Good summary. When it comes down to it, when you're investing, you're either right, wrong or early. I don't think I'm wrong, as it's trading on ~1 to 1.5x EV/EBITDA THIS year, with a buyback and a dividend. Plus Montney provides capital upside optionality. If you (or anyone else) can find me companies with those characteristic please tag me.
And I'm certainly not right yet as I'm down on my average price, so that leaves being early. That makes a lot of sense given we're really only just inflecting on cashflow now and the production upside hasn't yet kicked in. I think that will become apparent in coming quarters and my time horizon is not short so I'm ok.
When the price is low we can be pretty critical. I think it's a good thing to ask those questions - why is the price so low?
I ask myself constantly, where could I be wrong, has my thesis changed? For me, other than the price, not much has changed.
I do think the capital raise hurt us and killed momentum, but in time I think it will play out better for shareholders, particularly if they pick up a stack of shares in the buyback <20c. Also, production has been below my expectations but I think we'll get there i.e. +5500boe/d, just not as quick as expected. These are not terminal issues and the company has also done a lot of good things too.
Besides that, we're just being impacted by poor market sentiment and a risk off mode due to higher interest rates and recession fears. This is market specific and not company specific and can often be a great time to buy (IMO). I've bought a stack of shares in other companies lately as everything has gone down including high quality companies. Perfect time to buy blue chips.
While I'm not here to champion the company, I have noticed some negative comments about paid broker research. Personally I think that is a good move. When you're under the radar, that's a great way to get noticed. It's also good proactivity by management and also enables me to check my assumptions against another analyst even if there might be conflicts of interest. In fact, CE1 got on my radar because someone sent me a broker report, which led to my own research and me buying.
In terms of funds, I believe that Bennelong is on the register but not sure which nominee they are in the T20. There's also Peters and Co. Not sure of others but there are a few nominee accounts at the top of the register. Unfortunately we're just not going to get the love from funds because of ESG - but this is also an opportunity as you're buying a company on <1.5x EV/EBITDA which is just crazy. Personally, I'd love more funds on the register though as that will put a rocket under the price. All we can ask is that the company perform and if it stays this cheap - or gets cheaper - it will be just too hard to ignore the cashflow/profits. They will come.
On Montney, management spoke in depth on their recent roadshow. Something will happen but I wouldn't recommend having that as part of your thesis - it should be the cream on top. I think the most likely course of action will be development with a JV partner. Timing unknown. They can't say too much obviously. If you take a 12 month view on this stock, there is going to be a large cash build up. That includes future dividends and the buyback. Unless offers improve, I think they will go for growth and reinvest back in the business and Montney presents a pretty compelling opportunity in an energy market facing significant structural supply issues - this is my opinion only and not what management guided too btw.
Anyway, good summary and always good to ask those type of questions.
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