Head Full of Steam
Kodiak Oil & Gas (KOG) began the year in an expansive mood, with capital expenditure waiting to be unrolled as the company initiated its own variation on the plug-n-perf methodology for successful fracking in its Polar well series, which saw their production numbers climb despite the introduction of 2 additional wells into the normal mixture of six they had traditionally drilled in each spacing, completion costs that were continuing to drop as completion times diminished into the 17-19 day range, and strengthening oil prices globally rose on the lack of Libyan production, closure of the gap between WTI and Brent, and the promise of a refinery and infrastructure shortfall for light sweet crude in the United States. The entirety of these forecast events has transpired for KOG, and the stock price has reached 52 week highs in the past months, only to be battered down sharply
Royal Dutch Shell (RDS.A, RDS.B) is a favorite stock among dividend investors, including myself. The company has an outstanding track record and provides a stable dividend yield for investors. Shell announced ambitious mid-term financial targets to maintain the attractive dividend payments in the future. This plan includes a free cash flow and capital expenditures during the period 2012-2015. Shell is almost half way the mid-term time frame and I conclude that the company is not on track to achieve the mid-term financial targets, caused by production setbacks, for example: shale gas production within the United States. Further, Shell spent more on capital expenditures than expected, for example: the purchase of Repsol's (OTCQX:REPYY) liquefied natural gas portfolio. Shell is still able to achieve their mid-term targets, because it took several precautionary measures to achieve their mid-term financial targets.
Shell disclosed their mid-term financial targets on their corporate website (see
News of Warren Buffett's $524 million investment in Suncor (SU) in August received a lot of news coverage. However, a quiet news release last week regarding its 2014 guidance and capital spending did not get so much attention. However, it contained a very positive outlook that will help to push the stock price higher. The stock is down slightly since it released earnings on Halloween.
2014 Capital Expenditures:
Suncor announced that it will spend $7.8 billion in 2014 as capital expenditures and its total production will grow about 10%. The $7.8 billion of capital expenditures can be funded entirely from Suncor's internal cash flow. For the last 12 months, cash flow from operations was $9.3 billion and I expect it will increase to around $10 billion in 2014.
$4.2 billion (approximately 53%) of the $7.8 billion is allocated for growth projects, which includes the following: