Chris Carlsen, president and CEO of Birchcliff Energy, joins BNN Bloomberg to discuss the stock jump today on earnings, despite swinging to a loss in the quarter amid weaker natural gas prices.
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PRICES PERSIST. WHAT KIND OF SHAPE IS THE COMPANY? AND LET’S BRING IN CHRIS CARLSON, PRESIDENT AND CHIEF EXECUTIVE OFFICER AT BIRCHCLIFF FOR SOME PERSPECTIVE. CHRIS, THANKS SO MUCH FOR BEING WITH ME. >> THANKS A LOT FOR HAVING US.
AND PLEASED TO BE HERE. SO THE LAST TIME I SPOKE TO WAS ON THE BACK OF THAT DIVIDEND CUT WHERE YOU SLASH IT BY 50% IN AN EFFORT TO KIND THAT THE BALANCE SHEET AND DEAL WITH THESE LOWER NATURAL GAS PRICES. GAS PRICES HAVE COME
DOWN EVEN MORE. HOW DO YOU THINK ABOUT THE POSITION THAT YOU’RE IN? >> YEAH, SO I SAY WHEN YOU THINK ABOUT THE GAS PRICES, AMBER, AS YOU JUST REFERENCED, I MEAN, SINCE NOVEMBER OF 23 BE SEEN A SIGNIFICANT DECLINE
IN NATURAL GAS PRICES IN THE IMMEDIATE TERM. NO DOUBT. I THINK THERE ARE SOME POSITIVES, THOUGH, AS WE MOVE INTO THE BACK HALF OF 24 AND A 2025. SO NOT WITHSTANDING, WE’RE SEEING GAS PRICES TODAY ON THE SPOT MARKET, THE $1.60.
WE’RE SEEING HUGE CAN TANGLE IN THE GAS MARKET, WHERE IN 2025, THE AVERAGE PREDICTING THE FUTURE IS SOMEWHERE AROUND $3.40. SO IT’S, IT’S ALMOST DOUBLE WHAT THE PRICE IS TODAY AND THAT’S REALLY ON THE BACK OF A FEW THINGS, CERTAINLY IN
ALBERTA, WE’VE GOT, YOU KNOW, 2700 MEGAWATTS OF POWER GENERATION, THAT’S GOING TO BE STARTED UP IN 2024 IN THE PROVINCE AND THERE’S 3 DIFFERENT PROJECTS. THAT’S A DEMAND OF ALMOST 450 MILLION CUBIC FEET A DAY ON THE MARKET. THAT’S 17 BCF A DAY.
SO I KNOW THAT’S A CERTAINTY. AND A MAN CALLED THE OTHER PIECE THAT I THINK A LOT OF PEOPLE ARE WAITING IS LNG COMMODITY PRAYER ANALOGY STORY HERE IN CANADA, WHICH SHOW AND THE CANADA LNG PROJECT COMING ON AS WELL AS SIGNIFICANT
GROWTH IN LNG IN 2025 IN THE U.S. ESSENTIALLY DOUBLE THEIR U.S. CAPACITY FROM 12 TO 14 BCF A DAY TODAY. AND THE NEXT 3 OR 4 YEARS GOING TO YOUR 25 BCF A DAY. SO THIS CAN TANGLE IN THE MARKET. WERE OBVIOUSLY
DEALING WITH LOCAL MY PRICES HERE IN THE SHORT TERM, BUT CERTAINLY OUTLOOK STILL LOOKS POSITIVE INTO THE BACK HALF OF 24 IN THE 25 FOR SURE. SO I HEAR YOU ON THOSE FORWARD PRICES, BUT I’M CURIOUS ABOUT WHETHER YOU HAVE THE LEVERS TO PULL.
