BXE - Bellatrix Explorations

[dustin_johnson25]

Hi Wilson-TPC, I am curious to get more color on your comment that BXE's JV's are expensive.  I viewed the JV's as a competitive advantage in the short term, while perhaps being dilutive to their asset base over the longer-term.  But given the balance sheet constraints and pricing envronment I would have put the JV money as a net positive to the company. 

[Wilson-TPC]

Hi Wilson-TPC, I am curious to get more color on your comment that BXE's JV's are expensive.  I viewed the JV's as a competitive advantage in the short term, while perhaps being dilutive to their asset base over the longer-term.  But given the balance sheet constraints and pricing envronment I would have put the JV money as a net positive to the company.

 

Companies who do JVs are really only caring about "growth". Peyto would never do a JV, because your "ALL IN" cost would be high because your profitability decreased by 50%.

 

And for companies who are more return on capital focused, JV is the most expensive financing. Obviously, if they did share issuance at this level, that would be considered the MOST expensive. But, the management team was just growth hungry, which I don't particularly like.

 

 

[Wilson-TPC]

For those that found the previous model really complicated to look at, here's a simpler one.

 

Big assumptions are:

 

- Nat gas spot recover to 3.5 in the next 1-2 years.

 

- Sell of Angle assets for 200 mil next year. BXE bought Angle in 2013 for 570 mil. Flowing BOE valuation is 30k on 6500 production.

[Picasso]

If nat gas does not recover and ends up lower in 1-2 years, what would you estimate for the value of BXE?

 

[Wilson-TPC]

If nat gas does not recover and ends up lower in 1-2 years, what would you estimate for the value of BXE?

 

BXE is already hedged 50% in 2016 and 35% in 2017.

 

The value of the equity will remain below 2 given that all cash flows will be used to maintain current productions and interest costs.

 

Noncore asset sales will likely still yield 100 mil give or take.

 

 

[tede02]

Wilson, thanks for your detailed commentary.  It's both interesting and helpful. 

[Guest wellmont]

not really feeling the peyto love. I think it lives off it's reputation. I did a 10 year chart on it and was surprised that the stock is lower now than it was at start of the period. I did a rough calculation of fcf over last 4 years and discovered it didn't produce any. it was investing heavily. But I can't be sure they are producing real owners earnings they can pay out after all the investment it takes to grow production at low costs. It has around 20m more shares outstanding and almost $500m more in debt. and it continued to raise the dividend for Canada's widows and orphans. :) I would much rather own tou and aav. bxe is very cheap along with bir. both are buys in my book. I also would prefer vet and arx although I don't own either.

 

I think the divvie props peyto up and consequently it sells at a higher valuation than most gassers. Beware of stocks that pay high dividends. they can be misleading because the analyst just assumes the cash is being produced to pay it. As such, one should study them closely.

 

your mileage may vary. I know peyto has been a great Canadian company for a long time. I learn a lot from their monthly newsletter from CEO. this is just my humble opinion as an energy "tourist", and it could very well be terribly off base. So I wouldn't listen to me. :)

[Wilson-TPC]

not really feeling the peyto love. I think it lives off it's reputation. I did a 10 year chart on it and was surprised that the stock is lower now than it was at start of the period. I did a rough calculation of fcf over last 4 years and discovered it didn't produce any. it was investing heavily. But I can't be sure they are producing real owners earnings they can pay out after all the investment it takes to grow production at low costs. It has around 20m more shares outstanding and almost $500m more in debt. and it continued to raise the dividend for Canada's widows and orphans. :) I would much rather own tou and aav. bxe is very cheap along with bir. both are buys in my book. I also would prefer vet and arx although I don't own either.

 

I think the divvie props peyto up and consequently it sells at a higher valuation than most gassers. Beware of stocks that pay high dividends. they can be misleading because the analyst just assumes the cash is being produced to pay it. As such, one should study them closely.

 

your mileage may vary. I know peyto has been a great Canadian company for a long time. I learn a lot from their monthly newsletter from CEO. this is just my humble opinion as an energy "tourist", and it could very well be terribly off base. So I wouldn't listen to me. :)

 

Wellmont, I read your posts and agree with you the majority of the time, but in the case of Peyto, I can't possibly disagree with you more.

