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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: bill who wrote (7334)	5/13/2000 5:33:00 PM
From: SofaSpud	Read Replies (1) \| Respond to of 24939

bill / debt:cf What is the significance of a debt-to-annualized cash flow ratio of 1.5? Low, okay, high, scary? In part the answer is "depends." By and large in this price environment 1.5x is OK. But note that they're saying current debt and annualized cash flow. What is their capex budget? If they're going to spend another 2x cash flow on drilling over the balance of the year, then the exit debt would be much higher than 1.5x, and could get scary. With these little guys, you have to be careful how they are growing. Is it internally, 'cause they've got a hotshot, can't miss geologist, or is it through acquisition? Look at the projected cash flow for the year, and the projected capex, and estimate what the year end debt will be to trailing (2000) and next year cash flow. If they have reasonable production growth and cash flow growth, 1.5x at y.e. shouldn't be too scary (unless everyone is wrong on prices). Hope that helps.