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is now the time to invest in oil stocks?

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Deal Addict
Aug 16, 2015
1201 posts
516 upvotes
cartfan123 wrote: No offence, but I use you as a contrarian indicator. Hence I might have to look at buying back into energy names....which I have been out of since the pop off the Saudi attack in the fall.
this could be the bottom. I went long UCO today at 13.74.
Member
Jan 31, 2008
492 posts
226 upvotes
Québec
I own: TCW, Cj, fru, arx, meg, cqe, wcp, tog, hse, vet and for midstream enb & ala.

This is a great time to invest in Canadian energy, especially if Transmountain is cleared this afternoon.

Already the US shale industry is going bellyup after a decade of flooding the market with a 'new' technology.

Canadian companies are producing strong free cash flow yields (that was without proper pipeline capacity...)

I believe we will have a bullrun later this year, as US shale pulls back and OPEC likely overightens the market.

Libya has lost 1,000,000 barrels for the past 16-days, few are talking about it.

Once the Wuhan woes subside, I believe oil is due for a massive bull run. Natural gas should within a year too as supply is being curtailed and demand keeps growing.

Avoid American shale!
"It is never too late to be what you might have been. "
Deal Guru
Aug 17, 2008
10989 posts
13539 upvotes
Re: @chriskanaan

I can't believe I'm quoting the CBC, but this is most comprehensive current article.

Federal Court to decide fate of Trans Mountain expansion | CBC News

"The court will issue its decision at 1 p.m. ET."

https://www.cbc.ca/news/politics/federa ... -1.5450748
Answer not a fool according to his folly, lest thou also be like unto him = Never argue with an idiot, they'll only bring you down to their level & beat you with experience
Deal Addict
User avatar
Oct 14, 2015
2116 posts
2515 upvotes
Oily shorts don't appear to be panicking, yet.

A well-experienced and successful commodities trader used to say that if there's a sharp price increase, but momentum indicators don't correlate with price, it's a good chance that the move is due to short covering.

At time of posting, US Oil Fund, Energy Fund, Marathon, Phillips 66, Valero, are showing nice lift.
Will watch this week to see if momentum can go positive.

Moving Average Convergence Divergence (MACD) shown on charts.
Relative Strength Index (RSI) is another popular momentum indicator (not shown).

https://stockcharts.com/freecharts/cand ... A12,26,9|0
Member
Jan 31, 2008
492 posts
226 upvotes
Québec
MrMom wrote: Re: @chriskanaan

I can't believe I'm quoting the CBC, but this is most comprehensive current article.

Federal Court to decide fate of Trans Mountain expansion | CBC News

"The court will issue its decision at 1 p.m. ET."

https://www.cbc.ca/news/politics/federa ... -1.5450748
My view is that the Transmountain pipeline is a game changer for Canadian energy. Currently, nobody seems to care about energy because energy is dead and apparently Tesla is the life of the party, but they are going to care soon as the energy sector has been underfunded (oil discoveries outside of shale basins) and all focus has been on American shale which has been the worst thing in the history of oil investors. The world likes to forget, but we consume over 30 billion barrels per year, which is an incredible amount of oil that needs to be annually replaced and those numbers are still growing y-o-y.

Yesterday, MN ruled in favour of Line 3 which was the last of any legitimate threat to Enbridge Line 3.

The two pipelines offer Canada 1,000,000 additional barrels per day of egress capacity.

Next year should be a good one for natural gas as well as the NGTL system in Alberta is expanding which will further boost our gas sector.

Overall Trudeau gets a bad rap, but things are looking very good from here. We just have to wait for the shale industry to continue to crater a bit more and get these pipelines online.

Our biggest barrier has been poor selling differentials and egress uncertainty, both of which will essentially be fully resolved with Line 3 and Transmountain.

Keystone XL could be back in play. Trump's adminstration is pushing hard for it. If it is built that is an additional 1,000,000 barrels per day of egress capacity to U.S. Gulf Coast!

Buy the gloom and sell the boom....
"It is never too late to be what you might have been. "
Deal Guru
Aug 17, 2008
10989 posts
13539 upvotes
For the full article click on the URL,

In a major victory for Trans Mountain, Federal Court dismisses Indigenous appeal of project's approval

https://www.cbc.ca/news/politics/federa ... -1.5450748

"The Federal Court of Appeal has dismissed an appeal by Indigenous groups challenging the federal government's approval of the Trans Mountain expansion project — clearing yet another major legal hurdle for the long-delayed $7.4 billion project, which will carry nearly a million barrels of Alberta oil per day to the B.C. coast."
Answer not a fool according to his folly, lest thou also be like unto him = Never argue with an idiot, they'll only bring you down to their level & beat you with experience
Deal Expert
Jan 27, 2006
21844 posts
15619 upvotes
Vancouver, BC
MrMom wrote: For the full article click on the URL,

