RE:Reply to MigrainecallGreat thoughts, thanks.
Institutional investment is important for the fossil fuel industry, I agree.
In fact, I think there is not enough investment in ALL forms of energy to meet increasing demand. High prices for renewables and skyrocketing costs of materials also support fossil fuels. I think it will be oil that will end up with the highest cost increases, and the Canadian sector is the most undervalued of them all based on the decades of reserves, current profitability, and lowest geopolitical risk.
I'm busy ATM day trading this volatility, but here's some info on money leaving ESG funds. Started to go that way last spring. I may have posted charts to this regard a while back.
I had more, and graphs as well regarding fund inflows into the O and G sector, but can't find them right now. I think it was from John Kemp...?
The past movement of capital away from producers has hurt production to the point that it has contributed to create the structural supply deficit situation we are in now, and the deficit is getting worse. Capital spending is still at levels that are unable to maintain current production rates.
I agree with Nuttall, that the rerating of energy stocks must eventually happen soon, as this kind of cash flow multiple compression cannot stay this low. It will be hard for most funds to miss out on the money being made here now and in the future.
Companies are positioning themselves to survive in an ESG constrained borrowing environment by paying down debt, and offering what shareholders today want, which is the 75% to 100% return of free cash flow once debt levels are reached. Production increases take a back seat.
As some funds are still leaving O and G, more and more others are moving in to take their place as per the data I have seen.
Cheers, and welcome to the board.
https://www.bloomberg.com/news/articles/2022-06-01/esg-equity-funds-had-worst-month-of-outflows-on-record-in-may#xj4y7vzkg https://citywireusa.com/professional-buyer/news/esg-funds-shed-1-6bn-in-brutal-second-quarter/a2393905 mrmomo wrote: Migrainecall wrote:
Thanks for this info.
Np. If it helps great, we're all the better for it. We frequent these forums and spend precious time here not only to seek information but to be better "informed" investors and absorb pieces of info we might have missed, as well as the opinions & view of others who we usually don't see eye to eye with. So in that regard, glad that was helpful to you.
"However, I think it is a positive development for Canadian oil and gas. Good riddance I say. The ESG exodus from fossil fuels has dragged on share prices for a long time, bu that has now changed."
It all well & good and it is your prerogative to say "Good Riddance" but there are & will be consequences from those folks leaving the Canadian oil patch with their money. Real consequences, whether in the immedaite or delayed further down the road. I've been investing in the O&G sector for over 3 decades, and i can tell you for a FACT this isn't a good thing. For one specific reason. The whole Canadian Oil&Gas sector was built on foreign investment as is/was the entire country. All that loss of money flows, and we're talking in the 10's of billions here, will have dire consequences which will show it ugly head & manifest itself in several ways. No way out it unfortunately.....
As for the ESG question, well, that;s a whole new different animal that the Canadian O&G industry WILL HAVE TO DEAL with now or latter. This particular issue will definintely NOT go away and imo will become a more crtitical & pertinent factor as time moves forward. The majority of the Western population, and that includes the Canadian one as well, is very pro ESG, sustainbility & renewables with anything to do with protecting the environement. Again no way around that and it will need to be dealth with, not sure how the sector will though...
"Now, funds are returning as capital inflows from funds are actually increasing. ESG funds have not performed well financially as oil companies have. It is just changeover and Total was late to the party, hence this news. Spinning off their oil sands investments makes good sense, and perhaps the new shareholders in this activity will be more aligned with the activities of the company to make it soar."
I disagree here. Just because O&G stocks are up in the last two years doesn't mean that captial inflows are better than the past, it just mean "some" venture money went into O&G stocks and that's it. As for perspective, If the ESG issue was non existant and the American & European investors didn't pullout for those reason, as well as for Chinese investment drying up for different reasons, these Canadian O&G stocks would be up at least 3X as much maybe even 5X more.
Unfortunately, because so much global captial was pulled out and/or avoided this "demonized" sector, the massively underpreformed ( I know !! you're probably thinking right now lol WHAT!!! underpreformed??? wtf is he saying??? It's been the best sector for last 2 years!!!!). And you would right BUT this sector with oil reaching almost $150 wTI should have gone A LOT higher thn it did. But it didn't becasue companies, investors, people & insititutions were reluctant to invest in there.....because of "perceptio & image" and backlash.
"We need shareholders in the industry to vote cunstructively and demand positive change, not those that are controlled or easily influenced by the nutbar agendas of radical special interest groups. Like a bad marriage, best to cut the ties and go their own way before causing too much unneccesary damage to the business."
Well, here again you can have your opinions, dismiss crucial facts & call them whatever you'd like BUT the Canadian O&G sector CANNOT survive on water & beans alone. It needs massive foreign investment to forge ahead and progress not only to survive. That financial aid or investment is not avaible by Canadian sources alone, at the very least they needed the American captial inflows, which was greatly reduced to almost nothing. And by my accounts, will completely be gone and a total dry well by the end 2023. The Canadian O&G sector could have tolerated & survived both the Chinese & European investment drying up, but not the American being taken away for good.
To end this, the one thing all those involved in the Canadian O&G sector, and by this i mean the companies themselves, the Canadian Ceo's, the lobbyists & Gov't, could have done was prepare and make the necessary measures for them to move ahead & adjust to this NEW environment, at least buy enough time to deleverage & survive to pivot the whole industry in a new direction. And imo this WOULD have started by removing all the nearly BK zombie ep's that are taking up spacev & valauble resources and consolidating the whole sector with just a handful of supersized but very efficient, effective producers.....
Butb they didn't even bother to do even that because they didn't want a loss of jobs, which imo not very smart and was very short sighted by those folks as those massive losses will come anyways regardless what little influence the Canadian O&G has. This is a global issue not an isolated one to the Canadian O&G.
That's my two cents worth.....
GLTA