Suncor secures Canadian Oil Sands deal

After failing to garner the support of two-thirds of Canadian Oil Sands’ shareholders last week, Suncor Energy (TSE:SU, Mkt cap 42.53B, P/E 447.72, Div/yield 0.29/3.94, EPS 0.07, Shares 1.45B) has acted quickly to agree terms on a $4.2-billion deal plus debt for COS, The Globe and Mail reports.

The turnaround comes only a week after Suncor extended its hostile bid for Canadian Oil Sands, with analysts casting doubt over whether Suncor was likely to sweeten its bid in order to reach a positive conclusion.

Suncor Energy COS

Suncor Energy has agreed terms on a $4.2-billion deal plus debt for COS

However, it has done just that, with Canadian Oil Sands shareholders now being offered 0.28 of a Suncor share – about 12% more than before.

That puts the total price of the deal at around $6.6 billion, but includes $2.4 billion in debt that Suncor will assume – making the stock portion worth about $4.2 billion.

As The Globe and Mail notes, because the offer is largely an exchange of shares, its monetary value will fluctuate depending on Suncor’s stock price. As of close of play Friday, the new offer was worth $8.74 per COS share, up from $7.81 under the initial offer.

In a joint media release, the two Calgary-based firms confirmed that both sets of directors – as well as major Canadian Oil Sands investor Seymour Schulich – are fully in support of the revised offer.

Schulich, who was fervently opposed to the original Suncor offer, said in a statement that he had urged the other COS shareholders to join him in accepting the new offer.

Don Lowry, chairman of Canadian Oil Sands, added: “Since Suncor made its initial offer, our board has remained steadfast in our commitment to maximize value for all shareholders. This agreement fulfils that commitment, providing our shareholders with a higher exchange ratio for their shares despite a 37% decline in spot oil prices.”

Suncor Energy Inc. in a Calgary, Alberta based integrated energy company. The Company is focused on developing Canada’s petroleum resource basin, Athabasca oil sands. The Company operates in three business segments: Oil Sands, Exploration and Production, and Refining and Marketing. The Company’s Oil Sands segment includes Oil Sands operations and Oil Sands ventures operations. Its Exploration and Production segment consists of offshore operations off the east coast of Canada and in the North Sea, and onshore assets in North America, Libya and Syria. The Company’s Refining and Marketing segment is engaged in Refining and Supply, and Downstream Marketing. In addition, the Company explores, for, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. The Company also transports and refines crude oil, and markets petroleum and petrochemical products primarily in Canada. More from Reuters »

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Suncor extends hostile bid for Canadian Oil Sands until Jan. 27

Suncor Energy Inc. (TSE:SU, Mkt cap 45.97B, P/E 483.94, Div/yield 0.29/3.65, EPS 0.07, Shares 1.45B) has extended its $4.3-billion takeover offer for Canadian Oil Sands Ltd. until Jan. 27 in an attempt to garner the support of two-thirds of its target company’s shareholders – the amount required for the deal to go ahead.

Suncor Canadian Oil Sands

Suncor extends hostile bid for Canadian Oil Sands until Jan. 27

At the time Suncor’s hostile bid had expired on Friday (Jan. 8), the Calgary-based firm had managed to convince less than half of Canadian Oil Sands shareholders, according to a source familiar with the tendering process quoted by The Globe and Mail.

While a Suncor spokesperson declined to comment and Canadian Oil Sands could not immediately be reached, the informed source said: “It’s clear shareholders have rejected the offer.”

Suncor had initially offered 0.25 of a Suncor share for each Canadian Oil Sands share, leading the market to bet “that there is a good chance that it doesn’t go through,” Bank of Montreal oil analyst Randy Ollenberger told The Globe and Mail in an e-mail.

At close of play Friday, Canadian Oil Sands shares were at $7.47 on the Toronto Stock Exchange, or roughly 11% below the implied value of $8.31 of Suncor’s offer, prompting analysts to cast further doubt on the likelihood of a deal.

Much of that doubt likely rests on the fact that Suncor will need to sweeten its bid in order to reach a positive conclusion – something its chief executive officer Steve Williams has so far resisted.

Williams has said previously that weak crude prices will mean that Canadian Oil Sands will find it hard to reverse recent cuts to its dividend, as well as warning that a rejection of the bid could result in a collapse in the shares.

Suncor Energy Inc. is a Calgary, Alberta based integrated energy company. The Company is focused on developing Canada’s petroleum resource basin, Athabasca oil sands. The Company operates in three business segments: Oil Sands, Exploration and Production, and Refining and Marketing. The Company’s Oil Sands segment includes Oil Sands operations and Oil Sands ventures operations. Its Exploration and Production segment consists of offshore operations off the east coast of Canada and in the North Sea, and onshore assets in North America, Libya and Syria. The Company’s Refining and Marketing segment is engaged in Refining and Supply, and Downstream Marketing. In addition, the Company explores, for, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. The Company also transports and refines crude oil, and markets petroleum and petrochemical products primarily in Canada. More from Reuters »

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Market Outlook & Top Picks – BNN Market Call Tonight

Market Outlook:

2015 was a tough year to be an investor, particularly if you were in a country where the economy and stock markets were exposed to energy and other commodities that suffered sharp price declines resulting from oversupply and slowing demand. Geopolitical instability weighed on investors’ concerns as tensions in the Middle East escalated causing mass migrations that elevated discord in the European Union that was already present from the debt crisis in several of the member countries and caused further friction between the US, Russia and China. In addition, investors waited with trepidation for the Federal Reserve in the US to hike interest rates despite high debt levels, slowing global economic activity and an already highly valued US dollar. As a result, investors are extremely wary of the economic environment that we enter into at the start of 2016.

While there is much to be concerned about, there are some potentially positive undercurrents that are running throughout the global economy. Within the energy and metal markets, producers have cut back capital expenditures to a significant degree. Consolidation is beginning to occur within these industries along with increasing asset dispositions at distressed prices. The oversupply stemming from Saudi Arabia will test the fortitude of the authorities as taxes are increased to cover large budgetary deficits that will serve to cause displeasure in the general population. These actions will serve to re-balance the supply/demand issues in the energy industry. Lower capital expenditures in both metals and energy will defer future production.

Market Outlook energy commodities.

Market Outlook – 2015 was a tough year to be an investor in a country where the economy and stock markets were exposed to energy and other commodities.

The strong US dollar will impact will put pressure on the profitability of US companies doing business abroad. Furthermore, margins will come under pressure as wage demands increase while low inflation diminishes the ability to increase prices, especially with the growing substitution from countries with weaker currencies. Shareholders are likely to demand that more capital be deployed in businesses and research and development to regain longer-term competitive advantage.

In Canada investors are concerned that new provincial and federal governments are advancing tax and spend policies. At least at the Federal level, we enter into this period in a strong fiscal position. In the interim, Canadian industry should benefit from the low value of the Canadian dollar to the extent that they export products and services.

We have witnessed a correction in many sectors of the Canadian market. Those companies with the financial and managerial wherewithal will take advantage of current conditions and prosper.

Top Picks:

Alaris Royalty Corp., AD-T, Owned personally and by clients, Last purchase August 26, 2015, $26.08

Alaris Royalty is a unique investment firm that invests in a diversified range of private companies with solid long term histories and stable management teams. The nature of the investment allows Alaris to participate in future growth while the entrepreneurs maintain control provided certain agreed upon benchmarks are met. Management has had a successful track record in identifying good investment opportunities. Since first recommending this company in June, the performance has been disappointing due to some operational problems at several of their investments, one of which resulted in a write-down. These issues now appear to be largely behind and Alaris has an expanding pipeline of deal flow with an expanded credit facility. We anticipate that profitability will increase as activities get back on track and dividend increases will follow.

Suncor Energy Inc., SU-T, Owned by clients, Last purchase December 21,2015, $35.00

Suncor is Canada’s largest integrated oil and gas company. Suncor: has a strong production base with quality long-term assets, a strong balance sheet, and an integrated business model smoothing to some extent the cash flow from the various business segments. The recent pressure on energy prices has caused the energy related stocks to pull back significantly. Suncor has the financial strength and diversified base of operations to do well in this environment as evidenced by the opportunistic bid for Canadian Oil Sands. The dividend currently produces a 3.4% yield.

