Gear Energy Ltd T.GXE

Market Tightening

[Roscoe747]

Some big buys today on 1.7 mm volume. The Bull narrative appears to be holding and significant draws will be encouraging but will the generalist investor come back? Will PE and funds return to the energy market or will energy resort to blowing down reserves and returning cash flow to shareholders until there is nothing left?

Obviously the lowest cost structure entities globally will last longest. US shale is already facing this hurdle,trying to avoid drilling Tier 2 acreage while oil sands with huge reserves will prosper. GXE will face the reserves conundrum sooner rather than later with ~5 years left at 6/k/d.

[navajojoe]

Looked more like big sellers than buyers, as the share price dropped. But you are right, borrowing to pay a dividend while depleting reserves is not a good strategy.

[kraftdinner]

Actually operating cashflow does have the dividend covered, the size of their capex program did require some borrowing and was large enough to cover depletion expense and provide about 7 million of growth capex. I think the size of their net debt is reasonable for the size of their operating cashflow. It takes time for the costs of a well to be recovered from production of the well, the well can

[navajojoe]

Hahahahaha, oh right, they didn't borrow to pay the dividend, they borrowed for capex. That must be the "new math" I keep hearing about! Hahahahaha

[kraftdinner]

This is still a small company and it takes awhile to grow. About 20 years ago, maybe even on this site, there was talk about using debt to annualized to cashflow to guage safety. The post mentioned using a number of two as being high, with the thinking being that if the company stopped all spending how long would it take to pay off the debt. A person can use any number they like though I did