Kelt Exploration Ltd T.KEL

Share buy backs do not serve Share Holders

[MyHoneyPot]

Share buybacks are a destruction of Capital and Economic opportunity for Energy companies.
 
The buying back of shares, sends a 2% Royality to Justine Trudeau while at the same time evaporates capital off the balance sheet, limiting the growth and opportunity in the energy industry in Canada.

Share buybacks occur when the companies are generating large amounts of FCF and are considered by some as a return to the shareholders, but  in my opinion, nothing could be further from the truth.

When you have the most FCF to buy back shares are when commodity prices are high, meaning you are buying back your shares when market conditions are good. Now when market conditions are bad you have blown the wad and are forced to reduce Capex.

Share buybacks slow down investment, investors buy energy companies because we think this commodity space has a future, not to watch oil companies  put a cap on the industry and evaporate capital.

Time is money, and with billions of dollars of resources sitting in the ground that could provide significantly more returns to the shareholders, increase FCF, and a larger production base.
People do not buy energy companies; to watch them buy back their shares, this is only good for the long-term insiders that have a job at these companies and is not good for the shareholders of the company.

Really in Kelt case in point you witness growth in the NAV every year that demonstrates significant shareholder return. However, there is more that does not always show up in the reserve report, but they have confirmed the resource in place and have gained knowledge and insight into their play areas. This can only be done by investing capital and share buybacks don’t do that.

Most of these share buybacks is because management is not sophisticated, they don’t know how to grow the company and don’t want to give special dividends or increase the dividends for shareholders.

Even more disgusting is companies that on month are buying back shares, the next month issuing new shares (Under subscribed), writing down assets for fire sales,  blow up their resource base, over pay for a new asset space, employ Eric Nuttal to pound the table that management has found religion, and when all the smoke clears hand a sign of VERITY on the company, and are not a Montney/Duvernay company with the best wells on the Planet.

I am comfortable that the value of Kelt is growing at an exponential rate, and that share buyback would simply add stress to the company, and the balance sheet, pay Trudeau, and evaporate Share Holder Capital. 
 
IMHO

[Seppelt]

You must have plenty of time writing a philosophy book about buybacks which are not applicable to this company because it doesn't generate any free cash. When it does, hopefully in the near future when the cash is plenty and oil/gas prices are strong and stable, it will be a different discussion. 

[MyHoneyPot]

Kelt performance for a company with a 1.2 billion marketcap, will be realized in a higher NAV value.  The evaporation of capital, at a typical buyback rate in not a genuine return for shareholders and is only done when the FCF is that, meaning at times where we are experiencing higher commodity prices.  These companies are still carrying huge debt loads and buy back shares when the

[MyHoneyPot]

WCP which is a good solid company, and they are buying back shares and will buy back more shares with the objective of increasing the share price because they think they are such a deal. However that only happens as long as the commodity prices support these buybacks, shareholders can witness the evaporation of capital off the balance sheet. So as soon as the commodity prices drop off then the

[Seppelt]

I own WCP, often trading a portion, holding the rest. I am OK with buybacks, at least a minimum to avoid any dilution due to options, rewards, etc. But I wish their dividend wasn't so generous and instead they would prioritise paying off the debt. Nothing is perfect.

[Trapped]

Wrong. Buybacks take time to reset key metrics but it would take someone with an attention span longer than that of an average garden flea to understand their value.