 

Peyto's history is very easy to understand, and how it operates makes it an outlier in the industry. Darren Gee, the man behind the scene at Peyto, makes Peyto the most efficient E&P company in the planet. Ken Peak would be up there, but unfortunately he passed away. There's a reason why Peyto operated with borrowings over the last few years. The only time to invest in a commodity business is during the down cycle. Costs are low, and competition for acreages are nile. Peyto was able to buy up acreages with zero competition, which means that Peyto is able to invest heavily and earn a great return on capital (natural gas prices at lows). The premium Peyto gets is not from its dividend, it's from the way the company operates and the respect the investor base gives its management team. After having many in person interactions with E&P executives, companies will tend to trade at a premium or discount simply because of the CEO, and the way he/she operates.

 

I recommend reading a recent SA article on Darren and perhaps watching one of his AGM videos. And if you ever get a chance, meet the man himself in Calgary. He will shine the light through you and tell you everything there is to know about how to operate an E&P company. Not to mention, he's got a great sense of humor.

 

Link to article: http://seekingalpha.com/article/3375565-the-unknown-outsider-the-story-of-how-an-outsider-ceo-thinks-in-the-oil-and-gas-industry

 

 

[Guest notorious546]

Why does peyto issue equity once a year if it generates free cash flow? Seems like they almost use it to fund the dividend. Think it's pretty clear and the share count consistently moves up y/y

 

At what is the lowest price for gas that BXE can service the debt? I bet it's maybe a dollar below or so today's prices. Not exactly the hardest to envision given the Marcellus flows pushing out Canadian volumes over time and aeco - nymex widening out to reflect this.

[Wilson-TPC]

Why does peyto issue equity once a year if it generates free cash flow? Seems like they almost use it to fund the dividend. Think it's pretty clear and the share count consistently moves up y/y

 

At what is the lowest price for gas that BXE can service the debt? I bet it's maybe a dollar below or so today's prices. Not exactly the hardest to envision given the Marcellus flows pushing out Canadian volumes over time and aeco - nymex widening out to reflect this.

 

If you think nat gas can go a dollar below where it is today, then we don't really have a conversation here. You stated one data point and said nat gas could go one dollar lower, so I don't know what else you want me to say to disapprove you. You don't list supply and demand going forward, storage levels, weather forecasts and LNG demand. So i'll leave it at that.

 

BXE receives a premium to spot, and futures curve is in contango, so the price BXE receives is typically .50 above spot on a full year basis assuming it hedges 100% 1 year out.

 

Peyto issues shares each year for the last few years, because Darren thinks its the perfect time to invest in the business. I've repeatedly said that the only time to invest is when commodity prices are low, and nat gas has been very low for the last 3 years. If you look at capex, Peyto has steadily raised it. It's not operating with free cash flow, the only time it did was when commodity prices were high. That's when he stops investing. If you want more clarity as to why Peyto does equity issuance, you should read Darren's monthly reports. I think it will give you a better view as to how he allocates capital.

 

 

[Wilson-TPC]

Why does peyto issue equity once a year if it generates free cash flow? Seems like they almost use it to fund the dividend. Think it's pretty clear and the share count consistently moves up y/y

 

At what is the lowest price for gas that BXE can service the debt? I bet it's maybe a dollar below or so today's prices. Not exactly the hardest to envision given the Marcellus flows pushing out Canadian volumes over time and aeco - nymex widening out to reflect this.

 

http://www.gasalberta.com/pricing-market.htm

 

The market obviously disagrees with what you said about nat gas prices.

[EliG]

I did a 10 year chart on it and was surprised that the stock is lower now than it was at start of the period.

 

Peyto split 2:1 on May 31, 2005. Google and Yahoo charts don't adjust for the split.

[kevin4u2]

Wellmont, I didn't see you post because I have you on ignore but after seeing other people reply I had to take a look.  Now, you may not be feeling the Peyto love (same goes for notorious546), but I sure have.  I have been a long term holder (since 2002), although I have sold nearly all of my shares in recent years.  I have no idea what calculations you were looking at but I would check your math.  Here is some love for Peyto.

