April 28/2022
1st QUARTER EARNINGS 2022
Today's release of 1st quarter results was a non- event , given they had none of the usual NEW bolt on acquisitions, or dividend / buybacks to mention .
However , the non-event should not be under estimated either , management did everything they set out to do , and even managed to have a small beat on production . They didn't mention how they did that though . For those who remember they advanced cap ex from Q1 2022 drilling program to 4th Q 2021 to keep the crews they had , and to avoid not finding the crews needed later.
What they definitely telegraphed albeit extremely quietly was there concern around obtaining crews , and or materials needed to drill. This investor thinks this was the news .
It's not bad news ! I read the report , and I thought what can I add to the already good thoughts mentioned on the board today . This is what I came up with.
Reading between the lines , with regards to Whitecaps mention of inflationary issues , around supply chain , and work force , what you think or your first thought might be there may be a production miss later in the year .
However , looking to the other side of this coin , one might take a overall sector outlook based on whitecaps worry's around inflation / supply chain issues .
If whitecap a company that is incredibly well managed , a company that advanced there 1st Q 2022 drilling program
to 4th Q 2021 so there well organized , is saying there are concerns around supply chain , work crews , and inflation. Then the entire sector is likely going to feel the pinch. I would think it's going to not just be in finding work crews , I think it's going to be the extortionist rates that the crews are going to charge. It's going to be a either pay or they will . In trucking my business , this has been happening for months .
If you hesitate you loose the truck , that someone else will pay happily for. No trucks ? No business. No drill crews, no oil.
So here are the negatives
1) can't find enough crews to meet your production targets
2) might actually loose the upside in oil prices , when you pay double for crews
3) worst case is all of the above , and you cant get pipe , sand , and materials
If you kept reading !! Then good , because what I see is the lowest amount of DUC wells in the last 15 years. I see a shortage of crews to maintain production , and better yet , as I said we are well managed , this is a entire sector issue.
So those rumblings around shale producers not being able to raise needed production, there not only true , but there could with the decline rates , and massive shortfall of DUC wells , there could even be a decline in production in the back end of the year. With Russia getting shut in , this is a real issue.
So aside from production concerns , cap-ex rising from pre budgeted amounts , I see oil prices staying strong for as long as there is a ban on Russia , with might be years , and might corilate with renewables coming on line.
So today was a let done on some levels , but management executed , and reading between the lines , the lemons , will be lemonade in my opinion .
Rating - HOLD