During Wednesday's quarterly conference call the team mentioned...

During Wednesday's quarterly conference call the team mentioned the reason why they brought forward the drilling of the 4 wells post Leo was because of supplier constrains, despite the fact that the Leo program was $2 million over budget and the production delays , down time ate into cashflow. Hence the rise in debt to pretty well the limit, even with a $2 million rise in the debt facility capacity.

These supplier constraints meant if they didn't bite the bullet at the time then, they wouldn't have been able to get the wells drilled until the spring thaw, and completion not till mid year.

If you think about it, this would have had 2 obvious consequences.

1) missing out on these record commodity prices for the hedging program for the new wells

2) production decline due to the drill/completion delay up to 6 months which could mean the June 20 production would be closer t0 2500-2800 BOEPD rather than the 4000-5000 BOEPD range guided.

What would damage management credibility more?.. I would say they took the prudent option in all honesty . They took the decision to advance the companies production / revenue knowing it would result in a short term cash squeeze that would require quick balance sheet repair that would be unpopular. The net effect would be unhappy shareholders but the company would be in a healthier capital position with a significantly better production/ cashflow profile in June 2022 allowing faster repayment of a smaller debt position ...VS not accelerating the drilling, which would mean a lower debt profile ( not taking the cap raise into consideration) but a significantly lower production/ cashflow profile (1000- 1500 BOEPD lower)in June 2022 which would mean a much lower repayment of debt from cashflow... Which of these 2 unpopular outcomes would shareholders prefer.

Also don't forget they hedge 50% of their production... I am pretty sure there are hedging counter party " collateral" requirements a producer has, and with CE1 close to being maxed out in their facility, they may not have been able to hedge the new production and not locked in these US$90 WTI prices.

Any monetization of the Montney assets or JV timing wouldn't have occurred in a timeframe that would have changed the events of Dec , Jan so not being able to change the outcome.


Having said that, any potential buy back will look pretty foolish if they raise capital at 20c , and buy those shares back above that price so IMO they won't buy back unless the share price is below these levels for an extended period of time.

So whilst I am not happy about the capita raise, if these are some of the reasons for doing it I understand the reasoning then IMO they are being prudent.

cheers

Dan