GNE - Genesis Energy

[Toddy]

Still producing plenty of high grade oil. The field will be around for years to come.

As the release noted, GNE is working on the future field forecast reserves and will let the market know soon

[winner (n)]

GNE share price still tracking down to $2.00

Not surprising

[Basil]

To my mind, another dividend reset in the years ahead has an air of inevitability about it, now that Kupe production is confirmed to be in steep decline.  No doubt that future announcement will be embellished with very generous sized portions of feel good ESG enunciations, so a tablespoonful of sugar helps the medicine go down.

GNE's best days are behind it when their main assets Kupe and Huntly had a heck of a lot more residual life in them than they currently do.  In due course I expect this to eventually go under the IPO price.   Wouldn't surprise me at all to see the share price to retreat in line with future dividends paid so total shareholder returns in the next few years are zero or very close to it.

I'm not buying the creative greenwashing talk that solar will replace the generation of legacy polluting assets.
GNE's marketing is brilliant though so maybe retail customer growth will slow the deterioration of this company down.
It's definitely not for me again, not even if it goes under $2.  Very pleased i sold out at ~ $3.90 in early 2021.  The mistake I made was buying back in at a lower price, (a mistake I fixed quite a while ago).

[Basil]

It was interesting to note the new 20 year deal with the smelter, (including the effective creation of a reserve battery supply in dry years at zero cost to the taxpayer), that really boosted the other power companies share prices quite a lot had no impact whatsoever on GNE's share price.  It would seem to me in some ways the huge new quasi battery reserve supply the new deal created, somewhat undermines the effective value of Huntly.   

[winner (n)]

Sub 200 still on cards ...not far away

[Plata]

one heck of a yo yo the last week or so

[Gerald]

Looks like that correlation to the 10Y that someone kept mentioning has turned up  Not getting too far off that IPO price, which interestingly was about 10 years ago.

[winner (n)]

First earnings downgrade for F25 .... Ebitdaf previous $500m now down to $460m

At least $460m is higher than the $450m guidance for F24 so thats good

Still expect reduced divie sometime and share price <$2

https://api.nzx.com/public/announcement/433539/attachment/421617/433539-421617.pdf

[Basil]

I expect to see a big reserves reduction at Kupe and LOTS of Indonesian coal being burned to charge up people's electric vehicles.  I remain deeply skeptical their plans around solar in the medium term will replace aging legacy assets.  I see their generation capacity as being in a slow systemic decline. How I see it is the extent to which they can slow that decline will determine whether there's yet another dividend reset in the years ahead.

I also note the directors never honored their original pledge at the time of the IPO to move dividends up in line with inflation which really undermines their credibility around new claims that they will move the reset dividend rate in that manner going forward.  There's better places to invest your capital is how I see it.

[winner (n)]

Piece in BusinessDesk today

When the facts change - the end of the golden weather for gentailers
Market events in recent times indicate that investors may be starting to realise the golden run for major generator/retailers as cash cows with ever-increasing dividends may be coming to an end.

And

Contact is not the only gentailer facing these pressures. All must build more generation to keep market share. This costs money, lots of money.

https://businessdesk.co.nz/article/opinion/when-the-facts-change-the-end-of-the-golden-weather-for-gentailers

It does seem gentailers not much of an investment these days ....if I was holding at moment I'd be hoping the much touted rate cuts might give me a good exit point early next year when share price should go up

[BlackPeter]

Piece in BusinessDesk today

When the facts change - the end of the golden weather for gentailers
Market events in recent times indicate that investors may be starting to realise the golden run for major generator/retailers as cash cows with ever-increasing dividends may be coming to an end.

And

Contact is not the only gentailer facing these pressures. All must build more generation to keep market share. This costs money, lots of money.

https://businessdesk.co.nz/article/opinion/when-the-facts-change-the-end-of-the-golden-weather-for-gentailers

It does seem gentailers not much of an investment these days ....if I was holding at moment I'd be hoping the much touted rate cuts might give me a good exit point early next year when share price should go up

One of these complex future pointing systems which are impossible to predict - and lets face it, the author does not even mention all of the input parameters.

So - what do we know?
- Electricity consumption likely to increase (EV's, heatpumps, A/C units, population growth)
- Electricity supply getting more erratic with increase of renewables (dependant on the weather ...)

- Conservative politicians likely to allow market forces to play their thing - resulting in higher prices and less reliable power
- Progressive politicians likely to regulate towards the common wealth, resulting in higher prices and more reliable power
- Climate impacts will make supply more unpredictable

> should all point to higher electricity prices.

One joker is obviously increased local supply (like cheap small solar panels which can be connected to the grid). Possible in many countries, but not yet in backward looking NZ.

I can't see how anybody can predict on this base how the earnings of Gentailers will develop - however, one thing we know: Gentailers produce a product which is in demand ... and at the end they can charge at least a fair price, otherwise they just stop doing what they do. Which results in a rather reliable earnings and dividend stream, which is rated higher while interest rates are lower (comparison to bonds).

Which means its probably a good idea to hold them while interest rates go down ... but dance close to the exit. Less joy to stay at this party when interest rates are rising again.

[Toddy]

It's a complete mine field. If the lakes are low then they need to buy electricity off the spot market at hight prices. Who wins out of the current NZ generators?

All roads lead to investing in gas producers who are in the hot seat over the  green energy transformation.

Poor NZ consumers will have to pay the higher prices and Industry will not expand as the cost of energy is too high.

NZ will end up importing Gas and Coal.

It's a disaster in the making for NZ. Years and years of under investment in the energy sector is starting to come home to roost.

[Toddy]

The CEO of NZO said that the Kupe drill has resulted in a better understanding of the rock structures and they are taking a 'closer look' at options to extend the life of the field.

[Basil]

That's drill speak for we stuffed up but don't want to admit it. No worries, throw another $75m at another hole...what could possibly go wrong ?

[Basil]

I expect to see a big reserves reduction at Kupe and LOTS of Indonesian coal being burned to charge up people's electric vehicles.

WOW, massive review and reduction in Kupe reserves from 225.8 units last year to only 124.3 units this year.  $64m write-down in the value of Kupe as reserves have nearly halved in the last year.
Dividend sustainable ?  You be the judge.  http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/GNE/436601/425263.pdf
Gross yield at 14 cents assuming that rate is sustainable as well as full imputation credits = 8.6% @ $2.26.
Huge jump in operating costs expected for FY25 on top of the jump last year but it's all going according to plan if you believe John's.  Not for me, I don't believe their plan for growth from FY27 is plausible.