 

The company has been in business for 16 years.  Over that time it has had a CAGR of 50%, or up 650x (total return).  As Darren recently said, that makes Peyto not only the best performing O&G company over the last 16 years but the best performing company in Canada, period.

 

Now many will counter by saying that, like FFH, the first few years skew the results.  Ok.  Over the last 5 years, the total return was *only* a CAGR of 24% or up 3x, in a period of terrible gas prices.  So, I really don't know what calculations you have been doing.  Yes they raise equity, mostly because it's overvalued most of the time, and they use debt (very low cost debt, I would add), but so what?  What well run company wouldn't do such things?  Share count is meaningless.  For IBM and Peyto it's the per share metrics that count, not absolute numbers. 

 

Anyway, I would add that I wouldn't touch TOU with a ten foot pole.  You want to talk about a company that lives off their reputation that is one.  They don't make money and have never made money, just like CPG.  TOU only makes money by issuing overpriced equity.   

 

I am baffled by investor sentiment of the O&G industry.  It's as if all financial norms get thrown out the window when it comes to valuing these companies.  Analysts and investors love talking about cash flow, as if earnings don't matter anymore.  And Peyto hasn't had any FCF???  Are you kidding me?  How have you looked at their production per share numbers?  Unbelievable.  This gets back to the maintenance and growth capex discussion on the other thread.  Value and growth are joined at the hip.  Anyway, back to ignore. 

 

not really feeling the peyto love. I think it lives off it's reputation. I did a 10 year chart on it and was surprised that the stock is lower now than it was at start of the period. I did a rough calculation of fcf over last 4 years and discovered it didn't produce any. it was investing heavily. But I can't be sure they are producing real owners earnings they can pay out after all the investment it takes to grow production at low costs. It has around 20m more shares outstanding and almost $500m more in debt. and it continued to raise the dividend for Canada's widows and orphans. :) I would much rather own tou and aav. bxe is very cheap along with bir. both are buys in my book. I also would prefer vet and arx although I don't own either.

 

I think the divvie props peyto up and consequently it sells at a higher valuation than most gassers. Beware of stocks that pay high dividends. they can be misleading because the analyst just assumes the cash is being produced to pay it. As such, one should study them closely.

 

your mileage may vary. I know peyto has been a great Canadian company for a long time. I learn a lot from their monthly newsletter from CEO. this is just my humble opinion as an energy "tourist", and it could very well be terribly off base. So I wouldn't listen to me. :)

[Guest wellmont]

I did a 10 year chart on it and was surprised that the stock is lower now than it was at start of the period.

 

Peyto split 2:1 on May 31, 2005. Google and Yahoo charts don't adjust for the split.

the split happened over 10 years ago. that is why it does not show up on a 10 year chart. The fact stands. PEY stock price is lower than it was 10 years ago.

[Guest wellmont]

kevin, this isn't the first time we disagree, nor will it be the last. We were on different sides of the bbry trade for a long time. I was telling people to avoid the stock. you were a bull who was shouting me down and trying to convince me that I was wrong. You were touting how great their new phones and OS were. I was saying neither would make it.

 

But what I remember most about your presence on the board was how PERSONAL you made things, and how Emotional you were about your bbry investment. I was saying bad things about bbry, Never you. So I am used to disagreeing with you.

 

Peyto is a great company with somewhat of a cult following. All I was saying was that, with everything washed out, I thought there were better opportunities in "non" cult gassers. I think there are cheaper stocks with more upside. that's all I said.

 

As for tou it's only been operating around 7 years. And their strategy was never to make money right away. There was too much opportunity to invest. They decided to build a $2b midstream business . It's hard to be profitable when you are spending like that. Rather than send cash out to shareholders, they decided to take full advantage of the low asset price environment, and look at every single investment opportunity they could. They still are. They don't have to worry about paying a dividend. That's a tremendous luxury to have with asset prices so bombed out. This company is in a different phase of it's life cycle than Peyto is. But the vast majority of it's investment in infrastructure is behind it now.

 

As for whether tou is living on reputation, (hard to fathom since it's only 7 years old and hardly anybody outside of Calgary even knows about it) some smart people (with reputations) have been buying an awful lot of it recently.

 

Jul 27/15 Jul 24/15 Riddell, Clayton H. Indirect Ownership Common Shares 10 - Acquisition in the public market 100,000 $32.47

Jul 23/15 Jul 23/15 Riddell, Clayton H. Indirect Ownership Common Shares 10 - Acquisition in the public market 100,000 $32.90

Jul 23/15 Jul 23/15 Rose, Mike Direct Ownership Common Shares 10 - Acquisition in the public market 5,000 $33.00

Jul 21/15 Jul 21/15 Riddell, Clayton H. Indirect Ownership Common Shares 10 - Acquisition in the public market 50,000 $34.03

Jul 20/15 Jul 20/15 Rose, Mike Direct Ownership Common Shares 10 - Acquisition in the public market 5,000 $33.98

 

best of luck with your investments (and finding decent software for your blackberry).

 

Wellmont, I didn't see you post because I have you on ignore but after seeing other people reply I had to take a look.  Now, you may not be feeling the Peyto love (same goes for notorious546), but I sure have.  I have been a long term holder (since 2002), although I have sold nearly all of my shares in recent years.  I have no idea what calculations you were looking at but I would check your math.  Here is some love for Peyto.

 

The company has been in business for 16 years.  Over that time it has had a CAGR of 50%, or up 650x (total return).  As Darren recently said, that makes Peyto not only the best performing O&G company over the last 16 years but the best performing company in Canada, period.

 

Now many will counter by saying that, like FFH, the first few years skew the results.  Ok.  Over the last 5 years, the total return was *only* a CAGR of 24% or up 3x, in a period of terrible gas prices.  So, I really don't know what calculations you have been doing.  Yes they raise equity, mostly because it's overvalued most of the time, and they use debt (very low cost debt, I would add), but so what?  What well run company wouldn't do such things?  Share count is meaningless.  For IBM and Peyto it's the per share metrics that count, not absolute numbers. 

 

Anyway, I would add that I wouldn't touch TOU with a ten foot pole.  You want to talk about a company that lives off their reputation that is one.  They don't make money and have never made money, just like CPG.  TOU only makes money by issuing overpriced equity.   

 

I am baffled by investor sentiment of the O&G industry.  It's as if all financial norms get thrown out the window when it comes to valuing these companies.  Analysts and investors love talking about cash flow, as if earnings don't matter anymore.  And Peyto hasn't had any FCF???  Are you kidding me?  How have you looked at their production per share numbers?  Unbelievable.  This gets back to the maintenance and growth capex discussion on the other thread.  Value and growth are joined at the hip.  Anyway, back to ignore. 

 

not really feeling the peyto love. I think it lives off it's reputation. I did a 10 year chart on it and was surprised that the stock is lower now than it was at start of the period. I did a rough calculation of fcf over last 4 years and discovered it didn't produce any. it was investing heavily. But I can't be sure they are producing real owners earnings they can pay out after all the investment it takes to grow production at low costs. It has around 20m more shares outstanding and almost $500m more in debt. and it continued to raise the dividend for Canada's widows and orphans. :) I would much rather own tou and aav. bxe is very cheap along with bir. both are buys in my book. I also would prefer vet and arx although I don't own either.

 

I think the divvie props peyto up and consequently it sells at a higher valuation than most gassers. Beware of stocks that pay high dividends. they can be misleading because the analyst just assumes the cash is being produced to pay it. As such, one should study them closely.

 

your mileage may vary. I know peyto has been a great Canadian company for a long time. I learn a lot from their monthly newsletter from CEO. this is just my humble opinion as an energy "tourist", and it could very well be terribly off base. So I wouldn't listen to me. :)

[Wilson-TPC]

kevin, this isn't the first time we disagree, nor will it be the last. We were on different sides of the bbry trade for a long time. I was telling people to avoid the stock. you were a bull who was shouting me down and trying to convince me that I was wrong. You were touting how great their new phones and OS were. I was saying neither would make it.

 

But what I remember most about your presence on the board was how PERSONAL you made things, and how Emotional you were about your bbry investment. I was saying bad things about bbry, Never you. So I am used to disagreeing with you.

 

Peyto is a great company with somewhat of a cult following. All I was saying was that, with everything washed out, I thought there were better opportunities in "non" cult gassers. I think there are cheaper stocks with more upside. that's all I said.