In a major victory for Trans Mountain, Federal Court dismisses Indigenous appeal of project's approval

https://www.cbc.ca/news/politics/federa ... -1.5450748

"The Federal Court of Appeal has dismissed an appeal by Indigenous groups challenging the federal government's approval of the Trans Mountain expansion project — clearing yet another major legal hurdle for the long-delayed $7.4 billion project, which will carry nearly a million barrels of Alberta oil per day to the B.C. coast."
I would add that it's not a surprising victory unless of course you are the BCNDP who are still wondering who switched out their toolbox with a Fisher Price one. The original court case on consultation didn't spell out what additional consultation was needed... just that more consultation was needed and that was done in this case.
Deal Guru
Aug 17, 2008
10989 posts
13539 upvotes
Getting closer to contango as per here and here = 1 less reason to sell
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Answer not a fool according to his folly, lest thou also be like unto him = Never argue with an idiot, they'll only bring you down to their level & beat you with experience
Deal Fanatic
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Oct 9, 2008
5684 posts
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Thornhill
Added to wife's RRSP yesterday into existing Husky position.

Will add to overall positions in both of our RRSP accounts this year if further opportunities come along to lower ACB's.
Deal Addict
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May 31, 2018
1207 posts
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SK
After watching the slow drop for the last month bought a bunch of XEG yesterday. Heh, trying to time the market will end poorly for me I’m sure but we’re committed now.
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Oct 9, 2008
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Thornhill
sleepyguy wrote: Nice uptick today... but who knows by weeks end. I still have some HSE as well.
I'm not expecting any fireworks for 2020 or even 2021 until possibly late 2022 for HSE which works in my favour as I'd like to build a sizable position in the next 2 years as I'm not seeing any opportunities in my normal bread butter investments which is normally more concentrated in residential homes in GTA. Market in the GTA is just too expensive and builders have become far too greedy so I'll be putting more cash into stock investments for the next few years than normal. Not finding much value out there that I'm interested in but HSE is certainly one that I do see as truly undervalued. I'm not even considering the company being taken private, this would be a nice of course but I'm not putting too much of my investment reasoning behind this event. It makes sense to me to do this before the completion of their bigger rebuilds/projects but that's all up to LKS.

I'm thinking we get some actual tailwinds though maybe after all/some of the following become completed ie: Transmountain pipeline, retail locations selloff, Liuhua/WhiteRose/Superior Refinery rebuild.
Deal Guru
Aug 17, 2008
10989 posts
13539 upvotes
Cenovus reported Q4 and FYE results this morning. They continued to focus on strengthening their balance sheet.

Add: A environment where WTI is at $65 and the WCS differential is $24 is better than the current environment of WTI at $50 with the WCS differential a little over $17. $65-24 > $50-17.

https://www.cenovus.com/news/news-relea ... mance.html

Cenovus delivers strong 2019 financial and operating performance
Company generates $2.5 billion of free funds flow; reduces net debt

"Cenovus continued to make significant progress on its deleveraging plans through the past year, repaying approximately US$1.8 billion of its unsecured notes and reducing net debt to $6.5 billion by year end, compared with net debt of approximately $8.4 billion at the start of 2019."


Key fourth-quarter and 2019 developments

• Reduced net debt by a further $289 million to $6.5 billion in the fourth quarter

• Generated cash from operating activities of $740 million in the fourth quarter and $3.3 billion for the full year as well as adjusted funds flow of $678 million in the fourth quarter and $3.7 billion for the full year

• Reduced year-over-year upstream operating expenses through focused cost leadership

• Exceeded crude-by-rail shipping target, achieving 106,000 barrels per day (bbls/d) loaded in December

• Achieved fourth-quarter oil sands production of more than 374,000 bbls/d, up from 355,000 bbls/d in the third quarter of 2019 mainly due to reduced curtailment

Update: From the Conf Call

-Cenovus Energy looked at Alberta rail contracts, stuck with current rail program: executives
Feb 12 (Reuters) - Cenovus Energy Inc <CVE.TO> executives, speaking on a quarterly call:
* CENOVUS ENERGY CEO SAYS ALBERTA GOVERNMENT SHOULD MANAGE PRICE DIFFERENTIAL OF HEAVY OIL TO WTI AT $10/BARREL
* CENOVUS ENERGY LOOKED AT ALBERTA GOV'T RAIL CONTRACTS, BUT HAPPY WITH CURRENT SIZE OF ITS RAIL PROGRAM - EXECUTIVE VP, DOWNSTREAM
* CENOVUS ENERGY EXECUTIVE VP OF DOWNSTREAM SAYS BLOCKADES COULD JEOPARDIZE CRUDE BY RAIL MOVEMENTS; SPEED REDUCTIONS HAVING LITTLE EFFECT ON ITS SHIPMENTS
Last edited by MrMom on Feb 12th, 2020 12:17 pm, edited 1 time in total.
Answer not a fool according to his folly, lest thou also be like unto him = Never argue with an idiot, they'll only bring you down to their level & beat you with experience
Deal Guru
Aug 17, 2008
10989 posts
13539 upvotes
Added to MEG at $6.85
Answer not a fool according to his folly, lest thou also be like unto him = Never argue with an idiot, they'll only bring you down to their level & beat you with experience
Deal Expert
User avatar
Sep 19, 2004
26761 posts
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where I belong
MrMom wrote: Cenovus reported Q4 and FYE results this morning. They continued to focus on strengthening their balance sheet.

