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Bullboard - Stock Discussion Forum Obsidian Energy Ltd T.OBE

Alternate Symbol(s):  OBE

Obsidian Energy Ltd. is a Canada-based exploration and production company. The Company operates in one segment, to explore for, develop and hold interests in oil and natural gas properties and related production infrastructure in the Western Canada Sedimentary Basin directly and through investments in securities of subsidiaries holding such interests. It has a portfolio of assets producing... see more

TSX:OBE - Post Discussion

Obsidian Energy Ltd > Good, the bad, the ugly from Q1
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Post by kavern23 on May 04, 2022 10:37pm

Good, the bad, the ugly from Q1

The Good
I think it is an easy trap too cut back on capex too much...just to pay a token dividend.
High capex in 100 plus oil and 8 plus ng is acutally strength.  
Obe on the shale curve still had too spend lots in 2022 to make up for the low 50M capx in 2020 during covid.  Think it was 50m too lazy too look but I know 2020 was crazy low capex.  Going to have to have the piper at some point when you cut back on drilling for a year.
Gear energy is trying opposite apprach of OBE...they are going crazy low capex...their producton actually declined alot on oil basis and ng makes them look better.  
Gear is also drilling cheaper wells that produce instantly but not much in 12 months...dont lower corporate decline curve drillng the cheapies.

This is what is interesting about the direction OBE will go.  What do they likely up the capital budget too.
Hard me too guess as it depends on if they do cheapie viking to get short production burts for realtively low capex compared to cardium.  I have always felt OBE would spend 200-220m this year.
They could though make it 170-190m if they scale back Cardium drilling and do more viking development.

The bad
Wow did they run up their accounts payable to an insane f*cking number.  Lol they must owe precision drilling millions....its smart on OBE's part to run that number up.
Instead of waiting to have debt already refinanced before gunning the capex...Obe did it anyway and suppliers "finance" it until pays it down over springbreak.
Why I list this as a bad thing...is OBE currently doesnt have crazy space on their debt faculty....over the next 6 weeks...OBE likely will go down % more then other peers because of how exposed it is too an oil drop. Remote that anything happens in next 6 weeks...but it is still risk...and on any bearish days investors punish the risk.

The Ugly
Nothing ugly. OBE has had such a horseshoe with luck.


I expect OBE to be extra rollercoster like both on up and down movements over next 6 weeks.
Comment by kavern23 on May 04, 2022 10:50pm
The logic behind why I felt 200-220M is YGR spends about 25M a Q with one rig hammering hard. Assumed 2 starting up July 1...one in Pembina and one in Cardium and rolling rest of year. 20M in Q2.  Then for this 50M in Q3 as double YGR.  Then 50M in Q4. 120m here +100 from Q1 = 220 ish range. They should have Cashflow lift going forward too at least cover any capex increase and keep ...more  
Comment by Kramerkarma on May 04, 2022 11:11pm
what are the viking wells like cost and on the oil/gas and ip 30/90
Comment by kavern23 on May 04, 2022 11:48pm
Obe has 8 wells licensed in Esther Viking. I would estimate they budget 10m for 8. Total production add would be 1200 boe (80-90 percent oil) for first 90 days. at these prices should be able to pay well off in 3 months...then have 5-11 more decent production months and then can level at 10-40 boe. Bad when commodity prices are low but work well right now. quote=Kramerkarma] what are the viking ...more  
Comment by kavern23 on May 04, 2022 11:53pm
''meant 1200 boe a day for first 90 days total and 10-40  boe a day level out is per well [/quote]  
Comment by fortunefavorsus on May 05, 2022 10:18am
If oil prices stay up and they get to 2.000 BOE might be easy to flip Viking to someone like Baytex and greatly reduce debt.
Comment by JohnJBond on May 05, 2022 1:43pm
You reduce debt for four reasons. 1.   Your lender requires you to do so 2.   You think your lender may require you to do so soon 3.   You can't pay the interest rate 4.   You think you may not be able to pay the interest rate in the near future. OBE is not concerned about any of the above four reasons.    We know this, because they ...more  
Comment by rascallion on May 05, 2022 1:59pm
Debentures A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years. Debentures are backed only by the creditworthiness and reputation of the issuer. Both corporations and governments frequently issue debentures to raise capital or funds. Some debentures can convert to equity shares while others cannot.
Comment by JohnJBond on May 05, 2022 3:07pm
Which book did you get that out of? Debentures can be secured or unsecured. In OBE's case, they will probably have some of each (becuase they've already said so). They can be any term, but 5 year is my guess for OBE.   They may stagger the maturies.   It will depend on their future debt plans - ie do they anticipate paying out some earlier than others.
Comment by fortunefavorsus on May 05, 2022 3:46pm
What will be the interest rate in this environment.  I don't see anything less than 8.5%.  Surge had to pay 8.85% for 130 million term debt facility.  Isn't the wait to see how little they have to finance.  With the higher oil and gas prices maybe go with not as much financed.
Comment by JohnJBond on May 05, 2022 5:33pm
A debt facility from a group of banks is not the same as a market traded bond (debenture). Baytex Energy Corp 5.625% 1jun2024 is trading just over par.    BTE has a B+ rating by Fitch (Upgraded from B in April). Will be interesting to see the coupon on OBE's debt.    Very unlikely it will be 8.5% plus
Comment by fortunefavorsus on May 05, 2022 10:06am
OBE probably got much cheaper rates to drill so running accounts payable was smart on their part.  They can always cut back on capex now and generate hugh FCF.  At these prices will have a massive 2nd quarter FCF.  I am guessing they are hedging some more now to cover these additional 1st quarter cost.
Comment by Flush11 on May 05, 2022 6:07pm
I think the market gets a little spooked when you see constant adjustments to spending on drilling. I also think they take it as 1. dishonest and 2. and indication that management has some sort of sleazy bonus system like Scott the d!ckhead used to have at CPG. Based on growing production whether any money was made or not. I would like OBE to commit to some sort of predictable drilling program ...more  
Comment by TheRexmember on May 05, 2022 8:40pm
If you listen to the conference call on the website they ststed months ago that they would spend about 105 million in Q1. the only surprise was the land purchase for 14 million. 
Comment by JohnJBond on May 06, 2022 12:24am
OBE has been very clear about their drilling program, and have followed it. If view that as adjustment, it may be becuase you didn't listen to what they said. OBE stated its capex for 2022 was 150 million, and would be revisited in mid 2022. They said they would spend about $105 million in H1.    Since Q2 is the breakup quarter in which very little capex can be spent, that ...more  
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