Post by
Obscure1 on Jul 22, 2021 3:30pm
Hope for pension income seekers
According to the company's guidance in February, they have all of their costs covered (operations, maintenance, dividend, Capex) with WTI at US$45.
If oil prices stay in the $70's, which they are likely to do as Russia and Saudi Arabia now control both the world wide supply and price, then Suncor will remain an incredible cash cow.
SU should be able to generate an additional $8 billion of free cash flow beyond paying it's existing dividend.
Next year, SU only has C$240mm of debt that is due, which represent less than 2 weeks of cash flow. If SU chooses to initiate another max. NCIB next year, they could be able to buy back another 135mm shares. At $30 per share, a max. buyback would cost $4 billion, which would still leave another $4 billion left over.
The extra $4 billion has to go somewhere. Will the company go on a shopping spree? Certainly not for oil assets. Could they spend it on something green? Perhaps, but that is a big chunk of cash. It wasn't too long ago when Buffet bought Dominion Energy's nat gas pipeline assets for $4 billion cash and that was a big deal.
If SU only raises it's dividend 25% next year, that equates to $0.21 per share. Based upon 1.35 billion shares outstanding, that equates to about $270mm which represents about 1/15 of the leftover $4 billion. I think mgmt will raise the dividend sooner and faster than they offered in their guidance unless they plan to make a huge acquistion every year, which is pretty much logistically impossible.
Comment by
highalpha1 on Jul 22, 2021 6:32pm
@Obscure1: Your posts are a breath of fresh air on here. Thank you for keeping your posts grounded in empirical facts rather than ignorant nonsese.