SharperDingaan

Keep in mind that most all public M&A discussion are vested interests promoting their various books. Nobody wins unless there are deals, and M&A season is a melting ice cube. The WCSB ice cube will have roughly 9 months to run, starting from when the new egress begins line fill. At the senior level, most would expect the bigger partners to continue buying out their smaller partners; as many with ESG reporting issues need a liquidity event to exit. The mystery will be whether the company itself concurrently executes on a NCIB, to facilitate the transaction and minimise/avoid the buyout tax. At the mid-cap level most would expect primarily share swaps, and field consolidation, concurrent with a follow up NCIB execution (deal structure). Over the last 5-10 years there have been few opportunities by which to issue 9-10 digit equity; it's tax efficient, balance sheets remain strong, cash remains for development/distribution, and a concurrent NCIB will avoid tax. All about production 'manufacturing', at the lowest possible cost/bbl. At the junior level most would expect outright sale vs transacting for scraps. Similar preference for the shares/NCIB combination, as it is better to hold slices of the bigger pizza vs all of a small one. Also easier for the bigger owners to simply sell their shares, and buy the scraps through private vehicles. Once the bulk of share swap/NCIB deals are underway; expect a switch to reverse-splits to eliminate the buyback tax, and a return to primarily drilling/special dividends. Carbon capture, refining, and green energy projects largely put on ice until there is a change in government. We live in interesting times. SD

Depends where you start from ... A great many people currently live in tents and shelters, and are driven elsewhere when a towns shelters are overwhelmed (Toronto->Niagara). It's at record levels, and while there's a pecking order within the shelter system; none of this is good for anybody. Mass apartment living vs tents/trailers and shelters isn't great, but it's a lot better than where we're currently at. Obviously, not all towers are the same; the tower for shelter replacement is quite different to the tower for starter families, or affluent retirees. Furthermore; the starter family may only need the flat for a decade, after which they may either sell or rent out their place, and move onto something else a better fit for their needs at that time. What matters is that the shelter is fit for purpose/secure/comfortable/safe, accessible/affordable for a long period, and that future costs are reasonably predictable. The Mac Mansion can be bought later if/when the couple can afford it. Choice between types of accommodation (MURB, duplex, suburbia, etc.) remains, but each type of accommodation is typically more costly. Every family/person decides upon what's best for their situation; but the tower is the default. Right now, that default is the tent/trailer, or a shelter. Times change, we need to change with it, and there are no guarantees. All that we can really do, is what we thought best at the time. SD

The realities are that the traditional 1950-80's solutions of green field (sprawl) mass affordable housing are 1) no longer affordable, 2) are too labour intensive. The masses cannot also afford the required car to get around, and/or the public transport time/costs from the former farmland to their place of work. It is also contrary to the new green economy (EV, smaller distances, vs ICE and longer distances). A 10-storey tower holds a lot of flats, and typically takes a lot less time to build than the equivalent green field housing. It's the common solution around the world, and today's industry is a lot better at brown field redevelopment than it used to be. Most new builds will also go a good 15-20 years relatively maintenance free. Towers would get a lot of people on the property ladder, provide a lot of accessible work, fuel innovation/productivity, and create a lot of new population (babies + immigration) to refresh the demographics. The new supply (across the land) dramatically lowering both rent/housing costs, upgrading the available housing stock, and lowering systemic inflation. Northern communities benefiting from factory built updated/upgraded modular housing/food growing facilities, deliverable via sea-lift, &/or air-lift. Politicians either get with the program, or get run over. Most of today's vocal NIMBY's will either be dead or in nursing homes within the next 10 years. Successors are a lot more open minded, and across the generations - the demographics favour a more progressive approach. Looks good for a Canada overall, but there are going to be a lot of busted heads; not a bad thing. Obviously it plays out differently in different nations, and the different parts of every nation. As we all know, housing is primarily a local solution; not a global one. SD

