What we need to understand about VET is that they have operated in Europe for over 20 years, the hedges they took on for NG were done (mostly) prior to the slump in prices early last year. The average price on their hedges are a floor of $7.96 and a ceiling of $9.04. They are still making out like bandits. That's on 68% of production, so 32% is still obtaining the current spot (which I might note can't continue at these levels indefinitely, demand destruction, NS2 stalling, more NA LNG and/or Spring 2022 will see to that. (However, for those who pine for the casino, 2022 is hedged at 48% with a ceiling of $8.65).
But that's not the real story going forward, they traditionally make great cash flow in European NG hedged or unhedged. Where their netbacks have stunk (the only part of their portfolio) is AB NG. And unfortunately (till now), their west central Alberta lands, where they typically target oil and/or condensate, has a high associated NG component, so much so that NG (6:1 basis) comprises 29% of their total production (vs. 19% from European NG, thanks to Ireland and the Netherlands). Right now, they are hedged on 44% of their AB NG at a miserable $2.26/mmbtu (pretty much the same/mcf, add 4%). However, that means over half is now receiving AECO spot, which is over $5/mcf. And, again for the people wanting maximum leverage, 2022 is completely unhedged.
And, in 2022, their entire portfolio is only hedged 10% (although I guarantee that at current pricing, they're layering on new hedges fairly expeditiously, which I doubt we'll regret if it accelerates a certain end to debt deleveraging.
At some point (soon) the debt dragon will be slain. It takes about $400m to address all declines and push production slowly back towards 90-100,000 boe/d. As I have asked previously, and will ask again, with circa $400-500m super-FCF, which excludes modest growth capex, which understates true FCF - and ignoring the effects of current blowout NG pricing, FCF could be much more for a time, which will simply accelerate the dragon-death-day - and 130m shares o/s, what do we all think they'll do with the $3.50-$4.00/sh. (each and every year into the future)??????
Regards,
Naamkat
P.S. I am motivated by none other than Baron Rothschild, who in the mists of time said about how he became wealthy, "I risk only my rate of return, not my capital" (or words to that effect).