- Teck Resources (TCK -9.2%) slumps to a 52-week low after Total's (TOT -2.8%) sale of its 10% stake in the Fort Hills oil sands project to Suncor (SU -1.3%) raises several questions for 20% stakeholder TCK.
- TCK's stake is valued at $620M, based on yesterday's deal, while TCK's net carrying value for the position at the end of June was $2.3B.
- But that does not mean a writedown is coming, TD Securities analyst Greg Barnes says, because TOT's sale was based on its desire to cut capital spending, not a valuation of the project.
- If TCK were to write down its Fort Hills stake, Barnes says the company's debt covenants would cause concern, causing its debt-to-capital ratio to tumble to 32% as of the end of June.
- Thus the odds of TCK selling its Fort Hills stake are "minimal," according to Barnes, while acknowledging the company's participation in the project will remain unpopular with investors in the current macro environment.