Anyone else incredibly tempted to dip their toes into these? Some of them are trading at ridiculous yields versus their historical trends and are extremely solid companies. Some are unsustainable such as HTE.UN (Harvest) trading at an over 40% yield but many others are fiscally prudent and very healthy. Some of them that I’m referring to have strong balance sheets and are partially hedged at or above current commodity prices. They also have a crapload of development opportunities. This includes Crescent Point, Vermilion, and ARC. My top pick is CPG.UN. I bought today at a 14% yield and will be holding for quite a while. Thoughts?
INSANE… and look at the hedges they have. Peyto is one of my favorites from the old days.
I’ve been buying NGPC. They are going to do well in this mess.
“Peyto is one of my favorites from the old days.” I cannot speak on behalf of all of their operations but in my experience, Peyto is the one of the worst company I have seen for natural gas drilling in terms of geological assesment of potential targets. I also think they have a poor land base position and I am astonished at some of the poor decisions this company continues to make in joint venture operations with my company and others. I suspect they have low ROIC but I haven’t scrutinized the financials. A lot of the oil companies in Calgary have employed the long put/short call strategy so I think you will find a lot of good hedges out there (I know my company is covered).
What are you taking about? They take no geological risk at all. It’s a resource play. Every well is low/no risk! The deep basin is the best natural gas resource on the planet and they have the 3rd most land there… next to some pretty big players: 1 CanHunter/Burlington/ConocoPhillips - 1045 wells 2 RioAlto/CNRL/Anadarko - 934 wells 3 Peyto - 600 wells These wells will be producing for 30 years! I’m not buying yet but this is the kind of asset you want in a fire sale.
Peyto is somewhat of an outlier in terms of its peers I would say. I normally don’t pay much attention to what they are up to.
KCIN, I did some very quick and dirty work on CPG last week. It’s base NAV (2p) is around $30 at $80 crude flat, it’s around 0.8x today with the yield. Just close you’re eyes until some rationality comes back!
I think CPG has the best assets to make a seamless transition into a corp as well. This company is money in the bank as far as I’m concerned.
virginCFAhooker Wrote: ------------------------------------------------------- > What are you taking about? They take no > geological risk at all. It’s a resource play. > Every well is low/no risk! The deep basin is > the best natural gas resource on the planet and > they have the 3rd most land there… next to some > pretty big players: > > 1 CanHunter/Burlington/ConocoPhillips - 1045 > wells > > 2 RioAlto/CNRL/Anadarko - 934 wells > > 3 Peyto - 600 wells > > These wells will be producing for 30 years! > I’m not buying yet but this is the kind of asset > you want in a fire sale. I will see if I can address your statements: I’m talking about their drilling activity – not existing production. The drilling turnover required to sustain production is high in the deep basin as the wells initially produce at high rates and then settle around low production rates. This is the typical deep basin production profile which you are probably familiar with. You’re correct in assuming the wells will produce for 30 years, however the rates will be so low (less 80 mcf/d) that the NPV of that production next maybe 5 years down the road is nothing. The deep basin WAS the best natural gas play on the planet, until costs substantially increased and the new royalty scheme came along. Unfortunately, Alberta now has some of the most expensive costs in the world with regards to exploiting their natural gas, especially in the deep basin. > What are you taking about? They take no > geological risk at all. It’s a resource play. > Every well is low/no risk! Peyto actively drills Cardium wells in Sundance and they are of course hitting targets (low risk), but in the very poor unfaulted areas (poor productivity and geology). Of course, not everything is slam dunk and unfortunately from my experience, this is what I have observed with Peyto. This is what I implied when I stated they have a poor land base. I don’t know if you have access to any software like Geoscout or Accumap but you could go and take a look for yourself at how crappy the wells are. Cheers, Ali