What a difference a month can make.
The price of WTI was $91 on Friday, and hit a high of $93.28 on Sept 27th. I mentioned in a podcast earlier this year that I believed the price of oil would hit $100 before year end. I’m hoping my prediction comes true.
Although an increasing oil price will push the cost of goods even higher for the consumer, from an investor’s perspective, it’s about time we earn some gains on the oil companies in our portfolio because we have been very patient.
Despite the increasing spread between WTI and WCS, at $72.46 a barrel, when foreign exchange is added, a barrel of Canadian oil is approx. $97. This is a great price and will likely continue for the next several months.
Currently, the discount between WTI and WCS is sitting at around $18. In January, the differential was $28 and in August it was $12. Ideally, the lower the number the better, but despite the increasing spread between WTI and WCS, Canadian oil companies are earning a lot and will continue to do so if the price of oil continues to rally.
With all the free cash flow piling up, companies can buy back shares, increase the annual dividend or provide special dividends to their shareholders. Most companies have already started, but we’ll begin to see even more over the next 6 months.
Many companies are hitting debt targets a lot sooner than initially expected, and will be debt free very soon (or could be if they so choose). As a group, our oil companies have never looked so enticing.
In the energy sector, we own AltaGas, Arc Resources, Cardinal Energy, Cenovus, Enbridge, Freehold Royalties, Gear Energy, Pembina Pipeline, Peyto Exploration, Suncor, TC Energy, Tidewater Midstream, Trican Well Services, Williams Companies, and Whitecap Resources. We sold Exxon this month (see more below).
“As small-cap valuations re-rate to in line with large-cap peers as the cycle progresses, we see enormous potential upside from here in particularly compelling small-cap oil & gas equities.” Bison Investments: Freight Market Rebound: Oil Recession Fears Were Exaggerated
Our September Dividend Income
We earned a total of $4,119.02 from dividends this month, which is an increase of 19% over last September.
Year-to-date we’ve collected a total of $32,240 and we are on target to reach over $43,000 by year end.