riski wrote: It is rather naive, though not unique, to think we have some secret insight or have done some smart analysis that will impact a company's share price in a way that the rest of the market is not seeing. It's a retail investor's fatal flaw and the reason that retail traders lose on most of their trades.
Can we really believe that there is no one else anticipating TMX completion and further hasn't pulled out a calculator to determine the impact of the cash flows that a narrowed differential will bring? After all, there are thousands of financial professionals, each getting paid millions of dollars to come up with ideas and perform such analyses so their firms can make billions. Yet somehow we have a secret insight into the future price action right here on Stockhouse for a pipeline completion that has been telegraphed for years. In reality, this is baked into everyone's analysis and investment decisions already and institutions were all over it months ago which is why the price has moved like it has this year.
The market looks forward 9 months. Retail investors struggle with this concept which is why they are frequently surprised and end up selling low and buying high. Right now, smart investors are contemplating things like the summer 2024 driving season and various data inputs that might affect demand next year's summer demand. Unknowns like the middle east war an Russia are mixed in with new projections being dialed into spreadsheets almost instantly as new information comes out. TMX and a narrower heavy differential is not new and has been sitting on those spreadsheets for a long time.
What we should be thinking is what happens if TMX is delayed further? What happens if the heavy spread stays wide for some market reasons not yet determined or known? Those are negative inputs that are quite possible. In fact, TMX/heavy differential news that negatively affects the share price is more likely at this point than positive TMX imputs since those cash flows are already being anticipated.
If any of that surprises the market, look out below.
What will move the share price up is continued strong oil prices which are not baked in at all....to any CAD producer. The market seems to be pricing for $60-70 WTI. So the longer the price stays high, the more cash flow we will receive which can be allocated to buybacks and dividends which will force an eventual re-rate. A spike to $90 is fun, but the market doesn't give that any credit unless it stays high for a prolonged period of time.
It's all about the area under the curve.
MLEWICKIMBA wrote: Disagree
There is nothing built into the price on ATH for TMX because there is no financial benefit right now.
$5.00 USD move om WCS is $80M CAD for ATH.
$24 USD Spread right now. When it goes to $12 USD that means $192M CAD per annum potentially in extra cash flow at Current Production.
Therefore for ATH it means being able to redeem 40M shares per year every year or conduct periodic SIBs.
The stock will move to 8 bucks by December 2024.
This is not built into ATH or any other heavy oil producer.
Do you think ATH management is happy with $4.24?
Happy weekend.
ML