RE:Great 3rd Quarter Results - up >$1 in AMintegrity11 wrote: As confirmed By TD, SU Q3 results very good. SU imo has an excellent upside from todays price and should continue its recent climb tomorrow. After reviewing the comments on the results it's very obvious most of the posts are not from shareholders, but are from posters who are either shorters or havd their personal vendettas against this excellent Canadian oil producer. It is very humorous to see how these posters pounce on what they see as negative news. If SU drops tomorrow if is because the sector drops not because of the good results. I think it is not unreasonable to see SU approach hung $60 by end of year.
Perhaps integrity11 - time will tell whether you are right or not.
In the meantime, here are some things to think about....
1....SU wrote down billions on its investment in Fort Hills based on market valuations as per the PR when they bought the Teck shares and in the 3Q report. This signals that the assets of all oil producers in Canada face the same fate. Of particular interest to shareholders of SU is that SU is trying to sell PetroCanada. The company says it will be making an announcement about this at the end of the year. Does the writedown of Fort Hills suggest that we may see another writedown for PetroCanada next quarter? IMO it is quite likely that we will see this. So while the FCF numbers will continue to look good in the 4Q report, another writedown of assets will not be viewed as a good thing by the market and will be seen as two quarters in a row with bad news which lowers market confidence in the company as an investment compared to other investment choices (even in the same industry if you are an oil bull like Migraine).
2....SU buying out Fort Hills and taking a writeoff associated with it and also announcing that billions will be spent over the next few years addressing production issues there raises a fundamental question and that questions is - Why? It is becoming increasingly clear that SU will not get approval to extend the Base Plant in 2030 so it needs to replace that production with something. Interestingly, the theoretical production at Fort Hills (192K barrels per day) is about the same level as the Base Plant (200K barrels per day). Since Fort Hills is about 50km from the base plant, getting this increased production from there to the upgrader raises issues about how to do it and the associated infrastructure costs to do it. There is no doubt in my mind that they will find a way to do it but the question will be - at what cost?
3...Point 2 in a way answers the question as to why SU is selling off renewable energy assets to pay for Fort Hills which seems to be going against the the grain for a less carbon centric world. To me the reason centres around the potential non approval to extend the Base Plant. SU will need feedstock for its upgraders and hence feedstock for its refineries so in a sense it has little choice but to do what it is doing. So while many, including myself, were scratching their heads wondering what SU is doing by doubling down on oil, the answer is now quite clear. While what they are doing in this regard is a good business decision on the surface and I would probably do the same thing if I was running the company, from a market perspective this is not a good thing and we can expect continued low valuation multiples for SU going forward.
4...some people here have questioned why there wasn't an announcement of if a dividend increase. One possible explanation stems from the points above. The original plan was to get approval for the extension of the Base Plant. This would place the expenditure of billions of dollars of mine development costs into the 2030s. The company is now hinting that this approval will not happen and they increase their stake in Fort Hills instead. This means that billions in costs slated for the 2030s now has to be spent over the next few years thus reducing the money available for dividend increases.