CA - Athabasca Oil: Reaching A Cash Milestone

2024-01-29 08:51:37 ET

Summary

• Athabasca Oil has achieved a cash balance in excess of the value of long-term debt for the first time since the acquisition of thermal oil production.
• The company's cash and cash equivalents probably allow for the full repayment of long-term debt.
• The strong cash position may enable management to pursue light oil and condensate production for additional cash flow.
• Thermal oil often has a wider discount during times of weak commodity prices.
• This is not a low-cost producer. Therefore, no debt is a high priority.

Ever since Athabasca Oil ( ATHOF ) purchased the thermal oil production while developing its own thermal oil leases, the sizable debt load has been a concern. Thermal oil producers often make their money all at once. That can provide a cash flow issue when pricing is weak, and the thermal oil discount expands. But now it appears that the cash position is becoming strong enough for that debt to be repaid. That would put management and shareholders in a far stronger position throughout the business cycle. Management would also be able to pursue more light oil and condensate production to provide needed cash flow at the bottom of the business cycle.

Cash Position

Athabasca Oil now has a negative net debt position for the first time since the acquisition....

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