Suncor Seeks Other Targets as It Touts Canadian Oil Sands Bid

  • Company's oil-sands upgrader running at 90% of capacity
  • Sees improvements in Syncrude with a larger ownership

Suncor Energy Inc. said it will keep looking for possible acquisitions as it works to persuade Canadian Oil Sands Ltd. shareholders to accept a hostile takeover bid that would increase its stake in the Syncrude venture in northern Alberta.

The company will continue to look at oil-sands and other acquisitions, Chief Executive Officer Steve Williams said in a conference call with analysts Thursday. He said that Cenovus Energy Inc, currently valued at about C$16 billion ($12 billion), wouldn’t add value to Suncor, which already has large reserves.

Suncor highlighted its oil-sands performance as further proof that its bid should be attractive to Canadian Oil Sands investors. Suncor’s upgrading operations that process oil-sands bitumen into light crude have run at more than 90 percent of capacity this year, compared with an average 70 percent for Syncrude, the company said Wednesday after the close of trading. Suncor, which would boost its stake in the partnership to 49 percent from 12 percent with the takeover, made the comments as it announced a third-quarter loss.

“We have been disappointed with Syncrude’s performance for some time now,” Williams said in the statement. “We believe that we can drive real improvements in Syncrude’s performance with a larger ownership interest.”

Canadian Oil Sands management has urged shareholders to reject Suncor’s takeover attempt, accusing the larger rival of undervaluing its business and exploiting undisclosed information about the partnership in making a low-ball offer. Suncor, Canada’s largest crude producer, renewed efforts this month to take over its partner and biggest shareholder of Syncrude after two friendly offers were rejected earlier this year.

Stock Rallly

Canadian Oil Sands’ stock had tumbled almost 40 percent this year through the end of September before Suncor offered 0.25 of its shares for each of the target’s. The stock has surged 55 percent this month. It was up 0.9 percent to C$9.87 at 11:38 a.m. in Toronto. Suncor rose 2.5 percent to C$38.45.

The price Suncor is offering for Canadian Oil Sands is “full and fair,” Williams said in response to a question about whether the company would increase its offer. Oil prices are expected to stay “lower for longer,” making the proposed takeover of Canadian Oil Sands “compelling,” he added.

Suncor’s shares have similar upside with an increase in oil prices to those of Canadian Oil Sands, while being safer with low oil prices, Williams said. Canadian Oil Sands shareholders should consider that risk when evaluating the offer, he said.

Suncor reported a third-quarter net loss of C$376 million, or 26 cents a share, compared with a profit of C$919 million, or 63 cents, a year earlier. The company took an unrealized after-tax foreign exchange loss of C$786 million in the quarter because of the revaluation of its debt denominated in U.S. dollars.

Cash operating costs per barrel at Suncor’s oil-sands operations declined to C$27 for the third quarter, the lowest level since 2007, from C$31.10 in the third-quarter of 2014. Its oil-sands production rose to 430,300 barrels a day from 411,700 in the year-earlier period.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE