The Case For Investing In Suncor Energy
Elliott Gue • 12 Comments
Elliott Gue • 12 Comments
Thu, Jun. 23, 2:19 PM
- Suncor Energy (SU +2.5%) is upgraded to Buy from Neutral with a C$44 price target, raised from C$40, at Citigroup, which cites a focus on free cash flow in the upcoming period.
- The firm notes that SU's acquisitions of Canadian Oil Sands and Syncrude's stake from Murphy Oil helped to boost free cash flow sensitivity to WTI prices, and believes the deal and debt buyback have lowered the leverage to an estimated 2.1x 2016 net debt/EBITDA, increasing confidence that SU would bridge the gap to increased oil prices next year.
- While SU does not expect to sanction greenfield projects before 2019, the firm expects smaller incremental investments at Syncrude to improve reliability and integration with SU's base mine and debottlenecking at MacKay River.
Tue, Jun. 7, 5:49 PM
- Suncor Energy (NYSE:SU) -2.7% AH after saying it plans to raise C$2.5B ($2B) by selling 71.5M common shares on a bought-deal basis at C$35/share, a discount to its C$36.5 closing price in Toronto.
- SU says it will use the proceeds to finance its April acquisition of an additional 5% in its Syncrude oil sands joint venture from Murphy Oil for ~C$937M and reduce outstanding indebtedness to help provide ongoing balance sheet flexibility for "potential future opportunistic growth transactions."
Fri, May 27, 11:14 AM
- Midwest and Rocky Mountain pipeline operators have lowered the cost of transporting oil after Alberta’s wildfires decreased demand for pipeline capacity and left transporters competing over a dwindling supply, Bloomberg reports.
- This week, several companies reportedly moved to lower tariffs for selected routes in those regions, including Tallgrass Energy Partners (TEP -3.5%), Legacy Reserves (LGCY -2.6%), Suncor Energy (SU -0.2%) and Marathon Oil-owned (MRO -2.5%) Red Butte Pipe Line, starting July 1; TEP reduced rates by ~2% on its Pony Express line heading into Ponca City, Okla., while SU cut the same amount on its system in Wyoming.
- Pipeline rates also have fallen due to a decline in last year’s producer price index, which the FERC takes into account when reviewing transportation costs.
Mon, May 9, 3:19 PM
- Crude oil prices erased all of Friday's gains and more, as June futures ended the pit session 2.7% lower to $43.55/barrel even as the massive wildfires in the heart of Canada's oil sands continue to spread, albeit more slowly.
- But positioning in the oil market is very stretched, and analysts say speculators already hold the largest number of wagers for a rise in WTI futures since last summer and near-record high bullish bets on Brent, so the scope for further gains was limited without more clarity on the extent of damage to oil facilities or supply outages.
- The sacking of Ali al-Naimi as head of Saudi Arabia’s oil ministry also may be a reason why oil prices failed to maintain early gains, as successor Khalid al-Falih, the former head of Aramco, is expected to follow the strategy of protecting the country’s market share.
- Yesterday, Cnooc’s Nexen (NYSE:CEO) operations to the south of Fort McMurray reportedly suffered minor damage, while Suncor (NYSE:SU) says its facilities have not been damaged and is beginning to implement a plan for a return to operations.
- Other relevant tickers: RDS.A, RDS.B, XOM, IMO, COP, OTCPK:HUSKF, OTCPK:ATHOF, CNQ, CVE, OTCPK:MEGEF, ENB, OTCPK:IPPLF, OTC:KEYUF, TRP, PSX, STO
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, UGA, USL, DNO, OLO, UHN, SZO, OLEM
- Now read Fort McMurray situation getting better - oil markets daily
Thu, Apr. 28, 12:57 PM
- Suncor Energy (SU +3.8%) CEO Steve Williams says the company is not likely to start any new major growth projects given the current economic environment.
- SU is working towards finishing two multibillion-dollar growth projects in the oil sands, but once those are complete, the company will be “taking a breath around growth projects," the CEO says.
- Williams says SU will continue to focus on lowering costs as it ramps up daily production from 691K boe/day during Q1, which was 602K boe/day in the year-ago quarter, to ~800K by 2019; the Q1 gain stemmed largely from the increased stake in Syncrude and higher oil sands output.
