Suncor / Petro-Canada Merger Just the Beginning?

The $15 billion all-stock acquisition of oil refiner Petro-Canada (NYSE: PCZ) by oil-sands producer Suncor Energy (NYSE: SU) marks just the beginning of a wave of energy company mergers, says Phil Flynn, energy analyst at Alaron Trading.

The fact that the two companies are using stock instead of cash indicates the degree of pressure some oil producers face in the wake of plunging crude oil prices since last summer, Flynn wrote today in his e-mail missive to clients.

The Canadian government, which could veto the deal, has signaled its support. Stock players should look for other possible merger candidates. Low energy prices have firms ripe for the picking right now.

Before the merger announcement, Phil Skolnick, analyst at Genuity Capital Markets, had identified Suncor Energy and another Canadian firm, Canadian Natural Resources Ltd (NYSE: CNQ) as attractive holdings for oil price optimists.

Since Washington’s massive economic stimulus plan passed in mid-February, oil prices have rebounded to more than $53 per barrel at midday Monday from $39.72 Feb. 18.

Skolnick said for investors who think oil “is going to really run up,” other oil sands players may be worth buying, too.

The question is how high will crude oil prices rally from here, and will it be enough to make oil sands production worthwhile?

Comments

[Mad Hedge F...:]

Environmentalists hate these companies. Anyone who has any illusions about the Canadian tar sands business should take a look at the March issue of National Geographic, not normally a prime source of financial and economic news for me. I’m not normally a big time environmentalist, but just looking at the glossy, eye opening pictures tells you that this is this an ecodisaster of Biblical proportions. A $50 billion investment by several firms over the last decade is now producing 750,000 barrels/day, and another $100 billion was headed north before prices crashed last year. You have to cut down a whole forest, remove two tons of peat, then another two tons of sand, and burn 100 barrels of oil equivalent to heat rivers of water to steam, just to produce a single barrel of oil. This gives you the world’s highest production cost, thought to be $80-$100/barrel. There are now 50 square miles of sludge ponds in Northern Alberta leaching a witch’s brew of poisons into the water supply, which has caused the local cancer rate to explode tenfold. We’re not just talking about a few sick ducks and fish here. Canada is the largest foreign supplier of oil to the US, accounting for 19% of the total, and half of that is coming from tar sands.

Mar 23 06:14 PM

[Uncle Pie:]

the total amount of carbon emissions from ALL the Canadian oil sands mines is equal to 2% of the carbon emitted by America's coal fired power plants. Or, in other terms, America's coal fired power plants emit over FORTY TIMES the carbon emitted by ALL the Canadian oil sands projects.
Alternative sources of oil? Cesar Chavez's Venezuela? Nigeria?
offshore Brazil three miles underwater? Iraq?

Mar 23 07:10 PM

[Uncle Pie:]

Sorry about the typo, that should be Hugo Chavez. But he is a bit of a Caesar, isn't he?

Mar 23 07:11 PM

[sandspider:]

Like I said in an earlier draft: There are no infrastructure projects to get all that solor and wind power to the customers. Petroleum is used in so much more then just burning it up on the highways. Until some folks start hooking the horse up at the front of the cart we are not going anywhere. And the need for petroleum will exist for a very long time. The article is about investing and at these prices they look like good investments. But for the No more drilling! No more drilling! No more drilling crowd! I have this to offer you. You are going to get your fuel someplace. I used to have a job back home working in Wyoming in the Jonah field. In the last year 70 rigs are stacked and rusting away in Wyoming. 10,000 oil field families in the Rockies have lost their jobs in the last 3 months. And me, well I am trying to get the Iraqi oil and gas fields up and running now so I can feed my family back home. Getting shot at and blown up so my family can have a meal and a place to live in. And you green peace types well you still jacking down big bucks in the Ivory tower back home still driving your Mercedes, while peddling your bike on the poker run in the summer to show your displeasure of oil and gas. So you are going to pay! The question is to whom you are going to pay it too. Who do you support? Oh yeah I almost forgot I am long on Suncor Energy and CNQ. They already have socialism figured into their price.

Mar 24 12:01 PM