 

As for tou it's only been operating around 8 years. And their strategy was never to make money right away. There was too much opportunity to invest. They decided to build a $2b midstream business . It's hard to be profitable when you are spending like that. Rather than send cash out to shareholders, they decided to take full advantage of the low asset price environment, and look at every single investment opportunity they could. They still are. They don't have to worry about paying a dividend. That's a tremendous luxury to have with asset prices so bombed out. This company is in a different phase of it's life cycle than Peyto is. But the vast majority of it's investment in infrastructure is behind it now.

 

As for whether tou is living on reputation, (hard to fathom since it's only 8 years old and hardly anybody outside of Calgary even knows about it) some smart people (with reputations) have been buying an awful lot of it recently.

 

Jul 27/15 Jul 24/15 Riddell, Clayton H. Indirect Ownership Common Shares 10 - Acquisition in the public market 100,000 $32.47

Jul 23/15 Jul 23/15 Riddell, Clayton H. Indirect Ownership Common Shares 10 - Acquisition in the public market 100,000 $32.90

Jul 23/15 Jul 23/15 Rose, Mike Direct Ownership Common Shares 10 - Acquisition in the public market 5,000 $33.00

Jul 21/15 Jul 21/15 Riddell, Clayton H. Indirect Ownership Common Shares 10 - Acquisition in the public market 50,000 $34.03

Jul 20/15 Jul 20/15 Rose, Mike Direct Ownership Common Shares 10 - Acquisition in the public market 5,000 $33.98

 

best of luck with your investments (and finding decent software for your blackberry).

 

Wellmont, I didn't see you post because I have you on ignore but after seeing other people reply I had to take a look.  Now, you may not be feeling the Peyto love (same goes for notorious546), but I sure have.  I have been a long term holder (since 2002), although I have sold nearly all of my shares in recent years.  I have no idea what calculations you were looking at but I would check your math.  Here is some love for Peyto.

 

The company has been in business for 16 years.  Over that time it has had a CAGR of 50%, or up 650x (total return).  As Darren recently said, that makes Peyto not only the best performing O&G company over the last 16 years but the best performing company in Canada, period.

 

Now many will counter by saying that, like FFH, the first few years skew the results.  Ok.  Over the last 5 years, the total return was *only* a CAGR of 24% or up 3x, in a period of terrible gas prices.  So, I really don't know what calculations you have been doing.  Yes they raise equity, mostly because it's overvalued most of the time, and they use debt (very low cost debt, I would add), but so what?  What well run company wouldn't do such things?  Share count is meaningless.  For IBM and Peyto it's the per share metrics that count, not absolute numbers. 

 

Anyway, I would add that I wouldn't touch TOU with a ten foot pole.  You want to talk about a company that lives off their reputation that is one.  They don't make money and have never made money, just like CPG.  TOU only makes money by issuing overpriced equity.   

 

I am baffled by investor sentiment of the O&G industry.  It's as if all financial norms get thrown out the window when it comes to valuing these companies.  Analysts and investors love talking about cash flow, as if earnings don't matter anymore.  And Peyto hasn't had any FCF???  Are you kidding me?  How have you looked at their production per share numbers?  Unbelievable.  This gets back to the maintenance and growth capex discussion on the other thread.  Value and growth are joined at the hip.  Anyway, back to ignore. 

 

not really feeling the peyto love. I think it lives off it's reputation. I did a 10 year chart on it and was surprised that the stock is lower now than it was at start of the period. I did a rough calculation of fcf over last 4 years and discovered it didn't produce any. it was investing heavily. But I can't be sure they are producing real owners earnings they can pay out after all the investment it takes to grow production at low costs. It has around 20m more shares outstanding and almost $500m more in debt. and it continued to raise the dividend for Canada's widows and orphans. :) I would much rather own tou and aav. bxe is very cheap along with bir. both are buys in my book. I also would prefer vet and arx although I don't own either.

 

I think the divvie props peyto up and consequently it sells at a higher valuation than most gassers. Beware of stocks that pay high dividends. they can be misleading because the analyst just assumes the cash is being produced to pay it. As such, one should study them closely.

