You Dumping Energy Stocks with a 2-Week Ceasefire?
I know a lot of short term traders & speculators are going to RUSH for the exits & SELL Energy stocks at the opening bell Wednesday morning 😂🤡 Are you one of them? Or will you be a buyer when people dump? I for one will be an observer who will set predetermined price targets to buy more 👍🏻🤠and I will NOT act emotionally or irrationally during this news cycle I have 3 conviction Energy buys, and will add to two of these names if the price is right 😃 I increased the Energy weighting in my portfolio when a few things happened during the war. Even if the 2 week ceasefire is extended, factors remain that should support higher for longer energyy prices. These factors are the 1. Destruction of producer infrastructure. LNG plants and refineries cannot be fixed instantly. Many wil take months to repair, some maybe years before prewar production levels are reestablished. 2. A demonstration of how vulnerable shipping lanes are in the Middle East. All it takes is one cheap drone to light up an oil tanker and we are back to energy insecurity. There will now be a Risk Premium assigned to those cheap $60 barrels going forward. 3. A demonstration of how many countries seemingly have NOT planned for a crisis triggered by egress curtailment. Many consumer countries simply did not create enough storage. Ironically, producing countries also had the same problem. 😱They thought their production would continuously flow into tankers and that storage wasn’t necessary. This crisis made it clear that due to a lack of storage, production had to be SHUT IN. Production is not like turning off a switch, and back on again when the all clear sign is given. Shutting in production can permanently damage oil reservoirs and effect the geology of future oil flows 😳 Future oil production can be sequestered in storage which may help ease “oversupply”. As with the refilling of strategic petroleum reserves 😵💫 4. Even if the straights are opened for 2 weeks, there will still be ongoing shortages of oil, LNG and other distillates like diesel and jet fuel. The tankers that left after the closure of Hormuz are being received now. There will be an “air pocket” of supply that will last for months due to transit times 😳 4-8 weeks of energy in transit doesn’t help a country that needs energy NOW. 5. I increased my weight in Energy because my investment thesis now believes that the $60-$70 Oil we enjoyed and thought will go to $40 will be replaced by a new reality. I believe that reality is now $70-$85 Oil 😃 I think the market will assign much higher prices for barrels even if the war would end immediately due to the previously discussed 4 points At $70 oil, my top conviction buys will be able to return capital to their shareholders via dividends and buybacks, fund their capital budgets to keep production flat and/or grow modestly. At $80 oil, they will print cash💰💰💰With great balance sheets, low debt, long reserve lives and low decline rates, they will be rock solid WITHOUT a continuing war 😊🥂 At $85+ Oil, they will be cash generating ATMs 🥰gushing massive amounts of free cash flow. Unlike our friends down in the US Basins, we don’t have to DRILL OUR BRAINS 🧠 OUT to keep production flat and saddle ourselves with higher CAPEX levels😃 So folks, this is WHY I am NOT going to sell my Energy stocks with today’s news🤡🤡 I wrote this piece to share for one big selfish reason, to impress upon MYSELF WHY I bought my Big 3 Energy names! Are you curious about what I bought? If you talk the talk, walk the walk! 🤠👍🏻. Canada 🇨🇦 Strong! 🤠🤠 I would gladly buy more of the last 2 names 11,500 Cardinal Energy 3,900 $CVE Cenovus Energy 9,000 $WCP Whitecap Resources I shared my investment thesis. Now please share yours or your Energy Top Picks where you have skin in the game 😃😃😃😃😃🥂🥂Cheers from YEG
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28 Comments
Le Corb@lecorb · 6mo
I agree with all your points. Even with a two week cease fire and hopefully permanent return to shipping traffic, oil is likely to remain north of $80 for some time and $70 for the next year. More countries will look to alternatives to Middle East oil and gas and satisfy their tariffs arrangements with the US by buying more from the US which means more Canadian producers volume through our pipelines to the US gulf until Venezuela ramps up over the next decade. I will continue to own and add to my energy and pipeline holdings and continue to collect a growing dividend stream.
H CL
@heroichenry · 6mo
A lot of canadian oil and gas are low cost producers and already making good bucks pre-war. Now they'll have more cash on hand to slide to my hands! Plus canada is expanding its LNG export capacity with a few more facs coming online in the next few years + LNG canada phase 2 underway.
As long as Israel continues to act like destructive toddler, the Strait will stay closed. Oil companies in the Middle East will continue to feel the pinch. Canadian oil and pipeline/transport companies - CNQ, WCP, ATH, ENB, TRP - will benefit immensely for the next couple of years. I won't sell any of my holdings. Not only will they experience price growth, but their dividend will follow suit. Many are already dividend aristocrats, increases year over year.
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