Provided to subscribers January 19, 2023.
Here is the latest from Canadian Value Investors!
Suncor Q4 Update – Buybacks bonanza
Happy 13F day! What are super investors buying?
Are we going to avoid a recession? Sam Zell vs Campbell Harvey
Mispriced Markets on The Case for Value
Complaining about mortgage rates? At least you are not in Mexico
Are North American refining margins structurally higher?
Suncor 2022 Q4 Update
-We are still long. Relative to MEG (our other Canadian energy holding), we consider SU a better bet at current prices.
-Net 2022 adjusted earnings of about $11 billion versus market cap of ~$60 billion, creating an earnings yield of ~18% (of course it is all about future prices, capex, and the cost of Pathways). Where did the money go? The quarterly dividend increased to $0.52, 23.8% increase. For 2022 they repurchased $5.1 billion of shares, paid $2.6 billion of dividends, and $2.5 billion of debt (would have been $3.2 if the U.S. dollar didn’t go the wrong way on them). “Based on current business plans and commodity pricing, the company expects to increase its share buyback allocation to 75% by the end of the first quarter of 2023, and to continue to progress towards its net debt reduction targets in 2023”.
Cumulative repurchases are now up to about 19% of total shares since 2017. Not bad. If they could only get their leadership, safety, and operational issues behind them. They say that the current dividend (4.66% at todays $44.59 price) is sustainable down to US$40 WTI; with Pathways capex, regulatory risk, AROs, and other issues, it is probably more like $45, maybe $50 long-term. Not so bad.
Where is the new CEO anyway? From their Q4 conference call (emphasis ours)…
Kristopher P. Smith - CEO & Interim President
Yes. Thanks. No, I'm not in a position to make an announcement on this call. And I'll say what I said before. The Board is going through a very diligent process, ensuring that they make the decision that's going to take this company forward. Expect the decision is going to be very soon. It's been communicated in the past that decision is expected in mid-February. I mean, we're sitting here at February 15. So I expect the decision and the announcement will be coming fairly soon.
Roger David Read - Wells Fargo Securities, LLC, Research Division
Yes, I appreciate that. I'm not real good at math, but it struck me the 15th was mid-February.
Other notes:
-Wind assets were sold for $730MM. Petro-Canada is being kept. NCIB was renewed. -“Pathways Alliance was awarded exploratory rights from the Government of Alberta for the proposed carbon capture and storage hub to safely and permanently store CO2 captured from over 20 oil sands facilities in northern Alberta”
-And TotalEnergies executed their ROFR, must be annoying for Suncor – “Teck’s 21.3% interest in the Fort Hills Project (Fort Hills) and its associated sales and logistics agreements for $1.0 billion, subject to working capital and other closing adjustments. Subsequent to the fourth quarter of 2022, TotalEnergies EP Canada Ltd. provided notice of the exercise of its contractual right of first refusal to acquire from Teck a 6.65% interest in Fort Hills, which reduced the amount of working interest available for Suncor to purchase. As a result, on February 2, 2023, Suncor completed the acquisition of an additional 14.65% working interest in Fort Hills for $688 million {before W/C adj)”.
Happy 13F Day! What are super investors buying?
In the United States, any institutional investment manager that manages over $100 million or more in Section 13(f) securities (explained below) must report its holdings on Form 13F with the Securities and Exchange Commission (SEC).
As defined by the SEC:
“In general, an institutional investment manager is: (1) an entity that invests in, or buys and sells, securities for its own account; or (2) a natural person or an entity that exercises investment discretion over the account of any other natural person or entity. Institutional investment managers can include investment advisers, banks, insurance companies, broker-dealers, pension funds, and corporations.
The securities that institutional investment managers must report on Form 13F are “section 13(f) securities.” Section 13(f) securities generally include equity securities that trade on an exchange (including the Nasdaq National Market System), certain equity options and warrants, shares of closed-end investment companies, and certain convertible debt securities. The shares of open-end investment companies (i.e., mutual funds) are not Section 13(f) securities.
These filings usually land on the last day they are due, being February 15th for Q4. Most notable changes for us were Li Lu buying more Google and Berkshire buying LPX and PARA.
Li Lu bought more Google around the same time we did last year for our Diversified Portfolio. What nice company to have. We really should send him a Christmas card next year.
LPX, or Louisiana Pacific Corp and PARA, Paramount Global, are the ones worth noting at Berkshire (we are still long Warner Brothers), though they are Ted or Todd holds and are too small for Buffett. We will leave PARA for another day. However, LPX is interesting.
The company “was founded in 1973 and is “a leader in strand-based engineered wood siding [that has] strategically transitioned from commodity to specialty.
…
LP is committed to returning cash to shareholders through dividends and share repurchases after necessary investments in growth. Capital Allocation (2019 through Q2-22): $690M in growth capital, $230M in dividends, $2.7B in share repurchases, Strong balance sheet with zero net debt.”
A few numbers. Interesting indeed. No position at the moment. August 2022 corporate presentation is here https://investor.lpcorp.com/static-files/8397d6ca-2100-4efc-9b8b-0eef1a55426a and their Q3 presentation is here https://investor.lpcorp.com/static-files/44bad8c7-a039-4e31-8060-4e295fa88270