- SU raises its FY 2016 production guidance to 620K-665K boe/day from its previous forecast of 525K-565K boe/day (Q1 earnings report).
- Williams says SU is considering selling off $1B-$1.5B in assets during the next year or so, with the sale of its retail gas business a possibility.
- SU also is keeping its spending plans for the year unchanged at C$6B-C$6.5B.
- Now read Suncor takes extra 5% stake in Syncrude for $937M
Wed, Feb. 24, 2:56 PM
- Suncor Energy (SU +1.6%) CEO Steve Williams tells WSJ his company will increase production even if crude oil prices weaken further, while asserting that "we will be one of the last guys standing" from the commodity industry downturn.
- Williams says SU’s operating costs are just under $20/bbl, and oil prices would have to fall below that level for an extended period before he would consider cutting production volumes.
- Separately, CIBC analyst Arthur Grayfer says higher debt stemming from the purchase of Canadian Oil Sands likely will lead SU to divest some non-core assets, and its retail gasoline business may also be put up for sale if oil prices remain depressed.
Mon, Feb. 8, 2:43 PM
- Canadian Oil Sands (OTCQX:COSWF -1.2%), preparing to be taken over by Suncor Energy (SU -1.6%), is overhauling its senior leadership team and board of directors.
- In as the new CEO is Sandy Martin, SU's VP of strategy and commercial development; out are Ryan Kubik, who was CEO during the takeover fight, and Donald Lowry, who was chairman during the period.
- New Chairman Harry Roberts was a senior VP at SU before his retirement in 2010, and the four other directors also are connected to the acquirer.
Mon, Feb. 8, 10:15 AM
- Suncor Energy (SU -3.4%) says nearly 73% of Canadian Oil Sands (OTCQX:COSWF -3.5%) shares and accompanying rights have been tendered to its C$4.2B takeover offer.
- SU says that as a result, it will be able to ensure that the deal will be completed and it will acquire the remainder of the outstanding COS shares.
- SU succeeded in winning over resistant COS management and shareholders after sweetening its offer last month.
Fri, Jan. 8, 10:49 AM
- Suncor Energy (SU +0.7%) likely would weigh its options over the weekend if it fails to convince enough Canadian Oil Sands (OTCQX:COSWF -3.4%) shareholders to accept its C$4.3B takeover offer which is set to expire tonight, Financial Post reports.
- SU must secure 50% of independent shareholders, which would blunt COSWF’s poison pill; the company then could extend the offer and squeeze out minority shareholders by calling a meeting, and Toronto-based lawyer Paul Davis of McMillan LLP believes CEO Steve Williams’ comments suggest SU would extend its offer if Williams feels the deal is close.
- COSWF shares have been volatile over the past few days and now trade made than $1 lower than SU's offer of C$8.82; “I would take from that people expect it [Suncor’s bid] would fail,” says Bill Gula, M&A lawyer at Hansell LLP in Toronto.
Thu, Jan. 7, 12:49 PM
- Suncor Energy’s (SU -2.1%) $4.3B takeover of Canadian Oil Sands (OTCQX:COSWF +1.3%) looks far from certain, with the target’s share price trading at a record gap to the bid just a day before expiring.
- COSWF closed yesterday at $7.47 in Toronto, putting SU’s $8.52/share offer at a record 14.1% premium since the deal was announced on Oct. 5.
- The market "seems to be pricing in a reasonably high probability it doesn’t happen, [which] reflects the fact that the market is concerned about the downside risk here if it doesn’t go ahead,” BMO Capital's Randy Ollenberger says.
- Shareholders against the deal, including Seymour Schulich, have been vocal in their opposition in claiming SU is making a low-ball offer, heightening speculation about how many shareholders agree with them.
- Others say SU ultimately will prevail, including Samara Fund president Ben Cubitt, who says “if this bid goes away, it trades probably at $5... These guys, I assume, have canvassed the world for someone willing to pay something more and haven’t found anyone. So it is impossible to argue that at this moment in time it is worth more.”
Mon, Jan. 4, 3:59 PM
- Suncor Energy (SU -1.9%) CEO Steve Williams says his company has not ruled out increasing its offer to buy Canadian Oil Sands (OTCQX:COSWF -5%), just days before a self-imposed January 8 deadline for a takeover deal.
