Obsidian Energy Ltd T.OBE

Reflections

[JohnJBond]

After reflecting on all the information shared yesterday

It feels like OBE is being flipped - like one of those flip that house shows 

Presentation pages on

value of tax pools and how they are not in the share price 

value of the reserves compared to share price 

Board payout tied to share price and payable upon their exit 

Rapid increase in production to 37-38k.   Reason given - to better reflect the holdings (this will also increase the NPV of the reserves 

Statement that company is forsale everyday

Statement they would buy back shares instead of pay dividend if decision made today 

No specific plan after they get to 37-38k

No particular interest in getting to 50,000

Feels like a flip this company situation.    Which is what frontfour does.   

lock debt at 225 million
produce at 37500 OBE
increase reserves 

Then sell

[mikesh]

Would they need 260-270 million cap-ex to keep the production at high 30k?

[JohnJBond]

They report a decline rate of about 20 ish percent  It follows they will need 7500 new boe to maintain production However the decline rate will be higher given the rapid growth rate    It will be dependant on how much of the new growth comes from low decline peace river and pembena vs the rest  They may need 9000 ish new BOE to maintain     260-270m would

[Hendrick3]

Great analysis and certainly your views jive with Front Four's vision all along. They began this journey in 2018 thinking it was an 18 month project with a 50%-75% rate of return. Obviously it is more like a 5 year project now but the BNE deal seemed rushed and a clear indication they wanted an exit. Every aspect of their strategy is to maintain as much wealth in the company. A dividend is

[JohnJBond]

If 37500 boe is their target for a sale, then we can work backwards from that number to guesstimate the sale price they are looking to obtain  Given their tax loss asset, the limited supply of oil globally, the potential WTI price in 2023, and their land in the Clearwater I wonder if they think $100,000 per flowing barrel is achievable?

[kavern23]

The short term problem through is alot of investors are going to sit on the sidelines before buying and will wait as if oil ever touches 100 bucks, market sentiment is so bad it would take this to 10 bucks if lucky...maybe 8-10 bucks if 95 -98. Not my fault, dont shoot the messenger but companies like BNE, OBE, and CJ will drop harder then average. Is what it is....maybe oil will not drop and

[kavern23]

BNE has f'in dropped from 13 bucks to 9.61 in what 10 days.  The 10m payments they have to make for next few months in this market sentiment equals a share price pummeling.

[Hendrick3]

CJ is an interesting case study in how a big dividend doesn't seem to move stock price in this sector. At current dividend of 60 cents and an expectation that could rise as far as $1.20, the share price has not been supported. Those that thought a $1 dividend by OBE would raise them to $20 can now see that at least in CJ's case a dividend yield of close to 8% with potential to 16% does not

[JohnJBond]

The dividend yield on CJ will support its price.  (Until such time as the dividend is considered at risk) That doesn't mean those paying dividends don't rise and fall      It means when they fall there is an additional reason for some people to move money into them  CJ presently has a 7.75% yield.    Rational investors don't give that up easily

[JohnJBond]

Ps - algorithms don't feel excitement on the phone.   They only sense it in the share price.   The trick is to sense it before they do 

[kavern23]

A fed rate increase really effects all dividend paying stocks. Every increase is not going to lower CJ yield in the market.   Fed rate increases are bad for stock market.

[JohnJBond]

Loukas and the board will be aware a dividend would raise the share price  If OBE is being prepared to sell, they must think they will get a better time weighted return from this strategy  The performance bonus program provides an incentive for the leadership to maximize share price over dividends.  The performance units don't pay dividends   They vest well into the