[AltaRed]

Thinking of it, but undecided if i want to wait until the trend reverses

whats your target entry price?

I'd look for a price between $36-$38 and a reverse in trend back up. Commodities have further to fall in my opinon since the global economy (China and Europe) seems to have a cold. That may turn into bronchitis shortly. The 'sensationalized' news about Suncor's shipment to Europe is testing the waters. There wil be no material volumes moving out of Eastern Canada without an East-West pipeline. The rail lines are pretty much saturated without extensive double tracking and taken up with Bakken crude.

 

[AltaRed]

I am not in any hurry. I think everything will head south again because oil is not likely going up anytime soon. I believe I can at least wait for 4Q14 results, if not 1Q15 resuilts... unless of course, the Saudis blink and future traders go wild with oil contracts.

 

[AltaRed]

The cuts will primarily be in contract jobs, partly due to deferred capex spending on various expansions and project delays. The number is well within expectations. They probably have 8000-10,000 contractors at work in addition to their 13000+ employees. That is a pretty typical requirement - things I've done at least 3 times in my O&G career.

 

[AltaRed]

CNQ is not far behind and check out IMO. The latter blows SU out of the ballpark. The lesson here is to sometimes look at those with (relatively) low dividend yields and a reputation for project and financial management. Course it helps that all 3 have a downstream position, especially IMO and SU.

 

[AltaRed]

Has Suncor peaked around these levels for the next couple of years or could it ever get back above $40

I believe it has room to move to $40 but it may take a year as they pay down debt and increase dividends to shareholders. Perhaps even share buybacks too. It takes a larger integrated longer to respond than the smaller pure upstream E&P companies.

Whether it will get above $40 on a sustained basis is an open question. There is not much room in Canada for substantial increased oil production growth so it really comes down to very modest production growth through production optimizations and most of all, margin increases. There are simply too many headwinds (carbon taxes and fuel substitution) for investors to project significant growth in the oil business. It may well become just another income stock in 2-4 years.

 

[AltaRed]

I agree and it will manifest itself in share buybacks and dividend increases (along with debt repayment). The endpoint is finite though so share price at some point, wherever that is, will stall due to lack of demand growth and hence production growth. Once TMX (end of 2022) and Enbridge Line 3 (end of 2021) are operational, there will be some room for production growth, after which we will see the limits of the Canadian oil industry.

There will come a point that the determining factor for production will be customers, not pipeline space. It is coming, even in America. Just a matter of when. Investors don't particularly like mature industries, or to some extent sunset industries and compressed valuation metrics, e.g. a P/E that doesn't exceed 10 or even 8, will reflect that. These things are real and will become a reality somewhere in the not too distant future.

It doesn't matter whether SU will top out at $35, $40, or $50. It will top out and I am not likely to own a stock that is on a 'leash'. SU will have to re-invent itself into other businesses if it wants to continue to grow.

 

[AltaRed]

I generally concur with Doctrine's viewpoint but not the numbers. I think peak oil demand will occur well before 10 years, with peak production rates well below what many believe. Oil prices could temporarily hit $100 but it will not be long lasting and oil company share prices won't reflect those prices for long. Every investor knows, or should know, the private oil industry will be boxed in taking the brunt of demand decline and eventually squeezed out. Sovereign oil firms will see to it.

I also don't believe 6 billion people will necessarily use more oil. There will be inexpensive EV alternatives and China will be leading the way. India will do likewise. Most people in the developing world don't need range beyond 100km anyway...treks into the wilderness not withstanding. I think we will see more e-bikes and e-motorcycles in developing countries too.
Example for China
Tata and Strom for India
Electric bikes and scooters in India - applicable for a lot of SE Asia and Africa too for that matter.

We in the West are far too insular to understand the revolution that is well underway.

 

[AltaRed]

I'm done with oil stocks. I think these companies will struggle if they don't re-invent themselves. Oil may remain for some time, but we cannot deny the new wave of alternative fuel/electrification going strong. Electric vehicles are here to stay. Technology is advancing at record speeds - its only a matter of time that gas vehicles become obsolete.

Commodities are cyclicals, i.e. trades, not buy and holds. Good money can be made from them but one has to really understand the cycles, and in oil especially, subject to the whims of OPEC+. A number of folks here have done well in this sector but it takes staying power and discipline....and I might add, luck too.

 

[AltaRed]

There is a limit to how fast renewables can pick up the slack. Activists and governments either have not thought this through or their ideology is clouding their judgement. Renewables are having a tough 2022 because they cannot get product, e.g. turbine blades, solar arrays, etc, etc.

 

[AltaRed]

It is likely going to take the collective (aggregate) effort of the major oil sands producers (Fort Mac and Cold Lake) to support the first modular nuclear power installation (anchor tenants so to speak). It could be justified simply from the increasing cost of natural gas as fuel for their operations. I don't see a current electrical utility putting up their hands willing to do this any time soon.

 

[AltaRed]

I am not suggesting Suncor or any of the oil sands producers actually own and operate modular nuclear power plants, but to be the anchor long term contracts so the plant could be financed by an enterprising entity. Same as is done for major pipeline projects. Someone somewhere, e.g. Brookfield Infrastructure, should see this as an opportunity