It is much more likely to be collections of 2-4 height limited very modern towers, replacing 1 in every 3 malls in suburbia; the limitation primarily being adequate water and sewer for the higher density. Biggest units aimed at boomers loosing mobility, needing everything on one floor, and someone else to do the maintenance. Everything else aimed at first time buyers, inclusive of a low cost BoC mortgage and a family tested, time limited (10 year) rental subsidy. Canada needs babies, and acts to help them along. Not yet a popular sell in the development communities, but it's coming. There are only so many quarters of poor results they can tolerate, before they have to do something. SD

I think there will be a lot of bitching and skull-cracking, but it is pretty much inevitable. All across Canada, the young/retired, widows/widowers are becoming forcibly acquainted with either finding roommates or moving to a cheaper community. It's generating a lot of intense and multi-generational anger, the young/old are demanding change, and they have the numbers/energy to force it. Politicians either get with the program, or get replaced; not a bad thing. A great many cities have dead malls, with good transport links. Demolish the malls, upgrade water/sewer, and replace with single floor towers of new 2-3 BR affordable housing. Same thing for the new towers of tiny 1-2 BR, and the great many C class buildings well past their useful lives. The towers themselves built under trades apprenticeship programs, financed under BoC 25-year low interest non-transferable mortgages, using domestic/imported labour willing to settle/learn. Get out of the way, or get replaced; your choice. You can still have the suburban/rural spacious SFH .. but it's largely something already existing, and sold by a downsizing boomer moving into a downtown tower of single floor 2-3 BR's. Boomers age in place, the 2nd/3rd BR's for the kids visits and live-in at the end of your time. Quite a bit different to what many expect today .... SD

That USD 53 billion share issue also ranks up there on the top 25 list of the largest in history, Petrobas leading the pack at 70 billion. https://www.irmagazine.com/reporting/worlds-biggest-share-issue SD

I was utter sh1te when I first began investing, and blew myself up least three times! Simply because you cannot 'do' investing until you have had 'real' money at risk, have learnt how to manage the greed/fear, and have had big enough losses to make you get your act together. Some people play poker and use their winnings to pay for school; I invested my student loan money in junior o/g and mining companies One of the smartest things you can do is get yourself a summer job in an industry you like; I spent a summer as a rig pig, and winter breaks relieving crew members in hostile places, over Christmas holidays. There ain't nothing graceful on a rig, crews are rough and direct, there's a lot of hazing and bullying, and you're that clump of sh1te on the bottom of everyone's shoe! But survive/thrive .... and as long as you listen, you will go very far indeed .... and learn! At < 25, your best investment is in you; grabbing life by the cohones and squeezing - hard! When you're eventually done having fun, you will be a lot more mature, know what you want, and be ready to start investing. For most people; learning the technical (CFA, MBA, etc) while staying in the juniors honing your risk management skills. You've 'graduated' when you trust your judgement/experience enough to toss out the 'CFA way'. Just don't expect to work on the sell side of the street Thereafter its just evolution, thinking for yourself, and doing your own thing. Good luck! SD

Keep in mind that housing is local, and price paid is the 'market cap' PLUS a premium (location, scarcity, utility, etc.). You own a boat on the market tide, and premiums change. We hold our London (UK) RE primarily as a luxury good; the better the 1% do, the more our neighbourhood gentrifies, and the better we do. The economic/political solution to millennial's deferring house purchases, are fiscal programs financing post WWII quantities (after servicemen returned) of affordable new builds for the masses. Today's mansions become tough sells at current prices, when buyers have viable alternatives. Millennial's are also increasingly viewing housing as just shelter, NOT an investment. Buy just what you need (house poor vs house rich), stay in it for some time, and buy it to live in. Sell/move only as your needs change (work, more/older kids, etc.). Not that a dissimilar view to those who lived through the 1930's depression. SD

