to buy and retire shares.  Good for supporting the price at this level.

7. Even with the price correction ATH is still generating about 900,000 CAD everyday in Cash Flow or more depending on BPD Output.  

8. I think most or all of the CAPEX and Maintanenance costs for 2023 have been spent so a higher amount of FREE CASH Flow is being generated in SEPT and into Q4.  This gives ATH a lot of freedom on what to do with that money.  The CEO talks about that in the video.  They are essentially unencumbered as a firm.  

9. Warrants should be gone after the recent share price rise.  We will have what we have soon and hence the importance of share buybacks in 2023 and beyond.  

Conclusions:

ATH still undervalued.  4.60 target once this selloff subsides.
ATH has one of the best management teams in Canada 
Because of the Management the firm sits with a clean and solid balance sheet for Q4 and 2024.

A price rally cometh soon.  This time to 4.60.

[OGInvest0r]

Awesome posts. I love reading them. Thank you for the rational perspective as always. 

[Sugaree]

In the video presentation he CEO says net debt end of Q2 was only $62m and about to change to net cash of $125m+ after sales of non-core assets.

[MLEWICKIMBA]

Yes that happened on Sept 14th. Cash on hand and credit facilities 420M to 440M CAD range as of today. Let's get through this.

[filefish]

I will repeat: Having gone to the brink of bankruptcy a couple of years ago, management should have learned a hard lesson about debt, just as we the long time shareholders did. If ATH is in a net cash position after the Duverney sale, they should take advantage of that and pay off the entire 10% term loan. They will still be able to cover an aggressive 2024 capital program with just the cash flow

[Deutz9170]

I agree with the hedging idea. The company is to one dimensional to take on the currents risks in the market. And also to small. A strategy that fits the company's profile is needed. Not hedging in my opinion,  implies that management is trying to be one of the big boys.  The US has to has a lot of options to fight 120 WTI.

[MLEWICKIMBA]

I agree it would be incredible to see the firm actually debt free.. Also hedges could help but the industry thinks 80 plus is here to stay.  Perhaps makes even more sense with TMX pipeline expansion and lower WCS Differential.

[cahclick]

  I concur with paying off debt 100%. I would support heavy hedging if WTI goes to $100 glt longs go ath go