RE:This is why SU is not increasing the dividend yetObscure1 wrote: Vlosun:
You are correct about the 10% as per the section 5.6 (NCIB) from the TSX:
"In general, an Issuer can, subject to certain restrictions
described in this Policy, purchase by normal market purchases up to 2% of a class of its own shares in a given 30-day period up to a maximum in a 12 month period of the greater of 5% of
the outstanding shares or 10% of the Public Float"
Since the shares outstanding and the public float are the same for SU at 1.51 billion shares, the "greater of" the 10% of the Public Float should apply.
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Therefore, in theory, SU could apply for an NCIB of 10% of the Public Float which would amount to 150mm shares for the year. That would mean the company could probably buy back about another 110mm shares when it's NCIB runs out by February 7, 2022.
I believe the same restrictions apply in regards to the 2% monthly maximum and the 25% of average daily maximum purchases.
"The daily maximum allowed, subject to the block purchase exemption that is available to Suncor for regular open market purchases under the NCIB, Suncor will limit daily purchases of Suncor common shares on the TSX in connection with the NCIB to no more than 25% (2,497,868 common shares) of the average daily trading volume"
Therefore, if Suncor's managment decides to focus on a share buyback program, they could buy back 110mm shares at say $30 per share, which would amount to another $3.3 billion dollars.
While that decision would anger some retail SU shareholders, I would be in favour of the decision. If the market is going to continue to penalize SU and other producers, why not capitalize on what are essentially force sales by institutions being pressured to exit "oil" at any cost.
SU could technically reduce its float by up to 2.5mm shares per day (plus block exemptions) to a maximum of 2% per month = 30mm shares per month. that means SU could complete the NCIB of another 110mm shares in 3 months and 8 trading days (30mm per month plus 2.5mm for 8 trading days in the 4th month).
My guess is that SU will have banked a billion dollars in Q2 after spending a billion on share buy backs. I think they can generate another $2+ billion of free cash flow in Q3 despite the scheduled maintenance program at the base plant as the rail system connecting to Syncrude's facilities and the added storage should help.
It seems like it is doable for SU to fulfill a max NCIB by the end of November which is only 4 months from now, as SU should have the free cash flow.
That means SU could have 1.35 billion shares outstanding by the end of the year as opposed to 1.5 billion shares. Of course, shareholders would have to wait for another couple of quarters before being able to see their dividends increased, but the intrinsic value of their shares would be worth 10% more (forever) by the short term pain of reducing the float. In the meantime, SU would be gobbling up the inevitable overhang being created by ESG sellers which is just good business.
Hopefully this adequately explains why the company is doing what it is doing. They are not out to "get ya".
Great Post!!
There are two ways to reward shareholders - dividend increases and/or share buybacks
There are pros and cons to each.
Given the low undervalued SP of SU right now, I would agree that a buyback of shares is in the best interests of long term shareholders. As a shareholder of SU I hope that Mgt will continue to find ways to reduce the production cost which is already below the fully costed production of even Saudi Arabia when you take into account that the oil money is used for handouts to Saudis to keep the Monarchy in power and to also reduce the 'dirty oil" stigma through money invested in carbon capture etc AND buyback shares with excess free cashflow.