Stuart Olsen Inc., SOX-T, Owned by clients, Last purchase October 5, 2015, $5.49

Stuart Olson Inc, formerly The Churchill Corporation, is one of Canada’s largest construction firms providing general contracting and electrical building systems contracting in the institutional and commercial construction markets as well as
electrical, mechanical and specialty services in the industrial construction markets. The stock has underperformed the market and its peers as investors have focused on its exposure to Western Canada. Going forward, there are plans by the governments of Alberta, Saskatchewan and BC, as well as the Federal government, to dramatically increase spending on infrastructure. Stuart Olsen’s Bulidings group has a $1.4 billion backlog and is well situated to get a share of the spending on social infrastructure. The Industrial Services Group while exposed to the oil sands, derives its revenue from maintenance, repair and operations in the energy, mining and hydro industries. Stuart Olsen has a good balance sheet The dividend currently yields 9.0%.

Watch Michael Sprung interviewed on BNN Market Call Tonight here>>

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

Canadian Oil Sands investors given extra month to assess Suncor Energy bid

The Alberta Securities Commission (ASC) has given Canadian Oil Sands Ltd. (COS) a month to seek an alternative to Suncor Energy Inc. (TSE:SU, Mkt cap 53.02B, P/E 567.65, Div/yield 0.29/3.11, EPS 0.07, Shares 1.45B) unwelcome advances.

Stock Watch Canadian Oil Sands Suncor Energy bid

Canadian Oil Sands investors given extra month to assess Suncor Energy bid

The target company had wanted until early February to decide on Suncor’s offer, having put in place a new shareholder rights plan, also known as a poison pill defence, shortly after Suncor took its all-stock bid directly to investors on Oct. 5.

However, COS suggested that the regulator’s decision goes some way to allowing its shareholders to make a balanced decision.

“The ASC decision applies the reins to Suncor, who tried to stampede our shareholders,” said COS chairman Donald Lowry.

Stephen Murison, chairman of the ASC panel, said both firms were entitled to play “hardball” – which is just what the two parties intend to do.

In fact, the nature of the debate has often been vociferous, with COS accusing Suncor of “fear mongering” in its efforts to secure a greater slice of the oilsands at a knock-down price.

Suncor, on the other hand, has argued that given the current landscape of low oil prices, COS shareholders will do well to remember that “hope is not a strategy.”

While COS appeared satisfied with the ASC ruling, Suncor said it will take time to analyse the decision before determining its next steps.

A COS financial adviser suggested the extra time was allocated because there are 25 other parties said to be interested in buying the business; four of which have signed non-disclosure agreements.

Suncor’s offer is worth about $4.5 billion, based on Suncor’s current share price.

Suncor Energy Inc. in a Calgary, Alberta based integrated energy company. The Company is focused on developing Canada’s petroleum resource basin, Athabasca oil sands. The Company operates in three business segments: Oil Sands, Exploration and Production, and Refining and Marketing. The Company’s Oil Sands segment includes Oil Sands operations and Oil Sands ventures operations. Its Exploration and Production segment consists of offshore operations off the east coast of Canada and in the North Sea, and onshore assets in North America, Libya and Syria. The Company’s Refining and Marketing segment is engaged in Refining and Supply, and Downstream Marketing. In addition, the Company explores, for, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. The Company also transports and refines crude oil, and markets petroleum and petrochemical products primarily in Canada. More from Reuters »

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

Suncor Energy To Proceed With Growth Projects

Suncor Fort Hills mine, which is slated to yield more than 180,000 barrels of oil per day, is on track to begin producing in 2017.

Suncor Energy Inc. (TSE:SU, Mkt cap 55.45B, P/E 18.52, Div/yield 0.28/2.93, EPS 2.07, Shares 1.45B) has affirmed that it is to press ahead with the construction of its Fort Hills oilsands mine, despite seeing its profit contract by more than 80% amid collapsing oil prices.

 Suncor Energy Proceed Growth ProjectsAs the Financial Post reports, the Fort Hills mine, which is slated to yield more than 180,000 barrels of oil per day, is on track to begin producing in 2017.

Suncor president and CEO Steve Williams suggested the firm's foresight in forecasting today's low oil prices has allowed it to prepare accordingly, meaning projects such as Fort Fill needn't be shelved.

The $13.5-billion project, which sees the company partner up with the Canadian division of France's Total and Vancouver miner Teck Resources, will have roughly $1.6 billion directed towards it over the course of the next 12 months.

On announcing its fourth-quarter and year-end earnings, Suncor said it had been ready for a drop in oil prices, and that it was continuing to cut costs.

On the same day, the company posted record oil production numbers and reiterated its unwavering commitment to growth projects such as Fort Hills and the Hebron development off the coast of Newfoundland.

Canada's largest integrated oil and gas company reported net earnings of $84 million for the fourth quarter, which is an 81% comedown compared with the same quarter a year earlier.

The announcement comes less than a month after Suncor slashed $1 billion from this year's capital spending, which is now forecast to fall between $6.2 billion and $6.8 billion. It also revealed it would be reducing its workforce by 1,000 — mainly contractors — from the current tally of around 14,000.

Warren Buffett's Berkshire Hathaway Inc.(NYSE:BRK.A) owns 18,477,730 Suncor shares.  As Mr. Buffett says, "If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes."

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Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

Stockwatch – Suncor Feels Impact of Lower Oil Prices on Profits

Stockwatch – Oil sands giant Suncor Energy Inc. (TSE:SU, Mkt cap 57.80B, P/E 19.17, Div/yield 0.28/2.82, EPS 2.07, Shares 1.46B) has seen more than $780 million shaved off its profits in 12 months, after feeling the effects of lower crude oil pricing.

The Calgary-based company has revealed its earnings for the third quarter were $919 million, or 63 cents per share, down from nearly $1.7 billion, or $1.13 per share, a year earlier.

Operating earnings, which removes the effects of anomalous items, were $1.3 billion, or 89 cents per share, surpassing the average analyst estimate of 77 cents per share, according to Thomson Reuters.

It represents only a slight dip from the same period in 2013, when operating earnings stood at $1.4 billion, or 95 cents per share.

Revenue, too, was comparable, amassing $10.3 billion in the third quarter, which is not too dissimilar from the $10.4 billion figure posted last year.

Steve Williams, president and chief executive officer, suggested the firm is content with the results given the shift in the industry.

“Our focused strategy, integrated model and strong balance sheet are competitive strengths that will continue to serve us well through the current lower crude price environment,” he added.

Suncor highlighted foreign exchange fluctuations and a drop in production from its exploration and production business as reasons why net earnings have taken a hit.

Company-wide production dropped to 519,300 barrels of oil equivalent per day from 595,000 barrels due to asset sales, maintenance work at some of its operations and lower production from Libya.

Output from its oil sands business, however, rose to 411,700 barrels per day during the third quarter from 396,400 in the same year-earlier period.

Suncor added that it is not looking at more exploration and production projects in the near future.

“We have been very, very disciplined and found nothing of interest to us. So while we have the capability to do it, you’ve seen us exercise discipline around what we’ve actually done,” Williams explained.

Stockwatch – Suncor has the financial strength and diversified base of operations to do well and maintain its dividend that currently produces a 2.8% yield.

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

Stockwatch – Michael Sprung on BNN Market Call

Stockwatch – Outlook

We had previously stated that compelling valuations were getting harder to find from which we concluded that market prices were running ahead of fundamentals.  In September, commodities and stock markets reacted negatively to the perceived slowing of the emerging economies and the ongoing stagnation in Europe.  The decline in energy and materials weighed on Canadian stocks and the Canadian dollar.  The US economy continues to exhibit signs of growth and this will eventually have positive impact on the Canadian economy.  As valuations correct, investors should be prepared to invest in quality securities.

