Q: Good morning 5i team...
Your thoughts please on Arc's consolidation of Montney assets at Kakwa.How does this affect their balance sheet and is it a good time to purchase shares at this price?
many thanks,
Jean
Your thoughts please on Arc's consolidation of Montney assets at Kakwa.How does this affect their balance sheet and is it a good time to purchase shares at this price?
many thanks,
Jean
5i Research Answer:
ARX has been showing nice momentum recently, and it trades at a decent valuation of 11X forward earnings. Its recent acquisition of Montney assets in Kakwa from Strathcona Resources is a significant strategic move, and it is expected to enhance ARX's production capacity and extend its inventory duration. To finance this acquisition, it plans to use a combination of a new $1.0B two-year term loan and existing credit facilities. After the acquisition, it is expected to have a net debt around $2.8B or more. We like the acquisition and for a long-term position, we would be comfortable buying here.