Suncor: Playing it Safe

By Andrew Willis

Rick George has always been an under-promise, over-deliver type, and that attitude appears to apply to the Suncor (SU) CEO’s planned clean-up of Petro-Canada’s (PCZ) holdings.

The knock on Petrocan was the company’s poor focus - its assets were spread all over the map, and many properties earn poor returns. Suncor is expected to fix these problems with anywhere from $2 billion to $4 billion of asset sales over the next year.

What’s got analysts a little puzzled is just what Mr. George and his team are promising to sell. Suncor released detailed asset disposition plans when it reported financial results last week, and didn’t include properties in Libya and Syria that were widely assumed to be first on the auction block.

Suncor is expected to quickly sell up to a third of its North American natural gas holdings. The Calgary-based company is also shopping its Trinidad and Tobago natural gas properties. And Suncor wants to move smaller interests in the North Sea, as management highlighted plans to sell stakes in the Scott and Telford oil fields that Nexen is also working.

However, a number of analysts who listened to Suncor present its plans wrote reports that said while the Libyan and Syrian holdings were not presented as priority sales, Suncor would likely part with these oil fields in 2010. State-owned energy plays, such as China's oil and gas companies, are seen as natural buyers.

Canadian oil sands properties are expected to stay in the Suncor fold.

“Management indicated that it is in no hurry to divest its Syncrude stake ... or any of its oil sands leases,” said a report from investment dealer Veritas on Monday. “Its criteria for divestiture are whether assets are non-material and non-strategic and it considers all its oil sands holdings strategic.”