RE:The Great "ESG Discount"
Lots of theories out there BUT don't forget most of the names in the O & G business are just beginning to recover from a major train wreck.
We read estimates by Nuttal and others of how xyz will generate gazillions in fcf and too many assume it's already happened. Truth is, the quarter we're in right now is the first quarter oil names are booking some significant fcf. Big fcf is delayed to show up in Q'rly reports because of hedging but it will happen as long as oil stays at or above current rates.
Its going to take a few Q's for the big fcf $ to show up in some rosy quarterly reports. When that happens lots of funds will pile into the sector.
It was only 6 - 9 months ago that many were setting record low share prices
So, sit back, relax, enjoy the ride. Those that have taken positions already will see the biggest gains. The old saying of rising tide raises all boats apply.
Even names like Cpg (which has been a shorters paradise) wii rise from the dust.
The most important factor right now is that oil stays at or above current prices.
In a few Q's when all the sector names start puking out fcf everybody and their dog will be chasing your shares.
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CdnOilObserver wrote: Over the past weeks and months all I have been hearing is 'when will the generalists' show up and begin investing in energy. There is no doubt that at >WTI$70 that the Canadian Energy Sector is selling at a steep discount compared to 2020, 2018, and years earlier.
It is almost unfathomable that so many mutual funds and pension fund, etc have fallen for a false ESG story that promotes Canadian Energy Companies as being a poor investment - these are the smart minds that should be investing in the best interest of their clients.
Do these "smart" managers think Russia cares? How about the Saudi's, or Iranians? Or maybe the Chineese do? Nada.
If Canadians dont believe in their own energy sector, who will? Canada has the 3rd largest reserves in the world, and Ontario and Quebec still need to import oil to meet current demand.
CPG is in the same boat as all other Canadian Energy Companies.
What the management of these companies need to do NOW MORE THAN EVER is show that they are creating shareholder value, they need to visibly demonstrate successful NCIB's and reinitiate dividends - this will push the share prices higher. The better this sector performs, the more the "generalist" mutual funds and pension fund manager will be inclined to invest, or be seen as underperforming the general indexes.
In the case of CPG - I would argue that at some point it will have to start buying out smaller companies, and buying new assets to ensure its continued prodcution - it's stock is its currency - and you can't be buying assets at WTI$70 or WTI$75 with a $5.00 stock.