Ann: Investor Update Presentation, page-6

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09/02/22

19:50

Post #: 59467007
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Originally posted by BullBear45: ↑

What do you think capex will be for 2H? and what sort of production rates can we expect ?

I'm thinking the 10 new wells they will drill in 2H might be around $20m and take us to 6000+boepd, leaving c $35-40m net free cash flow for the year, and no debt.

Overall it seems these guys are seriously bullish on oil price and will grow rapidly. The market doesn't like that too much even though it was absolutely the right bet to have made. With peers paying off debts as a high priority starting last year it seems they made the wrong choice as growth is far slower than CE1, when will the market price in CE1's huge growth, after all it goes hand in hand with looking at net cash flow after capex. Luckily the prices have worked in their favour. But I can see how they could get it enormously wrong if commodity prices crashed and they didn't readjust the strategy.

At some point they have to quit the extreme growth strategy while they are ahead and temper capex to 1/4 to 1/3 of all FCF to leave 1/3 as shareholder returns and the balance to build balance sheet, and M&A. This NEEDS to be the strategy from 2H in my opinion. 1/3 of ebitda back into capex I estimate would still be growing production by circa 30% at current wti, or 10% at 60 wti.

I think a faster re-rate would occur if they just stated a dividend plan of a nominal 1c to start. That's a measly 6m cash off their balance sheet. Easily afforded. Obviously won't talk about it just yet given the capital raise this week, but it's clear the rapid growth and relatively huge investment since last year affords them this strategy.

The market is valuing dividends way more than growth right now I think

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Agree. Was hoping to see some different capital management outcomes but it seems the tone has changed from dividends to M&A and potential Montney development - with a partner.

Going all in for larger capital returns can pay off but there’s a whole grave yard of shale companies that chased growth and got toasted.

Throw off some divis and reinvest. It’s not that hard! Hopefully we’ll get more clarity as we approach the next half.

CE1 Price at posting: 20.0¢ Sentiment: None Disclosure: Held
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Ann: Investor Update Presentation, page-6

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Ann: Investor Update Presentation, page-6

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