Seeking Alpha

Buffett's new Suncor stake could be the start of something bigger

Comments (14)
  • Transcripts&10-K's
    , contributor
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    As Warren has stated publicly on multiple occasions, any purchases under $1B are all but assured to be the doings of Todd and Ted; it's all but certain that Warren is not behind this investment.
    15 Aug 2013, 02:45 PM Reply Like
  • Marine85
    , contributor
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    Maybe so butI doubt Warren buys a half billion dollars of shares if he saw no profit. Something tells me you don't like oil sands.
    15 Aug 2013, 11:56 PM Reply Like
  • Transcripts&10-K's
    , contributor
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    "Something tells me you don't like oil sands."

     

    Nope, just not a fan of shoddy reporting (especially from a pretty good site like SA) and the comments that follow; I know it's done to drive views, but it's still annoying to see these purchases labeled as Warren quarter after quarter after quarter...
    16 Aug 2013, 06:53 AM Reply Like
  • Elronir
    , contributor
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    I couldn't believe my eyes when I saw an article about Buffet and SU this morning. I was long SU for a long time, but left shortly after the strong Q1 result. SU has alway been the weak stock of my portfolio and even today I completely fail to see why Berkshire would buy this, considering they are alway playing the "long" term. Suncor has a low economic moat , is not a leader of the industry, is unreliable and depend too much on the "others" to get the best revenue(pipeline, train industry, market price of petrol, politics, geopolitics, weather etc).
    15 Aug 2013, 06:23 PM Reply Like
  • benbolp
    , contributor
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    @elronir what oil company doesn't rely on others to get the highest revenue? No other oil company controls any of the things you mentioned, except you can argue the biggest companies can control the market price but that's kind of moot.

     

    Suncor is a fine company with a healthy balance sheet and commitment to returning profits to shareholders - it is a value stock with good fundamentals. There is very little upside and very little downside - it is what it is, higher yield than a bond, upside if keystone can be built, downside if oil prices go down. What is good about SU is it sells heavy crude which is more desirable than light crude.

     

    I think depending on the operations of the company expect 4-7% annual CAGR and a slowly increasing dividend.
    15 Aug 2013, 06:55 PM Reply Like
  • RS055
    , contributor
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    SU is sitting on 40-50 years of reserves ( reserves/production). Most large oil companies spend huge amounts of money on exploration and giant fields have not been found in decades. US shale is growing fast - but the wells have a very high decline rate - about 50% - so the companies have to keep drilling wells to grow production. As inflation picks up ( I happen to believe it will over the next decade) - the cost of drilling is going to go up , and margins down. SU just keep scooping up the goop and boiling it - and work on improving their technology.
    So , on a very long horizon, it sems to me SU is a great way to own some hard assets and inflation protection.
    16 Aug 2013, 12:45 AM Reply Like
  • FatRat2
    , contributor
    Comments (12) | Send Message
     
    Purchasing SUNCOR may have been a significant blunder on Mr. Buffet part for the following reasons:

     

    1) US already have a glut of oil from oil sands with great difficulty with refining them due to shortage in refinaries in the US.
    2) And with recent public relationships nightmare (e.g. water contamination) over Oil Sands in the US, oil company's liability can becomes more expensive and more frequent.

     

    The only upside that I see see here is the possible discount that Burlington Northern Rail can give SUNCOR on delivery (pickup) of gas.

     

    My guess for this blunder is Mr. Buffet is tired and ready to retire -- or he needs his afternoon nap.
    15 Aug 2013, 10:36 PM Reply Like
  • john001
    , contributor
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    Mr. Buffett's move tells me that approval of the Keystone XL pipeline is imminent. Now we will see if he also sells his "oil by rail" holdings.
    15 Aug 2013, 11:26 PM Reply Like
  • Transcripts&10-K's
    , contributor
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    So you're saying he bought $500M of stock to take advantage of the upcoming approval? What will he do again with BNSF, which is worth $50B+, or 100X as much? You certainly have an original way of thinking there john...

     

    I'll give you 1,000-to-1 odds that BNSF is still part of Berkshire five years from now if you're interested. You probably won't take the bet because you realize just how nonsensical your comment is in comparison to everything Warren has ever actually said or done (as opposed to your distorted view of reality).
    16 Aug 2013, 06:57 AM Reply Like
  • john001
    , contributor
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    Ouch. What can I say.

     

    oh yes...the market responded well to Buffett's purchase of Suncor but then, what does the market know.

     

    When the KXL gets approved there will be much less demand for rail to move the Bakken oil. I'm sure Buffett realises this. But then, like you say...that is just "my distorted view of reality".
    18 Aug 2013, 01:54 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (860) | Send Message
     
    You didn't answer the question; you're saying that Buffett hedged his $50B stake in BNSF (based on similar metrics for UNP, etc) with a $500M stake in Suncor, or 1% of the value - is that what you believe?

     

    By the way, you know Warren has come out in support of Keystone, right?

     

    http://huff.to/16YLtZl

     

    "Buffett was asked about the project that would cross Nebraska Monday on Fox Business Network.

     

    Buffett says he's not an expert on the project, but he thinks it generally makes sense to build the pipeline."

     

    That's from May 2012; I'm sure I won't get a response to this post...
    18 Aug 2013, 08:44 PM Reply Like
  • john001
    , contributor
    Comments (830) | Send Message
     
    A lot of BS and rhetoric from the US administration & the environmental lobby has flowed, and continues to flow, down the political pipeline since the article you referenced came out.

     

    Unlike you, I'm not on a first name basis with Mr. Buffett and so I don't have an intimate knowledge, like you, of what he is up to. I just know that his recent investment in the oilsands has raised my portfolio nicely.

     

    If you are asking if I think Buffett has put his investment in BNSF at risk..NO, I don't think that and I never intended to imply that. But if you have knowledge of the impact that the KXL pipeline will have on the BNSF economics "we" would be interested in knowing...so thanks in advance.
    18 Aug 2013, 10:57 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (860) | Send Message
     
    I'm confused; here's what you said:

     

    " But if you have knowledge of the impact that the KXL pipeline will have on the BNSF economics "we" would be interested in knowing."

     

    But then this is what you said in the previous post:

     

    "When the KXL gets approved there will be much less demand for rail to move the Bakken oil."

     

    It seems that you do have an opinion - that KXL would be bad for BNSF; am I reading that correctly?

     

    And I'm not on a first name basis with Warren; I just don't come to the discussion with a political bias that assumes he is in some way benefiting from the current administrations decisions (or more exactly, driving their decisions) because of his political views. I've found that many people on this site believe just that; are you among those believers?
    19 Aug 2013, 07:50 AM Reply Like
  • Lionel Yeo
    , contributor
    Comments (379) | Send Message
     
    Buffett or his men are right on the money.
    Im' going to put my money on them. I don't like to bet against Buffett.
    17 Aug 2013, 12:34 PM Reply Like
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