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Bullboard - Stock Discussion Forum Birchcliff Energy Ltd T.BIR

Alternate Symbol(s):  BIREF

Birchcliff Energy Ltd. is a Canada-based intermediate oil and natural gas company. The Company is engaged in the exploration for and the development, production and acquisition of oil and gas reserves in Western Canada. The Company’s operations are focused on the Montney/Doig Resource Play in Alberta. Its operations are concentrated in the Peace River Arch area of Alberta. The Company has a 100... see more

TSX:BIR - Post Discussion

Birchcliff Energy Ltd > Peer Comparison
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Post by GuidoSan1 on Oct 28, 2021 11:41am

Peer Comparison

Good day, just to qualify my copy of a post made on the SDE board by black4444 which in reposting here has indeed a bias to SDE when taking into consideration all the peer group associations listed including BIR as comparisons of company EV's.

This copy has been born out of board discussions recently posted here including most recently Touchdown12 on both boards.

As many know I held a large position for 2+ years in BIR up until not long ago and transitioned profits made into a expanding position in SDE starting at slightly under $3.75 average. I qualify now that although it may appear I am promoting SDE for consideration, I really feel it may be of benefit here to assess general peer group comparison of a number of these companies instead of viewing the copied post as a direct comparison of BIR vs SDE.

The underlyling fundamentals are varied and many, EV value, P/E value, production, financing, debt, cash flow, earnings, future P+P barrels in the ground, etc. all looking technically up to 12 months out.
Here it is from black4444 peer analysis:

"  Thanks GuidoSan 1 for the kind acknowledgment .

Since Q3 numbers are about to drop, it's probably worth updating things since my July 28 post.
The bottom line for the TL;DR crowd is:

Notwithstanding the 28% share price rise since the last posted, SDE remains undervalued relative to its peer universe. SDE equity valued pari passu with peers on an EV basis is easily $10 per share.

That peer universe (AAV, BIR, CR, KEL, NVA, PEY, PIPE, POU, SRX) consists of companies not materially larger or smaller than SDE and with a mix of gas and liquids weighted towards the Montney play.

Using Q2/21 numbers from the peer group, and proforma SDE as if all of the press released transactions occurred Apr1/21 we can look at two metrics, specifically EV per flowing barrel and EV per P+P barrel in the ground.

The first measure sees the peer group trading at between $31k and $42k per flowing barrel, with an oilier weighting attracting higher prices as seen in the values ascribed to PIPE and POU. The second measure sees a range of $2.12 to $5.28 per P+P barrel in the ground. The split between proven and probable influences this number, and CR with its large proportion of probable and undeveloped is the outlier here.

SDE comes in at $23k per flowing and $3ish per barrel in the ground. That is materially less than the peer group in the $ per flowing barrel department and at the low end in $ per P+P barrel.

The question then is why the disconnect from the peer group?

Is management at SDE that much worse than all of the peers? Doubtful. Are SDE properties materially inferior to the peers? Given that many of their peer’s assets are direct neighbors to SDE, that’s unlikely. Is it the hedge positions? Possibly, but I would argue much of the industry is hedged similarly, and over the multiyear lifetime of the assets the 1-2 year life of those hedges shouldn’t have a huge impact on the discrepancy between SDE and its peers who may have lesser or no hedges. Operating costs and G&A? Nope, looked into that. Debt? SDE debt per flowing barrel is considerably less than BIR, CR, NVA and PIPE and not materially worse than AAV and SRX.

So, what is it?

I’ll argue that the bulk of Bay Street still hasn’t figured out what the old SDE + Inception + Velvet + Cequence + financings + debt conversions looks like. Projections/guidance are one thing but real results are another. And algo’s can’t scrape guidance very well. So maybe Q3 results start to illuminate the picture that has been painted, with a finalized balance sheet and a taste of the cash flow and earnings that will be fully revealed in Q4’s results.

If anybody has some corrections or pushback on the above I’d love to hear it and help improve the thesis.

And finally, I’ve mentioned this before. Look at the land maps. See who’s directly adjacent to the northwest and south of SDE in the Montney. Pipestone and Hammerhead. And who controls those two entities? Riverstone, who is jettisoning everything oil and gas related to focus on the new green economy.

Does 1 + 1 + 1 = 5?

Food for thought." End

Suggest doing some homework for those interested and have the time in general to do your own peer comparision and it would have to be somewhat extensive on an individual basis, I am interested to hear all/any comments from this point now which of the 2 BIR/SDE or any other from the peer's listed has the most to gain in share value appreciation over the next 8-12 months, black4444 would too. Of course all IMO.

PS Yes I know black4444 who rarely posts on Stockhouse personally, cheers.
Comment by TouchDown12 on Oct 28, 2021 2:18pm
We all learn by comparing somewhat - so Talking about SDE and BIR together in an analytical context is helpful in qualifying and setting expectations for mulitple stock holdings in a sector like E&P. Good idea to post this GuidoSan1!  TD12
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