Birchcliff Energy Ltd T.BIR

Difficult to understand why Birch is stuck when they benefit

[Naveed23]

Difficult to understand why Birch sp is stuck when they benefit far more than other Canadian gas companies. It's laughable how oversold and depressed Birch's stock price is in comparison to the company's value. Birch sells mainly to the US hubs: NYMEX and Henry Hub. They are by far the cheapest Canadian Oil/gas stock to buy yet it gets shorted and beaten down daily. Very confusing. I have a feeling Q3 may finally be the turning point but will have to wait and see. See Below: 

Birchcliff uses NYMEX HH/AECO swaps to manage its natural gas sales price exposure by hedging against the difference between the US-based NYMEX Henry Hub (HH) price and the Canadian AECO price, allowing them to receive prices more closely aligned with the more robust NYMEX market for a portion of their production. These financial instruments help Birchcliff Energy Ltd. diversify its revenue and enhance its effective sales price by linking Canadian production to the higher-value US natural gas market. 

What are these swaps and why are they used?

• Natural Gas Hubs: 

  AECO is the Canadian benchmark for natural gas prices, while NYMEX HH (Henry Hub) is the US benchmark. 
• Price Differential: 

  There is often a significant difference, or basis differential, between the AECO price and the NYMEX HH price. 
• Birchcliff's Strategy: 

  Birchcliff sells a significant portion of its natural gas into the AECO and Dawn markets but also uses NYMEX HH/AECO basis swap contracts. 
• Hedging Mechanism: 

  These swaps allow Birchcliff to effectively receive NYMEX HH prices instead of AECO prices for a portion of their production. 

How do the NYMEX HH/AECO swaps work?

• Birchcliff enters into financial contracts to receive the difference between the NYMEX HH price and the AECO price. 
• If the NYMEX HH price is higher than AECO, Birchcliff benefits from the difference. 
• This hedges against the higher costs often associated with selling into the AECO market, providing a more favorable and predictable selling price for their production. 

What are the benefits to Birchcliff?

• Improved Realized Prices: 

  The swaps help Birchcliff achieve an effective average realized sales price that is significantly higher than the benchmark AECO price. 
• Market Diversification: 

  By linking their Canadian production to the US NYMEX market, Birchcliff diversifies its natural gas sales exposure. 
• Enhanced Financial Performance: 

  This strategy contributes to better revenue and financial stability by capturing more value from their natural gas assets.