 

your mileage may vary. I know peyto has been a great Canadian company for a long time. I learn a lot from their monthly newsletter from CEO. this is just my humble opinion as an energy "tourist", and it could very well be terribly off base. So I wouldn't listen to me. :)

 

Tourmaline belongs in the growth by acquisition category. When I asked Darren about Tourmaline, he said the company is way too growth focused. The company could have been a lot more patient, build the production volumes from scratch, and focus on return on capital. Instead, all the management team cared about was growth growth growth. Tourmaline has a much higher opex/boe than Peyto.

 

Will Peyto 10x your money in 5 years? No, but if all Darren cares about is earning you a 35% return on each dollar of capital invested, I think it's safe to say that Peyto has the best intentions for shareholders in mind.

 

 

[Guest wellmont]

Management, board and other insiders, who now own 30% of the shares, have invested hundreds of millions of $ of their own money into tou since 2008. They put up a lot of money to get it off the ground. But they buy more stock virtually every time they do an offering, including the last offering in June of 2015, when they bought 60,000 shares. tou is run by owner/entrepreneur operators who have actual skin in the game, and not by professional managers who got what stock they do have largely from option grants. These guys do not want to be diluted down from 30%. So they keep putting more money up.

 

The two largest individual shareholders who know it best just spent over $8.5m buying more tou on the open market. Meanwhile peyto insiders, who own less than 4% of the shares, have done no insider buying to speak of, even as the stock has come down in 2015, nor did they participate in the peyto equity financing this past Spring, as the tou insiders did in their recent offering. They get diluted by every stock offering they do.

 

tou management are proven acquirers (this is not their first rodeo) and most of their acquisitions are small tuck-ins that perfectly augment their stated strategy. I can see why Darren may be a little envious of what tou has done in 7 years, which is less than half as long as peyto has been operating. tou has already built a far larger company, has more assets, higher production, faster production growth, a larger land base (including huge position in the montney), and no obligation to send cash out the door every month to Canada's widows and orphans.  It has done all this while keeping leverage low, and indeed, currently has a better balance sheet than peyto has, with way more financial flexibility to invest.

 

darren seems to have lots of opinions on other companies. if I was a shareholder though, and he were my CEO,  I would want him to focus only on Mine. But even as darren opines, he seems to be contradicting himself, given what you said earlier. on the one hand he says this is a fantastic time to invest in alberta deep basin assets, and uses that as justification for selling so much equity and borrowing millions. On the other hand he criticizes the biggest investor in the deep basin, tou, for investing "too much" and growing too fast. which is it Darren?

 

For such a loquacious guy, I am really surprised that Darren does not put his money more where his Mouth is.

 

good luck with your investments.

[Wilson-TPC]

Management, board and other insiders, who now own 30% of the shares, have invested hundreds of millions of $ of their own money into tou since 2008. They put up a lot of money to get it off the ground. But they buy more stock virtually every time they do an offering, including the last offering in June of 2015, when they bought 60,000 shares. tou is run by owner/entrepreneur operators who have actual skin in the game, and not by professional managers who got what stock they do have largely from option grants. These guys do not want to be diluted down from 30%. So they keep putting more money up.

 

The two largest individual shareholders who know it best just spent over $8.5m buying more tou on the open market. Meanwhile peyto insiders, who own less than 4% of the shares, have done no insider buying to speak of, even as the stock has come down in 2015, nor did they participate in the peyto equity financing this past Spring, as the tou insiders did in their recent offering. They get diluted by every stock offering they do.

 

tou management are proven acquirers (this is not their first rodeo) and most of their acquisitions are small tuck-ins that perfectly augment their stated strategy. I can see why Darren may be a little envious of what tou has done in 7 years, which is less than half as long as peyto has been operating. tou has already built a far larger company, has more assets, higher production, faster production growth, a larger land base (including huge position in the montney), and no obligation to send cash out the door every month to Canada's widows and orphans.  It has done all this while keeping leverage low, and indeed, currently has a better balance sheet than peyto has, with way more financial flexibility to invest.

 

darren seems to have lots of opinions on other companies. if I was a shareholder though, and he were my CEO,  I would want him to focus only on Mine. But even as darren opines, he seems to be contradicting himself, given what you said earlier. on the one hand he says this is a fantastic time to invest in alberta deep basin assets, and uses that as justification for selling so much equity and borrowing millions. On the other hand he criticizes the biggest investor there, tou, for investing "too much" and growing too fast. which is it Darren?