- The CEO tells Dow Jones that SU's offer of 0.25 of a share for each COSWF share, a deal currently valued at ~C$4.28B ($3.09B) remains fair, especially since crude oil prices have continued to fall after making its bid in early October, but "I wouldn’t rule anything completely in or out" on additional incentives to win over more shareholders.
- Williams says he expects to announce early next week whether or not the company will proceed with the buyout.
- Earlier: Canadian Oil Sands plans to remain independent after Suncor bid
- Earlier: Schulich says he plans to hold Canadian Oil Sands shares in Suncor bid
Mon, Jan. 4, 12:23 PM
- Investor Seymour Schulich says he will not tender his shares to Suncor Energy (SU -2.5%) in its C$4.3B ($3.1B) hostile bid for Canadian Oil Sands (OTCQX:COSWF -5.3%), preferring to hold on to his shares and wait for a rebound in crude oil.
- "Everybody I have talked to thinks the offer is too low,” says Schulich, who says he owns 5% of COSWF, making him one of the company's biggest shareholders.
- SU has offered 0.25 of its own shares for each COSWF share in the offer worth ~C$8.93/share, a 44% premium to COSWF's pre-bid trading price.
Dec. 15, 2015, 10:52 AM
- "Hope is still not a strategy," Suncor (SU +1.2%) says as it urges Canadian Oil Sands (OTCQX:COSWF +2.6%) shareholders to tender their shares to its offer for the company.
- In a letter to COSWF shareholders, SU highlights the premium it is offering and warns that the share price likely would drop "sharply" if its bid is rejected.
- "Your Board is telling you that COS will be better off continuing as a standalone company," the letter says. "What they aren't telling you is that in this environment, it could take as long as 10 years before COS would have enough cash flow to fix its balance sheet and reinstate a significant dividend."
Nov. 18, 2015, 11:49 AM
- Suncor Energy (SU -4.3%) is downgraded to Hold from Buy with a price target of C$43 at TD Securities following the company's disappointing 2016 guidance.
- Despite SU's strong structural advantages in this market, the firm says its downward adjustments to its 2016 estimates after the company's update precipitate the downgrade.
- TD says SU's relative value suggest it is now the most expensive large-cap on a price/NAV basis, and recent share price outperformance has resulted in the highest total return of any large-cap since the beginning of the oil price rout.
Nov. 18, 2015, 10:27 AM
- Suncor Energy (SU -3.2%) opens sharply lower after announcing a larger capital budget for 2016 even as it forecasts lower production volumes.
- SU says it plans to boost capital spending to as much as C$7.3B (US$5.5B) next year, an increase from ~C$6.3B this year; SU says the program is flexible, within a range starting at C$6.7B, to respond quickly to any further deterioration in market conditions.
- SU sees 2016 production of 525K-565K bbl/day, below earlier guidance of 540K-580K bbl/day for the current year, citing scheduled maintenance at its oil sands plants for the reduction.
- Oil sands production is expected to total 400K-425K bbl/day, not including an additional 30K-35K bbl/day from its interest in Syncrude; the range is below this year’s estimate for oil sands output of 410K-440K bbl/day, not including 32K-36K bbl/day from Syncrude.
- As a result of cost-cutting efforts, SU says its oil sands cash operating costs would fall to C$27-C$30/bbl next year, below the C$28-C$31 it projects for this year.
Nov. 16, 2015, 7:46 AM
- The latest 13F from Berkshire Hathaway (BRK.A, BRK.B) shows a new 59.3M share stake in AT&T (NYSE:T), and the GM stake taken up to 50M shares from 41M. At least part, if not all of the T stake is the result of shares received in the DirecTV merger.
- Phillips 66 (NYSE:PSX) is up to 61.5M shares from about 30M; Kraft Heinz (NASDAQ:KHC) 325.6M shares from zero; Suncor (NYSE:SU) 30M shares from 23.3M, John Malone (LMCK, LMCA) a total of about 24M shares from about 13M.
- Buffett trimmed his Wal-Mart (NYSE:WMT) position to 56.2M shares from 58.3M.
- AT&T +1.4% premarket
Suncor Energy, Inc. is an integrated energy company, which develops petroleum resource basins. It explores, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. Suncor Energy, through its Petro-Canada brand, provides oil sands development & upgrading,... More
Sector: Basic Materials
Industry: Independent Oil & Gas
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