[MyHoneyPot]

Buybacks are table pounding when there is FCF and a dividend working.  However when the commodity price fall, all the stock fall whether they have done share buybacks or not, look at ARC today, they are trading in the 23 dollar range and just bought back over 25 dollars.  They finally got attachie off the ground and now that they have some meaningful direction from management share

[PabloLafortune]

I wouldn't consider buying shares back you've recently issued to staff a buyback program.  What it is actually is clarifying what the share ownership program is costing you on a cash basis. For example if 1,000,000 shares get redeemed this year, and it cost staff $2 and the company bought them back for $6, on a cash basis it means the ESOP cost you $4M in 2024 or $0.30 per boe (based

[gassygeezer]

i second this philosophy...it's the old game being played with a new name

[MyHoneyPot]

There is only 55 employees and the CEO doesn't take a paycheck. This puts money onto the balance sheet, and it is only pennies when compared to the value the company adds each year in terms of reserves and produciton growth.  May they can re-evalate their strategy once they hit 55000 boe/day.  Kelt will be dripping in cash in 2025 and likely will change the way they do things. 

[teashade]

>>Kelt will be dripping in cash in 2025 and likely will change the way they do things.  They'll have revenue but also the cost of maintaining their production growth, I think true FCF is still a 2027 event. They need to grow significantly to hit their processing commitments and current NG prices aren't helping the ROCE. Their maintenance capex will grow in tandem with

[gassygeezer]

With ubiquitous options selling, these 55 may be the highest paid team in Oil/gas, performance notwithstanding

[Trapped]

... look at ARC today, they are trading in the 23 dollar range and just bought back over 25 dollars.  -- An extremely shortsighted and deeply flawed take. Not that I would expect you to understand, but I was explaining that the benefit of buybacks take time to kick in. But once they do, look out. By your same logic, what would you say about the ~80 million shares ARC bought back in

[MyHoneyPot]

Between share buybacks and the worst hedging program in the history of OIl+Gas, Arc has evaporated more that 3 billion dollars of shareholder capital. Imagine if they had that on the balance sheet, all they are doing is cycling your money, paying a measly dividend while they buyback shares when commodity prices are good, paying to dollars.  I will buyback into ARX at $17.50 on the next

[Trapped]

I will buyback into ARX at $17.50 on the next downturn.  -- Don't hold your breath.

[gassygeezer]

MHP, perhaps you should have held Arx and dumped vs pumped Kelt. Obviously,tangibly proven better returns...Arx hedging improved significantly, how has Kelt hedged dry gas on their major capex in BC?...jiust get realistic,most here retain shares while watching dilution to mgmnt...AND Kelts favoured Contractors(hopefully arms length?)

[MyHoneyPot]

You don't want to egg me on do you? ARX sunrise is not even postage stamp size and the capital they spent to bring on dry gas, mean the 20 section play would not be mentioned in most real companies.  ARX attachie, very hard rock and is no where close to Kakwa, they are living in la la Land.  Dividend yeild 2.8%, not really a dividend, and between share buybacks and band hedges

[gassygeezer]

I'm a shareholder too and want Kelt to succeed, it seems amatuer hour too often as they persue growth/sale objective Hal Kvisle,  P.Eng a more recognised, esteemed,proven "legend" in Calgary O/G has been buying Arx while Kelt insiders selling...made a lot w/Hal, notsomuch wilson etal over their respective histories...Wilsons always been junior in that space and Kelts capex

[MyHoneyPot]

Hal Kvisle has been selling shares consistently in ARX over the past few years.  I really don't like the ARX is management, it is inefficient, it is not opportunistic, and they do not take full advange of their resouce or plant at Kakwa.  Their hedging cost shareholders billions, and it was stupidity, and management put out a video how smart they were, that they later took down

[gassygeezer]

Disagree, how many Insider purchases in Kelt during 2024? Try selling out a big position in Kelt without price capitulation, a big risk Timing applies to both companies,one has scale and a mandate to continue growing,other to sell oportunistically(in some cases to those with infrastructure),  problematic timing can lead to squeeze plays..ie Inga 

[MyHoneyPot]

I am sorry i disagree, ARX growth has been marginal at best.  It has take 5 years to get the CVS Albright gas plant built, Kelt is going to double it production over the next two years.  ARX has made catastrophic mistakes, that cost the shareholders billions. Hal is chairman of the board he is not involved in operations on a day to day basis.  Wrong type of people running ARX