RE:RE:RE:RE:The seesaw battleOldnagger wrote: The whole oil industry is in a difficult place. Particularly the majors. BP saw the writing on the wall after their Gulf Coast disaster. Share prices increases have been stunted for most companies way below the increase in commodity prices an yet cash flows are rising dramatically.
Renewables etc are very capex intensive and low return investments. The Industry knows this and so does the market What to do ?
Well the first one is obvious . Pay down debt. The next is very risky increase Capex. That leaves 2 choices divies vs buyback reward investors now or much more later ?
It really is that simple !!
Generally agree with you.
Where we might differ is as follows..
In the case of SU, the oil reserves associated with the base plant are expected to run out in 15-20 years. They have begun the process to get approval to extend the mining area. In the current political climate it is not a certainty that they will get approval. As time goes on, the prospects of approval IMO will become even lower.
Without this approval, their production will fall dramtically. So irrespective of any forecasts of oil demand, there is a strong possibility that SU production will decline and hence cashflow will be much lower. This isn't a pleasant prospect for long term investors in the company and hence a low SP relative to its FCF.
The answer is to do what I have posted earlier - migrate the company to a renewable energy company while the company still has huge FCF. Right now the company is signalling that it plans to stay as an oil producing company, albeit a low cost one. The market is saying "Nope, we don't like that strategy" and this is reflected in the SP.
I will reiterate what I have said before. SU has tremendous potential if it successfully migrates to a renewable energy company and if it can the SP today is a steal. If the company doesn't signal sometime in the next year that that is the next step in its strategy then I will be "getting out of Dodge" and putting my SU dollars to work somewhere else. Conversely, if they signal that they are going to morph to a renewable energy company and announce a sensible and concrete strategy to achieve that objective, I will increase my position and buy even more if they achieve success in achieving milestones.