 

For such a loquacious guy, I am really surprised that Darren does not put his money more where his Mouth is.

 

good luck with your investments.

 

Lol. Look at you, study a bit of insider ownership and all of a sudden you know how E&P companies do M&A.

 

http://www.proactiveinvestors.com/companies/news/60401/tourmaline-oil-to-acquire-perpetual-energys-interests-in-alberta-deep-basin-60401.html

 

Did you know this acquisition was done because the CEO's wife's company was in trouble?

 

I bet you didn't know that.

 

There's a reason why Tourmaline's stock is down more than 50% versus Peyto's decline.

 

Perhaps, instead of looking at insider ownerships, you should do more scuttlebutting by speaking to various executives and asking industry experts who they think are the best operators and acquirers. Don't take my word for it, go do some due diligence yourself.

[Wilson-TPC]

Management, board and other insiders, who now own 30% of the shares, have invested hundreds of millions of $ of their own money into tou since 2008. They put up a lot of money to get it off the ground. But they buy more stock virtually every time they do an offering, including the last offering in June of 2015, when they bought 60,000 shares. tou is run by owner/entrepreneur operators who have actual skin in the game, and not by professional managers who got what stock they do have largely from option grants. These guys do not want to be diluted down from 30%. So they keep putting more money up.

 

The two largest individual shareholders who know it best just spent over $8.5m buying more tou on the open market. Meanwhile peyto insiders, who own less than 4% of the shares, have done no insider buying to speak of, even as the stock has come down in 2015, nor did they participate in the peyto equity financing this past Spring, as the tou insiders did in their recent offering. They get diluted by every stock offering they do.

 

tou management are proven acquirers (this is not their first rodeo) and most of their acquisitions are small tuck-ins that perfectly augment their stated strategy. I can see why Darren may be a little envious of what tou has done in 7 years, which is less than half as long as peyto has been operating. tou has already built a far larger company, has more assets, higher production, faster production growth, a larger land base (including huge position in the montney), and no obligation to send cash out the door every month to Canada's widows and orphans.  It has done all this while keeping leverage low, and indeed, currently has a better balance sheet than peyto has, with way more financial flexibility to invest.

 

darren seems to have lots of opinions on other companies. if I was a shareholder though, and he were my CEO,  I would want him to focus only on Mine. But even as darren opines, he seems to be contradicting himself, given what you said earlier. on the one hand he says this is a fantastic time to invest in alberta deep basin assets, and uses that as justification for selling so much equity and borrowing millions. On the other hand he criticizes the biggest investor there, tou, for investing "too much" and growing too fast. which is it Darren?

 

For such a loquacious guy, I am really surprised that Darren does not put his money more where his Mouth is.

 

good luck with your investments.

 

To add to your last statement. Peyto grew all of its productions organically as opposed to acquisitions. Why don't you ask why Tourmaline's cost is more than 50% than that of Peyto's? What about return on invested capital at a mere 9% even excluding midstream capex spending?

 

Darren can have opinion on others, that's because no one has executed as well as he has over that many years. Ken Peak's Contango is up there, but there's not a single other E&P company that gets close. Advantage is up and coming, but still far away from a return on capital perspective.

 

I really think you should do more due diligence before opining into who the best operators are and etc. Some of the things you list is very surface level analysis. None of it illustrates to me you conducted any deep due diligence. Checking insider buying and then reading a company's presentation isn't due diligence.

 

 

[Guest wellmont]

I told you guys it was a cult. :)  since darren has become CEO of peyto he has levered it up (making it more risky for the widows and orphans who own it) and profitably and steadily grown production at satisfactory rates, thus ensuring that these same widows and orphans in Canada will continue to get their checks every month. Over that same time frame, Rose built up his previous venture, Durvernay Oil and sold it to Shell for $5.9b, making him and those who invested with him fabulously wealthy. He then immediately went on to start and build up tourmaline, a company that is not only far far larger than the one he sold for $6b, but one that now produces 2 x the gas and liquids that Peyto does, on it's way to 3 x. That was all during the time Darren has been CEO of Peyto.

