RE:With Line 3 delay, dividends are the only game in town
I think that you are correct Joseph. However, I do believe that we will see upward movement in the stocks if WTI/WCS improve further. That is a big if.
It is a very uncertain environment right now with China-U.S. trade deal and today Draghi really hurting confidence by lowering by quite a bit European growth prospects. Sometimes I wonder if these bureaucrats/politicians create uncertainty on purpose or to create opportunities for themselves and their buddies?
So equity markets will definitely impact us and who knows if energy demand is going to weaken?
Getting back to your point and looking at financials that have been released so far there are few companies that have much flexibility. Most are on a treadmill at current oil prices and sustaining capex consumes most of cash flow. A company like BTE will have $200 million in excess cash and CPG maybe over $400 million. That does not do very much to reduce debt (which is about 10 times as much for both), buy back some shares (CPG) and accrue value to shareholders.
With the asset market still frozen, hard to see how they can create much value. If assets could be sold at reasonable multiples of NOI of 6-7 times or at $60,000 - $65,000 boe/d, the game would change by a lot but, who has cash right now? Who is willing to snap cheap assets? Seems like no one.
Then there is YGR with continued exceptional well results (new January wells is out of this world for Canada), high margin, low debt which will likely continue to grow in this environment. Very few like these. IPO could possibly be also but, we will have to see their financials.
Then we have the high dividend payers with flexibility and relatively low debt such as CJ, WCP and TOG. There you get an immediate cash return along with opportunistic reduction of their debt and maybe some share buybacks. And if CJ increases its dividend by 50% it becomes quite substantial.
CJ is also by far the cheapest but, there is more risk when oil drops by a lot as we have seen in Q4. I did work back netbacks and they should have been $7.04/boe in Q4 (before hedges impact). Does not leave much to pay interest, dividends, capex and yes G&A!!!
I bought back most CJ that I had sold at an average of $2.30. I was really overweight following the recent drop to $1.95 and lightened up a bit hoping to reload at cheaper prices and with more data in hand.
I think this is quite an opportunity right now looking at a free cash flow yield of 21% and at FCF/EV of 10% using very conservative assumptions or only $50 million in FCF. It is more right now.
I wish I would have waited for the $2.10 prediction that I had mentioned which unfortunately seems to be close to happening...... I got them just under $2.20.
It is quite crazy what we are seeing now. We have these stocks trading where they were when the Alberta energy world was about to end in late November and December. Both political parties now want to keep production in check which should match with demand which is actually increasing for heavier grades due to Venezuela and continued decline in Mexico along with OPEC+ cuts.