Stockwatch Michael Sprung market outlook stock picks Mark Bunting BNN

Stockwatch – Michael Sprung discusses his market outlook and stock picks with Mark Bunting on BNN

Stockwatch – Top Picks

Stockwatch – Bank of Nova Scotia, Owned by clients, last purchase September 4, 2014: $71.75

The Bank of Nova Scotia (TSE:BNS, Mkt cap 83.27B, P/E 11.68, Div/yield 0.66/3.86, EPS 5.86, Shares 1.22B) is the most international of the Canadian banks with branches in the Caribbean, Central and South America.  The Canadian banks have been impacted by recent market declines.  BNS is now selling at levels that long-term investors should find attractive.  The dividend yield is now 3.9%.

Stockwatch – Agrium, owned by clients, last purchase June 24, 2014: $99.64

Agrium Inc. (TSE:AGU, Mkt cap 13.65B, P/E 14.88, Div/yield 0.84/3.54, EPS 6.36, Shares 144.00M) Low crop prices and slowing economies have caused the short term outlook for fertilizer prices to diminish and hence the decline in the prices of fertilizer stocks.  Agrium recently lowered their short-term guidance in both the retail and wholesale sectors.  The price of the stock has overcompensated for these events thus making the stock attractive for long-term investors.

Stockwatch – Suncor, Owned by clients, last purchase March 4, 2014:$36.70

Suncor Energy Inc. (TSE:SU, Mkt cap 54.79B, P/E 14.53, Div/yield 0.28/2.99, EPS 2.58, Shares 1.47B) is Canada’s largest integrated oil and gas company.  Suncor: has a strong production base with quality long-term assets, a strong balance sheet, and an integrated business model smoothing to some extent the cash flow from the various business segments.  The recent pressure on energy prices has caused the energy related stocks to pull back significantly.  Suncor has the financial strength and diversified base of operations to do well and maintain its dividend that currently produces a 3% yield.

You can see Michael interviewed by Mark Bunting on BNN’s Market Call here>>
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Exchange Traded Funds Expose Investors to Unexpected Risks. Read more here>>

Investment Management – Risk vs. Return. Read more here>>

We believe successful investors must challenge the market consensus by maintaining an independent point of view. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

Stockwatch – Suncor Energy Reports A Significant Drop In Net Income In Q2

Stockwatch – Calgary-based oil and gas company Suncor Energy Inc. (TSE:SU, Mkt cap 62.12B, P/E 16.43, Div/yield 0.28/2.64, EPS 2.58, Shares 1.47B) announced its financial results for the second quarter of 2014 at the end of July. The results indicate a sharp drop in net income – $211 million, down from $680 million in 2013’s second quarter.

Stockwatch Suncor Energy Inc drop net income

Stockwatch – Suncor reports a sharp drop in net income

However, the company marks a strong quarter when it comes to operating earnings – for 2014’s second quarter they stand at $1.135 billion (or $0.77 per common share), compared to $934 million ($0.62 per share) in the same period in 2013. Suncor’s cash flow from operations also saw an increase, reaching $2.406 billion ($1.64 per share), up from $2.250 billion ($1.49 per share) in last year’s comparable quarter.

The company explained in its announcement that the plunge in net earnings was due to after-tax impairment charges. Those charges amounted to $718 million against the company’s interest in the Joslyn mining project, $297 million against its Libyan assets, and $223 million in Oil Sands assets that no longer fit into Suncor’s future strategy.

On a positive note, Suncor’s portfolio, which now comprises almost 100% crude-oil weighted production, had a favourable influence on the company’s quarterly results. Suncor’s total upstream production saw a tangible increase, reaching 518,400 barrels of oil equivalent per day in 2014’s second quarter, from 500,100 barrels of oil equivalent per day in the same period of 2013.

As for the company’s future strategy, Suncor states it will continue to strive towards ensuring sustainable and reliable operations. The strategy involves continual investment in profitable growth, as well as ensuring that shareholders get good value through dividends and share repurchases.

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We believe that successful investors focus on the quality of the assets they buy. Speculators focus on guessing the future prices. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.