RE:RE:Low share price is $25mm per monthVlosun wrote:
You can add the fact that Suncor will repeat these buybacks for the next 3 years. It can be estimated that 250 to 300 million shares will be repurchased at the start of 2025, in three and a half years. If they increase the dividend by 25 percent as planned it will therefore be $ 500 to $ 600 million that Suncor will save each year starting in 2025. With a lot of debt paid and a smaller dividend Suncor would have to free up $ 5 billion a year to make a shift and close. reposition while paying a generous dividend. THE question, will it be too late? Where on the contrary will we have better visibility on the survival of gasoline and to what renewable energy we will turn to replace the part of the cash flow coming from refining if the electric car really becomes democratized.
Good question!
As you probably know, I have posted in the past that the company needs to develop a plan to morph into renewable energy company and to effectively communicate their strategy. My other point was that I didn't see mgt needing to do this immediately.
That said, if we look at your question from the perspective of mgt - what do they see?
1......the transition to renewables will take at least one generation to happen if not two or three
2....the speed at which politicians want all this to happen will in all probability result in a lot of mistakes which will make oil even more valuable in the future
3.....the corollary to point 2 is that once politicians see their mistakes they will become increasingly desperate and throw even more money at companies which have renewable energy projects
4......right now the investment community is enraptured with anything renewable and have bid up the cost of poker for those wanting to join the game and so it is hard for mgt to find projects that meet decent metrics in terms of payback etc
When look at it from this perspective there isn't a compelling reason to join the renewable energy party right now unless there a special situation or a promising early stage company to partner with.
The problem investors face in this situation is that with the mania about renewables, the SP of companies like SU and CNQ suffer and worse yet this negative sentiment feeds on itself creating a downward spiral.
Frankly for long term investors this presents a great opportunity to snag cheap shares but only if ultimately mgt does really have a renewable energy plan.
What am I looking for?
Sometime over the next year, mgt articulates in very clear terms a renewable energy plan of sufficient size and scope to have a meaningful impact on future earnings. They don't have to buy something right away but clearly message that are going to be big players over the coming years.