RE: Pipeline Open soon7 Apr 2024 18:33
Investors 'might' lower the discount rate but that doesn't change the fact that money went out the door. "All else being equal" means just that. Personally, I don't 'value' dividends at all (and would not alter my discount rate as a result of them). To me, the value the company can actually generate is the only thing of worth (and builds share price) and not that it decides to pay some of that out. You might feel otherwise and if our difference of view is great enough then perhaps at one point I will sell to you.
And, yes, the best possible source of capital returns is recovery of the CRP much of which is in the invoices that are now long overdue. But, as I said, $25 per barrel or even $35 doesn't allow a lot of gross field sales headroom for those to be paid. For that, as mentioned, we need a return for exports. The next best place is a combination of both the excessive cash sitting on the balance sheet and the little biddy bits of CRP that are being recovered each month via local sales - there's still $50-55 million slowly being recovered. (Remember that current revenues are still flattered by excess cost recovery - that little bit of the CRP that has not yet been invoiced.)
"The share price is low enough to offer the prospect of value accretion through capital expenditure in that direction (unlike previous occasions)."
A buyback isn't "capital expenditure". Money leaves for nothing in return. It's distribution. But you, as would I, might feel that increasing your relative ownership at these levels (by not selling into the buyback) is a decent trade. The success of that too, however, depends on a return to exports via the pipeline.
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