 

best of luck with your investments. I think we should now turn this thread back over to the beleaguered shareholders of Bellatrix.

 

 

 

 

 

[Wilson-TPC]

I told you guys it was a cult. :)

 

Naw man, when you come back with more due diligence. We can have an intellectual conversation then. But until then bud, i'll leave it be.

[kevin4u2]

I told you guys it was a cult. :)

 

Naw man, when you come back with more due diligence. We can have an intellectual conversation then. But until then bud, i'll leave it be.

 

Happens every time Wellmont opens his mouth.  Now he says we were on opposite sides of the BBRY trade.  I have never owned BBRY, so I don't know what trade he's talking about.  Put the guy on ignore and quite wasting your time.  I shouldn't have bothered to demonstrate his ignorance of PEY today, it just brings out his emotional side.  He is now spouting off about how fast TOU has grown, but fails to mention how many billions more in capital they have spent.  This is exactly what I mean.  Who cares that TOU has spent 7.3 billion in CAPEX over the last 7 years (vs the 2.4 billion that PEY has spent)?  I guess Darren is a retard because he can't keep up to TOU with two hands tied behind his back, but ironically production at PEY isn't far behind.  TOU also can't afford to pay out any cash or they wouldn't be able to fund their 1.5 billion dollar capital program that fails to earn a return above it's cost.  Good grief, and don't get me started about the FCF for TOU... 

[Simple Investor]

I’d like to continue to build on this conversation.  Below is some basic info I put together.  I have this info for about 20 other companies.  Everything is converted to BOe/d.  The operating /transportation/ royalties and S&G are also converted to BOE/d in US dollars. 

 

BXE seems like the cheapest.  I also think Painted Pony is becoming cheap.  Plus they are the low cost provider as well as gigantic expected growth.  15k Boe/d to 102k Boe/d by 2019.  So I am trying to reconcile how to determine which bet might be the best. Maybe both??

 

Name                           Symbol       MVIC       BOE/D       EV/BOED

Bellatrix Exploration     BXE             860         40,426         21,279

Painted Poney               PDPYF           534       15,622       34,175

 

Boe/d in US$

Name Symbol           Operating       transport     Royalties SG&A         total

Bellatrix   BXE               6.56           0.96       2.42               1.39         11.33

Painted   PDPYF               4.49           1.49       0.31               1.13           7.42

 

 

BXE – about 70% natural gas

Pony (PPY -Canadian symbol). -93% natural gas

 

Not exactly sure what the true cost of just the natural gas production is or will be for BXE. ?

Production growth for BXE

Nat Gas production to 80k Boe/d in 2017  -currently 29k

2.7 times current production by 2017

 

PPY production growth - mostly nat gas I believe.  Currently at 15k.  So gigantic growth

23k (2016), 48k (2017), 72k (2018), and 102k (2019)

nat gas production to 48k by 2017 – currently 14.7k

3.3 times current production by 2017.  But more than doubling again by 2019. 

-super low royalties because of location of properties. – west of BC Royalty line.

-claim to have highest productivity Montney wells

 

Report from Advantage Oil reports that PPY has the 3rd lowest costs – same as Peyto.  Is the growth going to come out at the same cost? I have no idea.

 

How do you take into account the dilution?

 

Some basic info.  I hope it makes sense and we can continue the discussion. If it doesn’t make sense its because its my first crack at the natural gas companies. 

 

I’m not exactly sure how netbacks fit into the equation yet. 

 

I’m trying to reconcile the cheaper EV/Boed for BXE versus the cheaper costs the PPY has? 

 

 

 

[yadayada]

Hey wilson how do you see F&D costs? Is that purely capex? Or is it also operating costs. Because it makes me wonder, if a company adds reserves agressively, they must pay personel to do so? So at some point they will just keep their reserves steady and then you should see operating costs coming down?

 

For example if a company produces 14m barrels, and addes 30m barrels to developed proved reserves, and it costs let's say 15$ per BOE to add them, does this only show up in capex?

 

TIA

[Packer16]

Page 18 of the BXE's August Presentation provides a list of items included in half-cycle and full-cycle F&D costs.

 

Packer