Add: A environment where WTI is at $65 and the WCS differential is $24 is better than the current environment of WTI at $50 with the WCS differential a little over $17. $65-24 > $50-17.

https://www.cenovus.com/news/news-relea ... mance.html

Cenovus delivers strong 2019 financial and operating performance
Company generates $2.5 billion of free funds flow; reduces net debt

"Cenovus continued to make significant progress on its deleveraging plans through the past year, repaying approximately US$1.8 billion of its unsecured notes and reducing net debt to $6.5 billion by year end, compared with net debt of approximately $8.4 billion at the start of 2019."


Key fourth-quarter and 2019 developments

• Reduced net debt by a further $289 million to $6.5 billion in the fourth quarter

• Generated cash from operating activities of $740 million in the fourth quarter and $3.3 billion for the full year as well as adjusted funds flow of $678 million in the fourth quarter and $3.7 billion for the full year

• Reduced year-over-year upstream operating expenses through focused cost leadership

• Exceeded crude-by-rail shipping target, achieving 106,000 barrels per day (bbls/d) loaded in December

• Achieved fourth-quarter oil sands production of more than 374,000 bbls/d, up from 355,000 bbls/d in the third quarter of 2019 mainly due to reduced curtailm
and CVE -5% after that

yeah, not sure what can save TSX energy in general now, with markets pushing ATH daily regardless of virus development
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Deal Guru
Aug 17, 2008
10989 posts
13539 upvotes
jackrabbit000 wrote: Why does the world hate this stock so much? It doesn’t matter what news comes out or if the oil price goes up, this stock goes in one direction...down.
Cenovus Energy posts surprise loss on weak refining margins
https://www.theglobeandmail.com/busines ... as-prices/

Higher crude prices said to hurt CVE's refining margins >>> that's why I picked up MEG. They are neighbours in Alta, but MEG does not have any refining; therefore it is a "pure play."
jerryhung wrote: and CVE -5% after that

yeah, not sure what can save TSX energy in general now, with markets pushing ATH daily regardless of virus development
It looks like the CVE seller, post EIA data, is out of the way. Back to flat on the day.
Last edited by MrMom on Feb 12th, 2020 2:03 pm, edited 1 time in total.
Answer not a fool according to his folly, lest thou also be like unto him = Never argue with an idiot, they'll only bring you down to their level & beat you with experience
Deal Expert
Jan 27, 2006
21844 posts
15619 upvotes
Vancouver, BC
jerryhung wrote: and CVE -5% after that

yeah, not sure what can save TSX energy in general now, with markets pushing ATH daily regardless of virus development
From the looks of it, CVE can pay off over $1 billion in debt per year so that $6.5 billion will be gone in less than 6 years (sooner if oil prices go back up or if they use their interest savings and pile that into debt reduction). But that's the same store with the vast majority of Canadian oil pays.... I suspect that the we will soon see a very cash flushed industry with low stock prices and that typically means either massive returns to the shareholders in terms of dividends or buybacks OR massive diversification into other sectors by these companies as they try to find uses for their cashflows that will add value to the shares.
Sr. Member
Nov 24, 2016
684 posts
992 upvotes
Could one of you fine folks please explain why Warren likes Suncor over all the other majors? I'm new to oil. I bought into Suncor before it was announced that Warren had increased his stake by 5m shares. Granted, Suncor only represents 0.015% of Berkshire, but when he wants to own oil, he always looks towards Suncor it seems. He had over 20m shares at one point. Then sold and bought back in and now he's increasing again.

My reason for buying in was simple: if they can be profitable at current prices, they have a chance over the next 10-15 years. All I care about is the dividend. At 4.8% starting yield, if I can get 7-8% yield on cost in the next decade, I'll be happy.

btw, who has a lower break even point? Suncor or Canadian Natural?
Jr. Member
Nov 26, 2014
133 posts
137 upvotes
Calgary
MashGhasem wrote: Could one of you fine folks please explain why Warren likes Suncor over all the other majors? I'm new to oil. I bought into Suncor before it was announced that Warren had increased his stake by 5m shares. Granted, Suncor only represents 0.015% of Berkshire, but when he wants to own oil, he always looks towards Suncor it seems. He had over 20m shares at one point. Then sold and bought back in and now he's increasing again.

My reason for buying in was simple: if they can be profitable at current prices, they have a chance over the next 10-15 years. All I care about is the dividend. At 4.8% starting yield, if I can get 7-8% yield on cost in the next decade, I'll be happy.

btw, who has a lower break even point? Suncor or Canadian Natural?
I believe CNRL is still the lowest cost producer, but I'm not sure on break even points. CNRL is also piloting a in-pit extraction mining opertations. The in-pit extraction process is new and can potentially reduce production costs. It also reduces the tailing ponds which is a big cost and liability.

CNRL also bought a lot of oil sands projects at a discount during the downturn (Total, Devon, Shell). Which will help reduce capital costs to develop mines.

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