>> IF IF THAT FUTURE DOES DOES NOT AT PRESENT IS YOU IS EXPECTED TO FALL. THE LOT UNFOLD, A LOT OF ANALYSTS NOTED THAT YOU LEFT YOUR FORECAST UNCHANGED FOR 2024 AS WELL AS YOU’RE SPENDING PLANS, EVEN WITH THESE LOW PRICES. DO
YOU HAVE FLEXIBILITY TO PULL BACK ON THAT IF THE PRICES DON’T UNFOLD THE WAY IT LIKE. >> YEAH, I THINK YOU’RE SEEING SEVERAL EVALUATE THEIR CAPITAL AS YOU MENTIONED NUMBER LAST TIME WE WERE ON JANUARY 17TH. WE HAVE ADJUSTED OUR CAPITAL
PROGRAM TO GIVE US SOME OF FLEXIBILITY AND OPTIONALITY AND SO WHEN YOU LOOK AT OUR CAPITAL PROGRAM, WE STRUCTURED IN A WAY WHERE WE’LL SPEND, CALL IT 100 MILLION DOLLARS AND SHE WON 40 MILLION DOLLARS IN YOU TO GIVE OR TAKE. AND
THEN THE BACK HALF WILL SPEND ABOUT, YOU KNOW, THE REMAINDER OF THAT BUDGET, WHICH BUT 110 MILLION DOLLARS. SO WE HAVE SOME FLEXIBILITY AS YOU GET TO MID YEAR. AND I THINK THAT’S WHAT IMPORTANT PARTS FOR BIRCHCLIFF IS THAT YOU’RE
RIGHT, WE’RE FOCUSED ON THAT BALANCE SHEET. WE’RE ALSO FOCUSED ON THOSE SHAREHOLDER RETURNS, BUT WE’RE GOING TO MAKE SURE THAT DOWN, SHE STAY STRONG INTO THE FUTURE. SO WE CAN READ WORDS THAT FUTURE COMMODITY PRICE. OUR CAPITAL PROGRAM IS STRUCTURED IN A WAY
THAT A DEER WILL HAVE SOME OPTIONALITY WHERE WE’VE GOT 13 WELLS THAT WILL LOOK AT THE SENTIMENT AND WHAT’S HAPPENED AND THE 1ST HALF OF THE YEAR WITH RESPECT TO CASH FLOW AND OUR PRODUCTION AND WE’LL SEE NO MID-YEAR WHERE THINGS ARE
AT AND WILL MAKE A DECISION ABOUT POINT IN TERMS THE WELL PROGRAMS IN OUR CAPITAL SPENDING. >> THE DES I MENTION YOU CUT THE DIVIDEND AND YOU CAME ON ANY DISCUSS BUT THE DIVIDEND YIELD IS STILL VERY ROBUST AT 8%. WOULD YOU CALL THAT
SUSTAINABLE? NOW, YOU KNOW, EVERYTHING BEING AS IT IS. >> YOU KNOW, WHEN YOU LOOK AT IT, AMBER, IT’S WERE 45 DAYS INTO THE YEAR. SO WE’RE STILL QUITE EARLY INTO THE AIR. I KNOW THAT SENTIMENT IS EXTREMELY NEGATIVE HERE AS WE
GO INTO THE SUMMER. >> BUT THERE’S A LOT OF THINGS THAT COULD AND I THINK OUR POSITION IS THAT WE GIVE OURSELVES STRENGTHEN OPTIONALITY SO THAT WE CAN MAKE THOSE DECISIONS AFTER WE SEE WHAT THE YEAR PLAYS OUT YOU KNOW, WE’RE NOT GOING MAKE
TOTAL KNEE JERK REACTION WITHIN THE FIRST 45 DAYS OF THE YEAR, WE REALIZE WHERE PRICES ARE, BUT THERE’S A LOT OF POSITIVE STILL TO COME HERE IN 25. >> IF NATURAL GAS PRICES DO START TO RECOVER AND MOON LEAVING MEANINGFULLY HIGHER.
YOU KNOW, AND REACH A CERTAIN POINT. THE AESO SURROUND BEING AN UNHEDGED COMPANY, I KNOW HAS BEEN SO PERVASIVE, ESPECIALLY UNDER JEFF TONKEN. AND YOU’VE REITERATED KIND OF CONTINUING THAT AT THESE LEVELS, BUT SAY PRICES DO MOVE UP. YOU KNOW, THEY THEY DOUBLE
FOR FROM HERE IN THAT WOULD YOU RECONSIDER THAT, THAT IF THOSE AT LEAST LOCKING IN HIGHER PRICES, HE CAN OFFER A LITTLE BIT MORE STABILITY TO SHAREHOLDERS. THEY DON’T JUST, YOU KNOW, TRADE IN AND OUT, DEPENDING ON CAST IS DOING.
>> YEAH, I THINK THAT’S CERTAINLY BEEN A TRADEMARK YEAR COMMON TO TRADEMARK OF BIRCHCLIFF IS THAT WE HAVE FOR LUNCH EXPOSURE EXPOSURE FOR OUR SHAREHOLDERS TO THE COMMODITY PRICE. AND THAT’S REALLY WHAT A LOT OF THEM THEY WANT EXPOSURE TO MONEY PRICE
BECAUSE THEY BELIEVE IN THE FUTURE OF NATURAL GAS AND NATURAL GAS DEMAND INCREASING IN THE FUTURE. THAT BECAUSE LOOK, LNG IN GENERAL IS A HUGE POSITIVE FOR. >> FOR THE GLOW FULL FOR REPLACING COAL-FIRED PRODUCTION IN ASIA AND INDIA
AND THERE’S NO DOUBT THAT IN OUR MINDS, NATURAL GAS IS THAT FUEL THE FUTURE. AND AS WE BUILD OUT LNG, THAT DEMAND IS JUST GOING INCREASE OVER TIME. SO. >> WERE REALLY POSITIVE ON THE FUTURE AND I FEEL LOCKING IT
IN WHERE IT WENT AROUND LOW COMMODITY PRICE ENVIRONMENT INTO THE FUTURE. I’M JUST NOT THE RIGHT
2 Comments
My gas bill is maybe 20% for gas and 80% for Carbon tax, GST, Delivery, Customer charge. The Carbon tax is about the same as the gas cost. Plus it looks like there is GST on Carbon Tax. Enbridge is more of a Tax collector than a gas provider.
Native people were never paid for canadians stealing natural gas yet our treaties protect us …pay up