Peyto Exploration & Development Corp T.PEY

Basis Deals - TOU vs PEY

[TerribleEng]

How is it that we keep signing these ludicrously expensive basis deals for NYMEX when our competitors keep signing contracts at the base spread with hardly any premium? Q3 2021 was supposed to be the turning point on this overhang, but it looks like we have resigned them into 2024. The rates are getting closer to a $1, spread but with the CAD appreciating, these isn't that great. Definitely not compared to what TOU just announced:

• Tourmaline has an average of 634 mmcfpd hedged for 2021 at a weighted average fixed price of CAD $2.59 /mcf, an average of 158 mmcfpd hedged at a basis to NYMEX of $(0.17) USD/mcf and an average of 513 mmcfpd incremental volume exposed to export markets, including Dawn, Iroquois, Empress, Chicago, Ventura, Sumas, Malin, and PG&E.

 

 

[Yasch22]

This post has been removed in accordance with Community Policy

[Oldnagger]

As I understand it Peyto wiped out 40% of its cash flow for 4 years by one stroke of the pen Pre-covid ? Has management ever explained why ? Perhaps we should be spending more time on the Gee spot as in ESG !!

[sportstermathew]

I don't think they are that bad, are they not mostly expiring in next five months? On top of all of this all new production coming on stream is well known as a huge advantage going forward. Most companies would just hide all of this and you would never know as the numbers would be lumped into one or two total numbers and that is all you would see. On a similar note I would like to know more

[Yasch22]

This post has been removed in accordance with Community Policy

[sportstermathew]

There has to be a huge upside for Peyto to do these basis deals or else they would not be doing these. Apache and others constantly do basis deals and other hedging scenarios to reduce risk by not floating in the markets. At some point they will be on the right side that will mitigate these losses over time. Peyto knows their costs, but what they don't know are what they will get 3, 6 or 12

[Yasch22]

This post has been removed in accordance with Community Policy

[sportstermathew]

Well said... Some times the wind is hitting you in the face and other times it is hitting you in the back. They have made money more times hedging etc over the years, but it just happened during the worst of the worst to be on the wrong side of timing as you mentioned. If anyone has any ideas, not 2020 hindsight, in what Peyto should be doing going forward it is not like we see them from others

[houbahop]

Excellent summary , Yasch! There is nothing wrong losing money on some hedges. You win some, you loose some. The problem, I hope they won't repeat, is they acted emotionally in reaction to the context. In other words, they tossed out their strategy of placing hedges in small quantities and spread in time, and they bet the ranch against AECO when it was in the hole. It is a costly lesson

[shenty46]

The answer to your question,it is the same some analysts asked darren gee in March 2021, hope it soothes everyone nerves, no doubt, next few quarters are bad, but we would be slowly getting to normal by year end. Kindly read Darren Gee response: It's obviously much more difficult for investors to look through now because we've got so much diversity in our marketing. We had to obviously put