Suncor Energy Inc. T.SU

New NCIB to be announced?

[highalpha1]

Management has clearly laid out the game plan for how excess free cash flow will be utilized in 2021 -- 2/3 will go towards debt and 1/3 will go toward share buybacks. Management has reiteration this allocation strategy over and over again, including during its Q1 conference call and its Investor's Day presentation.

The current NCIB was to buyback up to 44 million shares. As per their 2020 Q4 earnings statement (released on February 3, 2021): "Subsequent to the end of the quarter, the TSX accaepted a notice to commence NCIB for up to 44,000,000 common shares." During Q2 earnings call, the CEO explicitly stated that SU had exercised the NCIB by buying back 20 million shares from January to April 2021. I also know that SU has been buying loads of shares in May and June.

I would imagine by the time Q2 earnings are released on Wednesday, SU would be close to buying back 44 million shares this year (or at least very close to that number). Management has not expecting the amount of free cash flow that they are seeing. Back in late 2020, management was projecting between $1.5-$2.5 billion in free cash flow (of which $1.0-$1.5 billion was to go towards debt and $0.5-$1.0 billion was to go to share buybacks). Well, in Q1 alone, SU realized $1.4 billion in excess cash flow (beyond operating expenses and dividend payment). Even with production levels lower for Q2, higher oil prices will likely mean that even more money was made in Q2.

I am wondering how SU will spend that excess free cash flow. I would imagine they will announce a new NCIB, or, maybe raising the dividend. I fully understand that management has said a dividend hike should not be expected until 2022, but I think from the numbers that I am analyzing, there is sufficient FCF to hike the dividend immdiately (to at least C$0.26/quarter).

[Experienced]

Nice analysis Here is my take SU will do another NCIB to cover the at least the rest of this year up to the maximum allowed by the regulators and will continue to pay down what debt that they can reasonably pay down subject to the agreements with their bankers.  They will not raise the dividend until probably at least Q1 next year. Why do I say this? 1....it is consistent with their

[Thor16]

You're almost certainly correct.  Expect a revised higher NCIB.  Dividend will increase Q1 2022.  In almost every scenario repaying debt, inclusive of early payment penalties, is substantially cheaper compared to letting the debt mature.  As well buying back shares at their current value is lucrative as compared to paying out more cash.  They desperatley need to reduce

[Vlosun]

Great posts on this subject. It would really surprise me if they increase dividend . Better to Buyback shares actually and stand with their plan. The completion of line3 and tmx will improve the Canadian producer situation after 2023 and fix the future dividend.

[Experienced]

Agreed The ENB Line 3 completion which entails higher throughput plus TMX can pretty much take up all of the oil sands production.  The quantity going through TMX has the advantage of getting something closer to the Brent price as opposed to the WTI/WCS price of Line 3 which is a good thing for SU. If the OPEC+ Agreement holds and that is a big "if" given past experience, we could

[Spanito]

This post has been removed in accordance with Community Policy

[highalpha1]

@Spanito: One of the dumbest posts I have read in a long time, combining a mix of conspiracy theory and utter stupidty. You claim to be long but then s*** on Experienced for offering constructive (and bullish) opinions grounded in empirical data. You, on the other hand, have offered nothing with the exception of your claim of being a poor investor. 

[PabloLafortune]

Obviously the stock is cheap but ask any pre pandemic SU retail investor and im willing to bet most hate this investment and are just hoping to get back to break even or small loss before dumping it. Why? Because on top of investors' paper loss, to add insult to injury mgmt cut the dividend (due to wasting money on buybacks instead of paying down debt) and didnt restore it. Meanwhile

[highalpha1]

@PabloLafortune: Fair enough. My point is simply that everyday you hold on to a stock is equivalent to you re-purchasing that stock at that day's price. If you want a higher dividend paying stock in the O&G sector, then the obvious (Canadian) name is CNQ. If you simply want a high yield with relatively stable share price, then, it's best to look at the utlities, telcos, or midstream

[Experienced]

A variable dividend adds nothing in terms of investor confidence and math and if I was mgt I wouldn't consider that option for a minute. As for guidance on future dividend increases...I wouldn't hold my breath to see anything in the upcoming Q report.  Perhaps we will see it for the 3Q report and if not certainly before the 4Q report. Since the company at current oil prices has

[Chris007]

Lol. As much as it sucks, if you don't agree with the direction the company is going, your best option is to just sell and move on, and save yourself the aggravation. unless you are a big swinging d ick activist investor like a Carl Icahn or Bill Ackman, companies aren't going to go out of their way to accommodate your wants and needs. I'll continue holding into earnings. If I

[Spanito]

This post has been removed in accordance with Community Policy

[PabloLafortune]

Hmm, should Suncor do buybacks or should they invest in renewable energy projects? I wonder which one is better for the environment, for the Alberta energy industry, and for shareholders and citizens as a whole.....