TSX:CVE - Post Discussion
Post by
retiredcf on Sep 18, 2024 7:11am
Scotiabank
Scotiabank analyst Jason Bouvier identifies the domestic oil companies that can still generate cash flow with lower oil prices and reiterated top picks,
“In response to the falling price of oil and crack spreads we have re-visited our breakeven analysis and sensitivities. Industry continues to be very healthy (maybe best we have seen in 25+ years), but falling commodity prices are clearly eating into FCF and ultimately shareholder returns. The average 2025 breakeven (sustaining capex + dividends) price of ~$50/bbl implies a >$15/bbl margin of safety at current prices … Although falling commodity prices are not good, breakevens continue to be robust with many companies able to fund their sustaining capital requirements with WTI at $40-$45/bbl and dividends at $45-$50/bbl … Leading the way [on efficiency gains] is likely to be SU, driven by cost wins such as autonomous trucks, reduced maintenance, improved turnaround execution, and enhanced logistics …We continue to like CVE and IMO, but both are hurt by falling cracks and weaker oil prices (higher sensitivity than SU on downstream and similar levels to others on WTI). E&Ps in general have seen an erosion in FCF levels, but unlikely to materially impact activity levels, positioning the royalty companies (PSK and FRU) well. We are also warming up to both MEG and SU”
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