2024-07-11 10:52:18 ET
Summary
- ARC's low costs, superior production mix, and international gas pricing exposure make it a low-risk/high-return investment.
- The start of production from its Attachie project in 2025 will provide a significant boost to FCF, resulting in a ~12% yield during high-growth Capex spending.
- ARC is valued at 15+% p.a. total of long-term return, assuming a current strip pricing.
- Despite trading at a premium to NAV, it's been calculated with only ~13% of internally estimated drilling locations.
- Since ARC's shares are trading at low prices, cannibalization via buybacks is value-accretive.
Earlier this year, I wrote an "introduction analysis" on ARC Resources ( ARX:CA ) ( OTCPK:AETUF ). While our investor community mostly agreed on ARC's quality, not everyone agreed on the undervaluation of the business, claiming that it's trading close to NAV, while many other Canadian O&G names, like Birchcliff ( BIR:CA ) or Peyto ( PEY:CA ), trade deeply below NAV....
Read the full article on Seeking Alpha
For further details see:
ARC Resources: Cannibalizing Undervalued Shares To Unleash Exceptional Returns