Investing

is now the time to invest in oil stocks?

  • Last Updated:
  • Mar 4th, 2024 9:55 am
Tags:
Deal Addict
Jul 30, 2012
2141 posts
3198 upvotes
MrMom wrote: Would have posted earlier, but I couldn't login. Initiated a starter position on ALA at $17.42 on the morning dip. Was targeting a 5.5% yield.

NG contracts rolling, but Dec is getting hit harder than Nov today. https://www.tradingview.com/x/xq2wApLv/
Seasonality on NG price strength (Spot) is typically Oct/Nov... Wildcard is production cut effects / weather patterns (which are currently reporting/forecasting Colder than normal). While predicting the weather is a mugs game, production cuts have been real.
Deal Guru
Aug 17, 2008
10945 posts
13446 upvotes
DealRNothing wrote: Seasonality on NG price strength (Spot) is typically Oct/Nov... Wildcard is production cut effects / weather patterns (which are currently reporting Colder than normal). While predicting the weather is a mugs game, production cuts have been real.
Oh I know that. From "waste product" to "clean energy" in about a year >>> AAV, BIR ... even the wealth destroyer "Encana." OK, Maybe not OVV yet.
@spotmonthenergy or @brynnekkelly on twitter, but not that Cdn Nut...
Images
  • NG.JPG
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
love2save wrote: BUY.
Trader Jack Chan hasn't been in energy for several years, but reentered this month - October.
The first page of his public charts shows all his energy ETFs. The only change I would make is to use ZEO instead of XEG.

https://stockcharts.com/public/1094070

Short-term trend lines are firmly in place on all charts.

The two most important acronyms Jack uses on his charts:
TLBBS : trendline break buy signal
TLBSS : trendline break sell signal
Member
Jan 5, 2015
456 posts
597 upvotes
Toronto, ON
Anyone have thoughts on what the negatives are on safer picks like PPL.TO? They're still down massively like the rest of oil picks, but they've had positive EPS the entire year unlike other picks like Suncor which have been losing billions for the past few quarters.

That said, I've always had trouble distinguishing between undervalued picks vs. value traps..
Deal Guru
Aug 17, 2008
10945 posts
13446 upvotes
CPPIB says excluding fossil fuels from its portfolio would be 'an active short on human ingenuity'
https://financialpost.com/financial-tim ... -ingenuity

“There are clearly stakeholders asking for investors to exclude oil and gas companies from their portfolios. To do that, I think, would be an active short on human ingenuity,” Richard Manley, CPPIB’s head of sustainable investing, told the Financial Times. “You actually have to take a very deliberate view that these management teams will not respond to changing regulation and changing expectations.”
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
Jul 30, 2012
2141 posts
3198 upvotes
MrMom wrote: CPPIB says excluding fossil fuels from its portfolio would be 'an active short on human ingenuity'
https://financialpost.com/financial-tim ... -ingenuity

“There are clearly stakeholders asking for investors to exclude oil and gas companies from their portfolios. To do that, I think, would be an active short on human ingenuity,” Richard Manley, CPPIB’s head of sustainable investing, told the Financial Times. “You actually have to take a very deliberate view that these management teams will not respond to changing regulation and changing expectations.”
CPPIB main goal is to invest in businesses that have solid business models and a history of predictable Cashflows. The fact that "Green" investors are exiting non-renewable investments driving valuations down doesn't make them poor business models. CPPIB makes long term bets, not short-mid term "flavour of the day" investments. Valuations matter, and several renewable sector businesses are far from attractive on current fundamentals on strip Cashflows. I would expect CPPIB to expand renewable positions when long-term fundamentals make sense. Even the most ardent renewable supporters are looking at 2030-35 for significant energy transition.

As of March 2020, CPPIB public equity portfolio was 13.7% weighted in CNQ. Hardly a bearish call.
Deal Addict
Feb 26, 2017
2891 posts
4551 upvotes
DealRNothing wrote: CPPIB main goal is to invest in businesses that have solid business models and a history of predictable Cashflows. The fact that "Green" investors are exiting non-renewable investments driving valuations down doesn't make them poor business models. CPPIB makes long term bets, not short-mid term "flavour of the day" investments. Valuations matter, and several renewable sector businesses are far from attractive on current fundamentals on strip Cashflows. I would expect CPPIB to expand renewable positions when long-term fundamentals make sense. Even the most ardent renewable supporters are looking at 2030-35 for significant energy transition.

As of March 2020, CPPIB public equity portfolio was 13.7% weighted in CNQ. Hardly a bearish call.
I watch what BAM is buying and they've been buying midstream assets the last couple of years which is a good sign they're undervalued.

I've been scared off from E&P names after taking some losses in 2016. The pipelines look like good value to me but I'd like to keep my investment in them limited in case I'm wrong. I had about 25% in pipelines in 2016 which was great for dividend income but it was stressing me out and I realized it was too much for me.
Deal Expert
User avatar
Oct 26, 2003
39293 posts
6324 upvotes
Winnipeg
faken wrote: I'm curious on what some of your strategies are on the stocks that you are holding.. Are most of you holding until recovery or trying to get out as soon as possible..
hold forever, would be nice to have a USD account in wealthsimple
Deal Guru
Aug 17, 2008
10945 posts
13446 upvotes
@DealRNothing

IDK who or what you are replying to, but from the FP/FT article and my chosen quote, i thought it was clear that I and the pension plan were bullish on human ingenuity. Where's the bearish call?

I've posted that I'm also long CNQ fwiw.
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
Jul 30, 2012
2141 posts
3198 upvotes
MrMom wrote: @DealRNothing

IDK who or what you are replying to, but from the FP/FT article and my chosen quote, i thought it was clear that I and the pension plan were bullish on human ingenuity. Where's the bearish call?

I've posted that I'm also long CNQ fwiw.
@MrMom
Wasn't referring to your outlook or position. Simply reinforcing the idea that not all Institutional investors believe fossil fuel investments are "dead". The added CPP position weighting simply reinforces the (your / mine as well) point.
Deal Addict
Jul 30, 2012
2141 posts
3198 upvotes
Chance7652 wrote: I watch what BAM is buying and they've been buying midstream assets the last couple of years which is a good sign they're undervalued.

I've been scared off from E&P names after taking some losses in 2016. The pipelines look like good value to me but I'd like to keep my investment in them limited in case I'm wrong. I had about 25% in pipelines in 2016 which was great for dividend income but it was stressing me out and I realized it was too much for me.
O&G Assets are cheap based on cashflow runways towards renewable transitions. The main issue is public investment is exiting. Alternative Asset managers (aka BAM / Berkshire) know assets are cheap based on cashflow streams and are scooping them up (Berkshire / Dominion Deal $10B in July). Business models work for private equity but tough for retail investors when Public markets / Gov't agendas depress trading valuations monthly/yearly.
Deal Guru
Aug 17, 2008
10945 posts
13446 upvotes
Wow!!! CVE had paid down some debt last year, but this is going to hit CVE's share price and the conversion valuation.

Imagine, HSE was going to pay ~$11 for MEG recently.

"Husky shareholders will receive 0.7845 of a Cenovus share and 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share, according to the statement."

Official PR;
https://www.cenovus.com/news/news-relea ... eader.html

COB Prices;
CVE = $4.88C/$3.71U
HSE = $3.17C

Inferred HSE equity valuation (CAD) = ($4.88*0.7845) + ($4.88*0.0651) = $3.828 + $0.3177 = $4.1457

* That's not the exact math as an HSE equity shareholder will receive the right to buy more CVE, but you do have to pay for them. Alternatively, you can sell the warrants, so what you will actually receive is TBD.

** HSE debt holders will be doing their happy dance.

"Net-debt-to-adjusted-EBITDA ratio of less than 2x expected to be achieved in 2022"
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
Homework for the fact-checkers.
Tagged : FWIW (and why I'm not able to buy into the Hydrocarbons Are Dead story)

Deal Guru
User avatar
Sep 21, 2007
13019 posts
11361 upvotes
...
Dream coming true for me. Thank goodness I held off on selling HSE bag Face With Tears Of Joy
"An essential aspect of creativity is not being afraid to fail." -- Edward Land
Deal Guru
Aug 17, 2008
10945 posts
13446 upvotes
Updates to CVE post.

(1) Cenovus to Create Canada Oil Giant With $2.9 Billion Husky Deal
Published on October 25 2020, 5:27 PM
Read more at: https://www.bloombergquint.com/business ... stock-deal

"Buying Husky will boost Cenovus’s production to about 750,000 barrels a day of oil equivalent from about 475,000 now. But perhaps more importantly, it will gain substantial downstream assets, namely additional refinery and pipeline capacity. That will equip Cenovus to refine and upgrade 70% of its crude at its own refineries. The company says that will leave it less exposed to Western Canada Select ..."

“Nobody should be surprised if non-core assets are sold,” Pourbaix said in the interview. Husky’s retail business, which includes gas stations and travel centers across most of Canada, is a division “we will take a look at.”


(2) Cenovus to buy Husky for $2.9 billion to create No.3 Canadian energy firm; more deals seen
OCTOBER 25, 2020 7:34 AM
https://www.reuters.com/article/husky-e ... SKBN27A0FD

After the deal closes, Cenovus shareholders would own 61% of the combined entity, with Husky shareholders controlling the rest. Hong Kong tycoon Li Ka-shing-controlled Hutchison Whampoa would hold a 15.7% stake in the new company. Hutchison Whampoa is the biggest shareholder of Husky currently, with a 40.2% stake.

BTW;
Nuttall opined on HSE on BNN TV. "There's just absolutely no reason to own the stock." Face With Tears Of Joy
https://www.bnnbloomberg.ca/investing/v ... gy~1898760

Update #1

Cenovus deal may be just the beginning as some analysts anticipate more energy sector consolidation
October 25 at 12:09 PM ET
https://www.theglobeandmail.com/busines ... pate-more/

"Scotia also predicts there will be further consolidation among Calgary-based oil sands producers, with MEG Energy Corp. a possible takeover target. ... MEG’s market capitalization is now just $717-million."

Update #2

MEG Energy Announces Third Quarter of 2020 Results and Conference Call
CALGARY, AB, Oct. 19, 2020 /CNW/
https://www.megenergy.com/news-room/art ... rence-call

or https://mma.prnewswire.com/media/131538 ... 0_Resu.pdf or

Update #3

Canadian oil-sands producer Cenovus Energy and Husky Energy, controlled by Hong Kong billionaire Li Ka Shing, agreed to merge in an all-stock deal valued at $2.89 billion
Updated October 25, 2020 04:25 p.m. EDT
https://www.wsj.com/articles/cenovus-an ... 1603632994

"As part of the trans­ac­tion, Mr. Li’s com­pany agreed to a five-year stand­still agree­ment, mean­ing it won’t sell shares un­til the agree­ment ex­pires. That should sig­nal to in­vestors the con­glom­er­ate won’t un­load its shares and put pres­sure on the stock price, Mr. Pour­baix said."

Update #4 via Morningstar

Excerpts;
"Based on our analysis, the solvent-aided process could eventually be the lowest-cost oil sands production, with most potential production having break-even prices around $45/bbl"

"The warrants carry a CAD 6.54 strike price that can be exercised within five years of the transaction’s completion date."

"As a result of the transaction, we are lowering our fair value estimate for Cenovus to $6.50/CAD 9 per share from $7.50/CAD 10 and increasing our fair value estimate for Husky to $5/CAD 7 from $4.50/CAD 6. We are maintaining our no moat rating for both companies."
Images
  • CVE.JPG
Last edited by MrMom on Oct 26th, 2020 3:35 pm, edited 4 times 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
10945 posts
13446 upvotes
gibor365365 wrote: So, if i'm doing nothing and hold 100 HSE shares, I just get 78 shares of CVE?
So Yes, plus 6 warrants. See above for the math.
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
Dec 20, 2018
10051 posts
10129 upvotes
IrwinW wrote: Homework for the fact-checkers.
Tagged : FWIW (and why I'm not able to buy into the Hydrocarbons Are Dead story)

But how much normal O&G did the $500B (which is miniscule amount anyways) lubricant for renewable displace from o&g generation?

I'll guess way more than$500B worth ?
Last edited by StatsGuy on Oct 25th, 2020 7:47 pm, edited 1 time in total.
Deal Guru
User avatar
Sep 21, 2007
13019 posts
11361 upvotes
...
Next buy out.. MEG. Face With Tears Of Joy
"An essential aspect of creativity is not being afraid to fail." -- Edward Land

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)