MEG uncertainty - real of imagined now I know I might sound a little negative on MEG and since I have a short and long position I can swing both ways and please don't take the remark out of context as I know some of you will.
for the record I have covered most of my shorts and only have a very small one left. So basically I have a smallish long position.
MEG has very good assets and management are good except they really dropped the ball on protecting the company in a severe down cycle, which we have been experiencing since the top in 2014.
MEG would be a 15-20 dollar stock today if they had issued 50-60 million shares when the stock price was 30-40 range and shored up the balance sheet but they didn't and I guess we can't blame either since most other CEO's also missed the opportunity.
SU was prepared to a degree and they used their strength to buy COS at very good prices. In a few years when oil is back to 80-100 range, they will look like geniuses but for now we are here to discuss MEG.
right now even with a higher oil prices, we need to delve into the details and those details are not always available to the lay person.
Bitumen prices, differentials, currencies, hedges, transportation, condensates blending prices, debt service costs, etc, operating costs, and production disruptions.
Q2 will be Ok, maybe not a negative CF quarter but definitely not more than 10-20 million in free cash flow and it all depends on the details and most of that cash will not be spent on increasing capex as some of you have been lead to believe.
q3 or q4 will be better but that's a ways off and not in investors minds at the moment.
so what is on investors minds?
1-MEG has been under some selling pressure of late even as oil prices have been climbing, why?
2-No news about MEG selling access pipeline, why?
3-no more news of takeovers in Canada or USA, why?
4-produciton increases by Iran, Iraq and Saudis and no more talk of production freeze are going to take care of the declines and disruptions as these OPEC countries fight for market share.
5-so you see there are not enough buyers to buy all of the shares of the sellers and consequently the SP has been falling lately or at least not responding to higher oil prices. If there had been more buyers we would be back above 7 or even 8 possibly.
6-we have been told that at 50 with the frackers will be back with a vengeance and everyone is scared of USA starting to drill and increase production again.
so these are some of the reasons why MEG maybe is not going up and responding to higher oil prices and most of them as connected to
I do have some conspiracy theories as well but lets leave those for another day.
Now share we discuss the individual reasons one by one and see if they are real reasons to stay away from buying MEG is just excuses and will not stand the test of time?