The US hasn't had 'normal' since the 2007 GFC (16 years ago); relevant interest rate history is anything prior to 2007, and for much of it, 5% was a pretty good number. It seems 'unimaginable' simply because anyone who entered the industry within the last 16 years has had no experience with it; therefore it doesn't exist. Multigenerational mania. US financial manias are common. In the run-up to the 2007 GFC, US finance was 'positive' that securitization (as it was done then) was the future; then along came Lehman Brothers along with the collapse of how many other major I-banks within how many weeks? Dramatic/undesirable social change is routine, and a great many would take great delight in the over privileged getting their comeuppances. Toronto/Vancouver is full of people who borrowed as much as they could when rates were ultra-low, when the 'new normal' was endless QE and helicopter drops of free money (covid period). Greed and FOMO drove the gullible towards buying houses they couldn't afford, the purchase of multiple properties to airBnb, and made RE unaffordable for most local people to live in. Today, cities are banning airBnb in certain areas, forcing negative carry investment properties back onto the market, and using the supply overhang to lower prices/improve affordability. Everyone else's fault but theirs; moral hazard is a bastard, and bankruptcy sucks, but it's part of life. Make poor decisions, you wear the consequences. When 'hell' arrives (and it will), the population will need someone to blame, and it'll be the central bank. Even Canada's official opposition party wants to both fire the head of the BoC, and make the BoC subject to the whims of parliament; were there an election tomorrow, they would be in power. Diminish confidence in the central bank, and hard assets are a better choice than financial ones; infrastructure, hospitals, premier RE, pawned watches (tech bros), etc. All are quality luxury goods. We just have great faith in the ability of disaster to concentrate the mind; pretty sure the end result is better, but how we get there remains a mystery! SD

'great podcast with an overview on energy from a rational viewpoint' Notable is that the executable takeaway is to generally oppose the news headline. Factoids presented out of context, let the reporter/presenter off the ethical/fact-check hook, and are exploitable. It also gets increasingly reliable as the demands of the 24/7 news cycle drive content towards factoid + filler (cheap), presented by the least experienced (cost saving). Also notable is that a supposedly high-risk position (per the head-line), is nowhere near the risk perceived; the adverse press release will drive the price of the item below what it should be, and keep it there until either the sentiment/story-line changes. When the carrot says something stupid enough to generate a one day 2,000 point drop in the index, doing a buy later in the day - is not the risk it is perceived to be. The only question is how long until the story-line changes ... It is not hard to maintain a solid ongoing understanding of an industry (context), or recognise over-reaction. It simply requires that the investor invests some time in developing WEB's circles of competence. Not a big ask. SD

Permian producers have been able to achieve 40% more production at 20% less cost; once they consolidated and went into manufacturing mode; Exxon-Pioneer is just the latest consolidation. What isn't mentioned is that 13M boe/d of US production depleting at an average 10%/year (conservative guess) is a loss of 1.3M boe/d (13M x .10). Consolidation in the Permian needs to deliver spectacular results in < 1 year, just for daily US production to remain flat. Governments don't run pipelines, operators do. Most of the time the sale will be to an operating P3 using public sector accounting, and most of the P3 will be owned by domestic special interests, pension and infrastructure funds, etc. No loss recognition upon sale as it will be recovered via a legislated rate-regulated charge to users. SD

DCF valuation is an industry practice, and not going away. The investor simply chooses whether to use it ($50 price per report 'X'), do their own quick and dirty DCF valuation, or do a comparatives valuation and re-engineer the DCF valuation backward; pros and cons to each approach. Realising the how/what DCF valuation does matters; the number itself is just a product of the assumptions that went into it. Every company's future looks brilliant 4 years out; but discount it at 25%/yr for the risk involved, and that future dollar is only worth 41 cents (1/(1.25)^4). The DCF value-add is understanding that if that future dollar can be pulled forward by one year it is worth 51 cents (1/(1.25)^3), or the same as a 25% increase in that 4-year dollar (1.25/(1.25)^4). To reliably make that happen most companies would be looking to acquisitions, the resultant growth rate would contribute to higher DCF valuations, and the industry would be publishing reports with ever rising price targets At times, you might also bet against the implied growth assumption, and benefit from the inevitable 'corrections'. Comparatives assume norms, and don't work well on outliers; the valuation itself is typically just a multiple of forecast one year cash flow, that can be readily dis-aggregated into product volume x price deck (o/g, mining, commodities, etc.). Plug actual prices into the price deck, apply the multiple to find out what the outlier is really worth, and buy/sell accordingly Then keep in mind that if there is zero future cash flow, the DCF is zero, and the asset is worth zero. After which along comes Bitcoin with zero future cash flow and a current valuation of USD 26,800 .... rubbing industry's face in the fact that DCF as a valuation tool is utter sh1te SD

I hear you .... but do a quick sniff test. The US rig count has been slowly falling for quite some time (1y, 3y chart), and most of the remaining rock is no longer top tier. How exactly, does more production arise when there have long been fewer rigs drilling? It can only occur if new rigs are drilling very prolific longer laterals, more bores from the same pad (manufacturing), and old bores are being used for water flood injection in top tier prospects (fewer rigs on site for longer). This is of course occurring; but it's real questionable whether that 'super production' from the relatively few monsters, is enough to more than compensate for the decline in all the US fields together, and whether it is sustainable when much of the best rock has already been drilled. Hopefully we're wrong, but .... https://oilprice.com/rig-count Agreed the EIA numbers should be credible, and sh1te happens. Thing is that when modelling errors go unfixed for some time, and reports don't tie against comparative independent reports (API), people will fill in the blanks - rightly or wrongly. Fail to correct the misinterpretation, the inference is that it is not wrong, and the entity reaps what it sows. US production is probably going higher, but whether there's another 10-15% of sustainable production over the next 1-2 years ??? EIA may well be 'right' ... problem is it's the EIA reporting them! SD

EIA thing. The EIA has had such screwed up weekly numbers, for so long (years of high/volatile weekly 'adjustment factor'), that many just don't see the EIA as credible. The weekly report still moves markets, but the organisation is increasingly seen as 'captive' to the desires of the US administration; OPEC+ is a lot more blunt about it. The source quoted knows his stuff, particularly developments in the NA small/medium o/g producers. The only way US production rises is if there is 1) new off-shore production, or 2) the major shale fields enter 'manufacturing' mode. Agreed, the majors are consolidating in the fields, and scaling up to improve production efficiencies; but higher net production is going to take a lot longer to achieve than 1 year, simply 'cause it's hard to grow against 20%+ annual depletion. Our own view is that it is 1) EIA is treating some of Canada's TMP expansion as US; 590,000 bpd x 36% US ownership (by share weighting) = 210,000 bpd incremental production. WTI. It seems pretty clear that OPEC+ has a USD 90 minimum in mind, is acting to enforce it, and doesn't want the price to go over some upper target (100?); hence the Saudi/US/Israel deal. Tighter sanctions enforcement (Russia/Iran) reducing illegal supply, that offsets declining Chinese/Asian demand. The west gets to demonstrate that sanctions are working; Russia/Iran earn enough from the higher price on existing supply to offset foregone income. Everybody wins. All the WCSB producers do very well under USD 90 oil, lower differentials, and tight supply of heavy. Today's supreme court ruling is also a game changer, that will mitigate against the possibility of windfall taxes. We would also suggest that CO2 release from the globes wild fires, and methane release from melting permafrost, were not part of the Kyoto climate models; and as the model predictions are materially wrong, the Kyoto agreements are mute. Almost certainly, not what the environmentalists had in mind. https://www.cbc.ca/news/canada/calgary/supreme-court-richard-wagner-impact-assessment-act-1.6993720 Again ... it's pretty hard to see a better place than the WCSB for the next few months. SD

The EIA is blowing smoke. Courtesy of blondeBond and coolreit https://www.investorvillage.com/groups.asp?mb=19168&mn=526030&pt=msg&mid=24427626 SD

Most of those in Gaza are not Hamas or Hezbollah, they are Palestinian, and have little to do with it; they are simply seeking a land of their own, just as Israel is. Sealing the exits, deliberately cutting off supplies to starve them out, and vowing to 'end it once and for all' (via invasion/disease) is attempted genocide. Something that Jewish people have been very familiar with, for centuries. Israel cannot expect everyone else to act rationally, when it doesn't do the same. When the US had 9/11, the result was the hunt for and eradication of Osama Bin Laden, not the elimination of the various populations that he was hiding in. Were Israel similarly rational, it would take a similar approach, as it has in past Nazi hunts. Mossad is very good at what it does. Bar fights happen, but if someone insists on getting into a gun fight, there is little their friends can do. Best solution is knock out their friend as rapidly as possible (saving their life), after that its just try to minimise the body count. Israel is that hot-head insisting on a gun fight. O/G price escalation is a bet on Israel doing something stupid. Hopefully cooler heads prevail. SD

Nobody knows how this will go, but most would expect variations of the below; Gaza/Egyptian border opened, managed by Egypt/UN; water/fuel/food/medicine in, people out, and held in camps on the Egyptian side. 2M people live in Gaza, they have nowhere to go, they cannot get out, and per the UN charter; collective punishment is illegal. The people living in Gaza are not animals. Israel is too far in to avoid a mass invasion of Gaza. Record body counts and atrocities on both sides quickly sour support, and create future generations of armed conflict. Israeli coalition government collapses, Hamas and Hezbollah disrupted, but continue to exist. The US cannot support both Israel, Ukraine, stay under its spending cap, and keep all the balls in the air without a new house leader, and quickly. Hot wars burn through munitions at an incredible rate, and US disruption fears are inevitable. US/Saudi/Iran/Israel deals collapse. Oil prices rise, and there is no longer a cap (Saudi supply flood) on how high prices can go. Somebody hits Iranian facilities, they hit Saudi facilities, and oil prices are .... Most would expect an overall downward market bias, and a strong upward bias on the price of o/g companies. Add a significant push for windfall taxes on the o/g majors (Exxon, etc), and the weapons suppliers; as they will be seen as war profiteering. Less of a push in Canada as an on-time completion of the TMP expansion is 'salvation'. Sh1tty way of making a buck, but pretty hard to find a better place than the WCSB. May we all do well. SD

Oil prices should go up a good USD 5-10 over the next little while. Little mentioned in the press are the current US/Iran USD Billion 6 prisoner swap, and 'permitted' increase in Iranian sanctions free oil supply. It's pretty clear that in pulling their strikes off, Hamas had to have logistics/co-ordination/intelligence help from a 3rd party; and that if escalation is to going to be contained, blood lust for Iran is going to have to be 'appeased'. Restructured prisoner swaps, no money, and all Iranian oil under sanction, etc. https://www.theguardian.com/world/2023/sep/18/us-iran-prisoner-swap-deal https://www.bloomberg.com/news/articles/2023-08-25/for-global-oil-markets-a-us-iran-deal-is-already-happening Total supply doesn't change, but Iran receives less for it (net of sanction breaking costs), and the western world temporarily pays a little more for sanctions free oil. The escape valves being Saudi agreement to reduce cutbacks, and additional Canadian supply on-line in late Q1 2024. More supply still if the number/length of Canada/US oil trains are also stepped up through Fall and Winter. All good for the WCSB. SD

Drug thing: Junkies routinely overdose on toxic drugs. BC averages 207 deaths/month (1455/7); in some places, so many at a time that it even overwhelms a city's ambulance capacity. Nobody plans on being a junkie, and nobody wants to use a questionable supply, but when needs must the dice are thrown. https://www.cbc.ca/news/canada/british-columbia/toxic-drug-deaths-july-2023-1.6950922 No matter the drug, some people are going to abuse it, it isn't going to go well, and there will be deaths; it doesn't mean we shouldn't use the drug as prescribed. However if we don't hear negative media, or see the bodies, we perceive everything to be fine. Manipulate social media to suddenly make patients aware, via a viral campaign and graphic imaging, and there will be a negative impact on the makers share price; that is exploitable. The financial industry has long been a haven for sociopaths and psychopaths, there will inevitably be attacks from time to time. https://www.ft.com/content/97fc800a-31e2-11e4-a19b-00144feabdc0 Economics thing: With only $X to spend on groceries, when inflation prevails you either buy less of the same (smaller packages), or substitute (house vs brand name). However if you can both eat less (Ozempic abuse) and divert the net savings into something more fun; the food industry sees immediate & growing permanent demand destruction. Furthermore that big earnings decline 'n' years out, discounted back to today, only appears as a gentle headwind and not as a hurricane. Exploitable opportunity. SD

Like anything, use Ozempic as prescribed for the type-2 diabetes it was designed for & it's a wonder drug. Abuse it to do something else entirely (weight loss), then repeatedly do it again by upping the dosage (overdosing), and it's a very different thing. Anorexics already suffer a disturbed perception of body weight and image, abusing Ozempic to keep the weight off is little different to a druggie craving a fix. Lot of people also used to think that Oxycontin was OK, until they got addicted. SD

Not enough. The reality is that Chinese demand continues to fall (relative to expectations), and to avoid an inventory build OPEC+ will need to apply matching cuts. Most of it will be from monthly OPEC+ run-rate depletion/disruption, plus the odd surprise. Russia cutting diesel exports while China sells off some of its excess is instructive. The mystery is India. Does it temporarily play nice with the international community, swap some of its Russian supply for Iranian, and continue to pay in other than USD? SD

Break down the ending stocks by type, and compare it to the minimum SPR requirement for that grade. Total stocks are approaching low levels, and a very high proportion of it is light. The heavy oil SPR is much lower than it should be, and the level of storage at Cushing has been flashing for some time. There is a reason why everyone is pushing for completion of the TCP expansion asap; almost everything going through it will be WCS (heavy), and it will be flowing an additional 500,000+ bpd. https://www.theglobeandmail.com/business/article-canadian-oil-output-to-hit-new-heights-within-two-years-report-says/ SD

Been shopping as well ... Keep in mind that the more EV takes over the world, the more valuable heavy oil gets; as it cracks into the feed-stock for asphalt, etc. Cars still need to run on roads, the roads need asphalt, and we get asphalt feed-stock from the bottom-middle layers of the heavy oil crack. If you want the benefits .... you have to crack heavy oil, and the more heavy fractions you want the more you will displace light oil (primarily shale). Today; heavy oil is typically despised; publicly seen as highly polluting to get out (oil sands mining/refining), and as 'dirty oil' when burnt (higher carbon release). Yet it is also routinely extracted in quantity; with minimal pollution via cold flow, water flood, and C02 sequester techniques, often at depletion rates < 10%/yr. Market miss pricing is a wonderful thing SD

It's click bait folks; designed to sell Ozempic. As body's 'starve' they initially extract more nutrient from less food; keep starving them and they try to conserve energy wherever possible, and feed on muscle. The rest of us get to put up with fashionable whining anorexics, and the well-know images of starving babies. Identical to the junkie selling highs (beauty); to keep the weight loss going, the dieter has to increase dosage, and toxicity rapidly rises on the ever declining quantities of dillutent(food). Ozempic does great until the bodies pile up, and the starvation images upload to social media. Exploit accordingly. SD

A lot of the consumption is simply boredom and availability; rich mans disease. Reduce the money that people have, and providers will just reduce the package size while charging the same. The population gradually gets healthier as it eats less, but no change to total revenue. SD